Audit Chapter 6 Homework questions

Which of the following should not normally be included in the engagement letter for an audit?

A listing of the client's branch offices selected for testing.

The primary objective of tests of details of transactions performed as substantive procedures is to:

Detect material misstatements in the financial statements.

The risk that the auditors will conclude, based on substantive procedures, that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as

Detection risk.

Which of the following best describes what is meant by the term "fraud risk factor"?

Factors often observed in circumstances where frauds have occurred.

Which of the following should the auditors obtain from the predecessor auditors before accepting an audit engagement?

Facts that might bear on the integrity of management.

Which of the following elements underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?

Materiality and audit risk.

As one step in testing sales transactions, a CPA traces a random sample of sales journal entries to debits in the accounts receivable subsidiary ledger. This test provides evidence as to whether:

Recorded sales have been properly posted to customer accounts.

Which portion of an audit is least likely to be completed before the balance sheet date?

Substantive procedures.

Which of the following is most likely to be an overall response to fraud risks identified in an audit?

Use less predictable audit procedures.

business risk

a risk that threatens managements ability to achieve the organizations objectives.

time budget

an estimate of the time required to perform each step

significant risk

an identified risk that requires special audit consideration

in planning and performing an audit, auditors are concerned about risk factors for two distinct types of fraud: fraudulent financial reporting and misappropriation of assets. Which of the following is a risk factor for misappropriation of assets?

an unreliable accounting system

audit plan

description of the nature, timing and extent of the audit procedures to be performed

The audit committee of a company must be made up of:

embers of the board of directors who are not officers or employees.

assertions

representations by management that are communicated, explicitly or implicitly, in the financnial statements

audit risk

the overal engagement level, this is the risk that the auditors may unknowingly fail to appropriatly modify their opinion on the financial statements that are materially misstated

engagement

the purpose of this document is to avoid misunderstandings between the auditors and the client

inherent risk

the risk of material misstatement of an assertion about an account without considering internal control