EP AUDITING+ASSURANCE...-MYACCT.LAB
16th Edition
ISBN: 9780134148656
Author: ARENS
Publisher: PEARSON CO
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Chapter 9, Problem 27.2MCQ
To determine
Identify the correct answer for the given statement.
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Which of the following is appropriate about risk assessment?
A. The assessed level of inherent and control risk can be sufficiently low, thus resulting to eliminating the need for substantive tests.
B. Audit risk may be more effectively determined by assessing inherent and control risk separately.
C. Detection risk is eliminated if an auditor were to examine 100 percent off the account balance or class of transactions.
D. There is an iverse relationship between detection risk and the combined level of inherent and control risk
As lower acceptable levels of both audit risk and materiality are established, theauditor should plan more work on individual accounts to(1) find smaller misstatements.(2) find larger misstatements.(3) increase the performance materiality in the accounts.(4) increase inherent risk in the accounts
tch 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.
Chapter 9 Solutions
EP AUDITING+ASSURANCE...-MYACCT.LAB
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Provide two examples of factors that might...Ch. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQ
Ch. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - Prob. 14RQCh. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - Prob. 17RQCh. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - Prob. 20RQCh. 9 - Prob. 21RQCh. 9 - Prob. 22RQCh. 9 - Prob. 23RQCh. 9 - Prob. 24RQCh. 9 - Prob. 25.1MCQCh. 9 - Prob. 25.2MCQCh. 9 - Prob. 25.3MCQCh. 9 - Prob. 26.1MCQCh. 9 - Prob. 26.2MCQCh. 9 - Prob. 26.3MCQCh. 9 - Prob. 27.1MCQCh. 9 - Prob. 27.2MCQCh. 9 - Prob. 27.3MCQCh. 9 - Prob. 28.1MCQCh. 9 - Prob. 28.2MCQCh. 9 - Prob. 28.3MCQCh. 9 - Prob. 29DQPCh. 9 - This problem requires you to access PCAOB Auditing...Ch. 9 - Prob. 31DQPCh. 9 - Prob. 32DQPCh. 9 - Prob. 33DQPCh. 9 - Prob. 34DQPCh. 9 - Prob. 35DQPCh. 9 - Prob. 36DQPCh. 9 - Prob. 37DQPCh. 9 - Prob. 38C
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- In deciding upon the acceptable risk of incorrect acceptance for an account, an auditor considers each of the following except a. Audit risk. b.Tolerable error. c.The risk that internal controls fail to detect material misstatements that have occurred. d. The risk that analytical procedures and other tests fail to detect material errors that occur and that are not detected by internal control.arrow_forwardWhich sentence below is true about audit risk: A. Audit risk is the risk that a company may hire an incompetent auditor. B. Audit risk can be completely eliminated through appropriate sampling of transactions. C. Audit is what creates the demand for an audit. D. Audit risk is the risk that a "clean" opinion will be issued when, in reality, the financial statements are materially misstated..arrow_forwardWhy is the audit team more concerned with controlling the exposure to the risk of overreliancethan with the risk of underreliance?a. Only the risk of overreliance results in an incorrect audit decision.b. The risk of underreliance is not related to the audit team’s study and evaluation of internalcontrol.c. The risk of overreliance can ultimately result in the audit team’s failing to reduce auditrisk to acceptable levels.d. The risk of underreliance can be controlled by performing tests of controls during theinterim period.arrow_forward
- Tests of controls are most likely to be omitted when(1) an account balance reflects many transactions.(2) control risk is assessed at less than the maximum.(3) the understanding of the control structure indicates that evaluating the effectiveness of control policies and procedures is likely to be inefficient.(4) the auditor wishes to increase the acceptable level of detection risk.arrow_forwardThe lower the materiality level, the higher the amount of required evidence from substantive procedures to compensate for increased risk. Further audit procedures include risk assessment procedures, test of controls and substantive tests. Group of answer choices False, True True, False True, True False, Falsearrow_forwardInquiries of clients and reperformance normally have a low cost to perform. True False When analytical procedures reveal no unusual fluctuations in an account balance, the auditor will probably perform fewer test of details of balance for that account. True False When analytical procedures reveal no unusual fluctuations in an account balance, the auditor will probably perform fewer test of controls for that account. True False Analytical procedures can be used to provide reliable evidence for all balance-related general audit objectives. True False One advantage of using statical techniques when performing analytical procedures is that they eliminate the need for auditor judgement. True False The type of audit evidence known as documentation involves the auditor’s examination of tangible assets with results of the examination being recorded, or “documented,” in the auditor’s work papers. True False If a company’s cash ratio is greater than 1.0, the company is…arrow_forward
- When completing the audit of internal controls for an issuer, the severity of an internal control deficiency depends ona. Whether there is a reasonable possibility that the company’s controls will fail to prevent or detect a misstatement of an account balance or disclosure.b. Whether a misstatement has actually occurred as a result of the deficiency.c. The magnitude of the potential misstatement resulting from the deficiency or the deficiencies.d. Both a and c are correct.e. All of the above are correct.arrow_forwardWhich of the following is consistent with an assessed level of control risk at below the maximum level after completing the auditors consideration of the client’s internal control over receivables? Increased materiality level in selecting receivables to be confirmed and use a positive confirmation letter. Increased materiality level in selecting receivables to be confirmed and use a negative confirmation letter. Decrease materiality level in selecting receivables to be confirmed and use a negative confirmation letter. d. Decrease materiality level in selecting receivables to be confirmed and use a positive confirmation letter.arrow_forwardThe audit risk model includes the four risks listed below. Match 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
- In auditing accounts receivable, the negative form of confirmations request is used when A. Response rate to positive confirmation request was low B. The total amount of account receivable is immaterial to the financial statement taken as a whole C. Recipients are likely to return positive confirmation without verifying the information D. The combined assessed level of both inherent risk and control risk relative to account receivable is lowarrow_forwardWhich of the following is consistent with an assessed level of control risk at below the maximum level after completing the auditors consideration of the client's internal control over receivables? * a. Increased materiality level in selecting receivables to be confirmed and use a positive confirmation letter. b. Increased materiality level in selecting receivables to be confirmed and use a negative confirmation letter. c. Decrease materiality level in selecting receivables to be confirmed and use a negative confirmation letter. d. Decrease materiality level in selecting receivables to be confirmed and use a positive confirmation letter. e. None of the abovearrow_forwardSome account balances such as those for pensions and leases are the result of complex calculations. The susceptibility to material misstatements in these types of accounts is defined as a. Sampling risk b. Detection risk c. Inherent risk. d. audit riskarrow_forward
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