EBK AUDITING & ASSURANCE SERVICES: A SY
11th Edition
ISBN: 9781260687668
Author: Jr
Publisher: MCGRAW-HILL LEARNING SOLN.(CC)
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Question
Chapter 4, Problem 4.12RQ
To determine
Concept Introduction:
Misstatements are incorrect entries or disclosures in financial statement. A misstatement may be due fraud or error on the part of the management. The auditor covers all the material misstatements during the process of its audit.
To indicate:The response of the auditor for pervasive risk of material misstatements.
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Students have asked these similar questions
For each of the following brief scenarios, assume that you are reporting on a client’s financial statements. Select the type(s) of opinion (per below) possible for the scenario. In addition:
Unless stated otherwise, assume the matter involved is material. If the problem doesn’t tell you whether a misstatement pervasively misstates the financial statements or doesn’t list a characteristic that indicates pervasiveness, two reports may be possible (i.e., replies 6 to 9).
Do not read more into the circumstances than what is presented.
Do not consider an auditor discretionary circumstance for modification of the audit report unless the situation explicitly suggests that the auditor wishes to emphasize a particular matter.
* Note that this simulation has more parts than one would expect in a particular CPA exam simulation. We present it to provide examples of many types of reporting situations in one problem. Types of opinion may be used once, more than once, or not at all.
1. A…
Which of the following factors do NOT impact the auditor's decision on the mix of substantive procedures to be performed?
O overall risk assessment for the client
O nature of the account balance
O management's opinion on the risk of the account balance
O risk assessment for the specific account balance
What is the ethical value of applying the Fraud Triangle to assess the risk of material misstatements in the financial statements?
Chapter 4 Solutions
EBK AUDITING & ASSURANCE SERVICES: A SY
Ch. 4 - Prob. 4.1RQCh. 4 - Prob. 4.2RQCh. 4 - Prob. 4.3RQCh. 4 - Prob. 4.4RQCh. 4 - Prob. 4.5RQCh. 4 - Prob. 4.6RQCh. 4 - Prob. 4.7RQCh. 4 - Prob. 4.8RQCh. 4 - Prob. 4.9RQCh. 4 - Prob. 4.10RQ
Ch. 4 - Prob. 4.11RQCh. 4 - Prob. 4.12RQCh. 4 - Prob. 4.13MCQCh. 4 - Prob. 4.14MCQCh. 4 - Prob. 4.15MCQCh. 4 - Prob. 4.16MCQCh. 4 - Prob. 4.17MCQCh. 4 - Prob. 4.18MCQCh. 4 - Prob. 4.19MCQCh. 4 - Prob. 4.20MCQCh. 4 - Prob. 4.21MCQCh. 4 - Prob. 4.22MCQCh. 4 - Prob. 4.23PCh. 4 - Prob. 4.24PCh. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Prob. 4.27PCh. 4 - Prob. 4.28PCh. 4 - Prob. 4.29PCh. 4 - Prob. 4.30PCh. 4 - Prob. 4.31PCh. 4 - Prob. 4.32P
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Similar questions
- The risk that a client's financial statements are susceptible to material misstatements is a. control risk b. inherent risk c. audit risk d. none of the abovearrow_forwardDefine the danger of substantial misrepresentation. RMM is measured by auditors at what level of the financial statements? Explain how auditors evaluate the RMM. What part of substantive testing does RMM play?arrow_forwardDuring the performance of risk assessment procedures, Andoy, CPA, noted a change in accounting principle has been effected by the client. In this case, Andoy should plan to evaluate the change to satisfy himself that: a. The newly adopted principle is a generally accepted accounting principle b. The method of accounting for the effects of the change is in conformity with generally accepted accounting principles c. Management’s justification for the change is reasonable d. All of the answersarrow_forward
- Which of the following factors is not an example of a risk relevant to the client continuance decision? a. Client entity characteristics. b. Independence risk factors. c. Third-party/due diligence risk factors. d. Advocacy threat.arrow_forwardWould it be possible to be objective when auditing a friend's financial statements? If you think, so, tell us why. If not, then describe the impediments you might encounter.arrow_forwardWhich of the following does NOT describe substantive procedures? O includes inspection, inquiry, and confirmation O also known as substantive testing or tests of details O influenced by the overall risk assessment O designed to obtain indirect evidence of information included in the financial statementsarrow_forward
- Below are events, for each event, identify the type of risk the event entails, classify your identified risk as either systematic or unsystematic risk; Economic distress Mismanagement Technological causes Working capital problems Fraudulent management.arrow_forwardDo you think that the provision of nonaudit services for a client with a failed audit is evidence of negligence? Explain.arrow_forwardDuring the performance of risk assessment procedures, Andoy, CPA, noted a change in accounting principle has been effected by the client. In this case, Andoy should plan to evaluate the change to satisfy himself that: The newly adopted principle is a generally accepted accounting principle The method of accounting for the effects of the change is in conformity with generally accepted accounting principles Management's justification for the change is reasonable All of the answersarrow_forward
- 2. A client has departed from GAAP for what you, the auditor, considers to be justifiable. The financial statements would have been misleading if the client had not departed from GAAP. Circumstance: Type of Opinion:arrow_forwardThe risk that an auditor issues a clean opinion when the financial statements are materially misstated is called O inherent risk. control risk. audit risk. O detection risk.arrow_forwardtch the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.arrow_forward
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