Audit CH 4 HW

An auditor assesses the risk of material misstatement because it

Affects the level of detection risk that the auditor may accept.

The existence of audit risk is recognized by the statement in the auditor's standard report that the:

Auditor obtains reasonable assurance about whether the financial statements are free of material misstatement.

According to auditing standards, external auditors' responsibilities for indirect noncompliance do not include:

Designing audit procedures to detect noncompliance in the absence of specific information brought to the auditors' attention.

If fictitious credit sales were recorded, and the fictitious accounts receivable were later directly written off as bad debt expense,

Income would not be misstated.

Which of the following is not an acceptable response to fraud risks related to sales that were identified in an audit?

Increase the assessment of detection risk for sales.

Experience has shown that the many large fraudulent transactions can be found in

Nonroutine, nonsystematic journal entries

Which of the following would not be considered an analytical procedure?

Projecting a deviation rate by comparing the results of a statistical sample with the actual population characteristics

When determining the inherent risk related to an account balance, an auditor theoretically does not explicitly consider the

Related internal control policies and procedures.

Generally accepted auditing standards states that analytical procedures

Should be applied in the planning and final review stages of the audit and can be used as a substantive test during the audit.

An auditor who discovers that client employees have committed an illegal act that has a material effect on the client's financial statements most likely would withdraw from the engagement if:

The client does not take the remedial action that the auditor considers necessary.

Which of the following information that comes to an auditor's attention most likely would raise a question about the occurrence of illegal acts?

The discovery of unexplained payments made to government employees.

While performing interim audit procedures of accounts receivable, numerous unexpected errors are found resulting in a change of risk assessment. Which of the following audit responses would be most appropriate?

Use more experienced audit team members to perform year-end testing.

Management fraud generally refers to

intentional distortions of financial statements