ACCT 410 Chapter 7 Pre-Quiz

Which of the following statements is false regarding planning analytical procedures?

A frequently used planning analytical procedure is regression analysis.

Which of the following statements is false regarding materiality?

Materiality is the magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it possible that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.

Which of the following statements is true concerning performance materiality?

Performance materiality is set less than overall materiality and helps the auditor determine the extent of audit evidence to obtain

Assume that the auditor sets audit risk at 1%. What is the most appropriate interpretation of this level of audit risk?

The auditor is willing to take only a 1% chance of expressing an audit opinion that the financial statements are fairly presented when they are materially misstated.

Which of the following statements is false regarding the nature, timing, and extent of risk responses?

When the risk of material misstatement is low, the auditor conducts the audit procedures closer to year-end, on an unannounced basis, and includes more elements of unpredictability in the procedures.

A high level of detection risk means that the audit firm is willing to accept a low risk of not detecting a material misstatement.

false

Detection risk is the susceptibility of an assertion to a material misstatement before consideration of related controls.

false

The auditor bases materiality solely on quantitative factors.

false

The nature of risk response refers to the sufficiency and appropriateness of evidence that is necessary given the risk of material misstatement and the level of acceptable audit risk.

false

Performance materiality is an amount less than overall materiality and helps the auditor determine the extent of audit evidence needed.

true