Becker, RC, Quiz ; ch 4
B3: Analytical procedures are required for which of the following? A. audit planning B. tests of balances C. client retention decision D. internal control evaluation
A
B3: the acceptable level of detection risk is inversely related to the: A. assurance provided by substantive tests B. risk of misapplying auditing procedures C. preliminary judgement about materiality levels D. risk of failing to discover material misstatements
A
B3: the objective of performing analytical procedures in planning an audit is to identify the existence of: A. unusual transactions and events B. acts of noncompliance with laws and regulations that went undetected because of internal control weaknesses C. related party transactions D. recorded transactions that were not properly authorized
A
Q4: Audit risk at the assertion level consists of inherent risk, control risk, and detection risk.Which of the following statements is true? A.Cash has a greater inherent risk than an inventory of coal because it is more susceptible to theft. B.The risk that material misstatement will not be timely prevented or detected by internal control can be reduced to zero by effective controls. C.Detection risk is a function of the efficiency of an auditing procedure. D.The existing levels of inherent risk, control risk, and detection risk can be changed at the discretion of the auditor.
A
Q4: In a financial statement audit of a nonissuer, an auditor would consider a judgmental misstatement to be a misstatement that A.Involves an estimate. B.Exists because of nonstatistical sampling performed by the auditor. C.Arises from a flaw in the accounting system. D.Arises from a routine calculation.
A
Q4: The objective of performing analytical procedures in planning an audit is to identify the existence of A.Unusual transactions and events. B.Noncompliance with laws and regulations that went undetected because of internal control deficiency. C.Related party transactions. D.Recorded transactions that were not properly authorized.
A
B3: as the acceptable level of detection risk decreases, an auditor may: A. reduce substantive testing by relying on the assessments of inherent risk and control risk B. postpone the planned timing of substantive tests from interim dates to the year-end C. eliminate the assessed level of inherent risk from consideration as a planning factor D. lower the assessed level of control risk
B
B3: on the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed risk of material misstatement from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would: A. decrease substantive testing B. decrease detection risk C. increase inherent risk D. increase materiality levels
B
Q4: As the acceptable level of detection risk decreases, an auditor may change the A.Timing of substantive tests by performing them at an interim date rather than at year-end. B.Nature of substantive procedures from a less effective to a more effective procedure. C.Timing of tests of controls by performing them at several dates rather than at one time. D.Assessed level of inherent risk to a higher amount.
B
Q4: Detection risk differs from both control risk and inherent risk in that detection risk A.Exists independently of the financial statement audit. B.Can be changed at the auditor's discretion. C.Arises from risk factors relating to fraud. D.Should be assessed in nonquantitative terms.
B
Q4: For a given audit risk, the relationship between the risks of material misstatement and detection risk is A.Linear. B.Inverse. C.Independent. D.Equal.
B
Q4: In an audit of a nonissuer's financial statements, projected misstatement is A.The likely amount of misstatement in the subsequent period's financial statements if a control is not properly implemented. B.An auditor's best estimate of misstatements in a population extrapolated from misstatements identified in an audit sample. C.The only amount that the auditor considers in evaluating materiality and fairness of the financial statements. D.An auditor's best estimate, before performing audit procedures, of misstatements that the auditor expects to find during the audit.
B
Q4: The concepts of audit risk and materiality are interrelated and must be considered together by the auditor. Which of the following is true? A.Audit risk is the risk that the auditor may unknowingly express a modified opinion when, in fact, the financial statements are fairly stated. B.The phrase in the auditor's report "present fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America" indicates the auditor's belief that the financial statements as a whole are not materially misstated. C.If misstatements are not important individually but are important in the aggregate, the concept of materiality does not apply. D.Material fraud but not material errors cause financial statements to be materially misstated.
B
Q4: Which of the following parties should an auditor notify first when discovering an immaterial fraud is committed by an accounting clerk? A.The audit committee. B.An appropriate level of management. C.The client's legal counsel. D.The client's internal auditor.
B
RC4: The risk of material misstatement differs from detection risk in that it: A.can be changed at the auditor's discretion. B.exists independently of the actions of the auditor. C.may be assessed in either quantitative or qualitative terms. D.arises from the misapplication of auditing procedures.
B
B3: regardless of the assessed level of control risk, an auditor would perform some: A. tests of controls to determine the effectiveness of internal control B. analytical procedures to verify the design of internal control C. substantive tests to restrict detection risk for significant transaction classes D. dual purpose tests to evaluate both the risk of monetary misstatement and preliminary control risk
C
B3: what if the primary objective of the fraud brainstorming session? A. determine audit risk and materiality B. identify whether analytical procedures should be applied to the revenue accounts C. assess the potential for material misstatement due to fraud D. determine whether the planned procedures int he audit program will satisfy the general audit objectives
C
B3: when an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most likely increase the: A. extent of test of controls B. level of detection risk C. extent of tests of details D. level of inherent risk
C
B3: which of the following best characterizes an auditor's exercise of professional skepticism? A. conducting all fraud-related inquiries in a nonconfrontational manner B. obtaining adequate conclusive evidence in support of the fairness of the financial statements C. having an attitude that includes a questioning mind D. taking into account past relationships and experiences with management
C
B3: which of the following characteristics most likely would heighten an auditor's concern about the risk of material misstatement arising from fraudulent financial reporting? A. there is a lack of interest by management in maintaining an earnings trend B. computer hardware is usually sold at a loss before being fully depreciated C. management had frequent disputes with the auditor on accounting matters D. monthly bank reconciliations usually include several large checks outstanding
C
B3: which of the following risks may be assessed in nonquatitative terms? control risk detection risk inherent risk A. yes yes no B. yes no yes C.yes yes yes D.no yes yes
C
B3:which of the following types of risks most likely would increase if accounts receivable are confirmed three months before year-end? A. inherent B. control C. detection D. business
C
Q4: Which of the following types of risks most likely would increase if accounts receivable are confirmed 3 months before year end? A.Inherent. B.Control. C.Detection. D.Business.
C
RC4: The achieved (actual) level of audit risk: A.should be greater than or equal to acceptable audit risk. B.is the same for all audit engagements. C.can never be known with certainty. D.can always be accurately assessed by the auditor.
C
RC4: Which of the following characteristics most likely would heighten an auditor's concern about the risk of intentional manipulation of financial statements? A.The rate of change in the entity's industry is slow. B.Turnover of senior accounting personnel is low. C.Management places substantial emphasis on meeting earnings projections. D.Insiders recently purchased additional shares of the entity's stock.
C
RC4: Which of the following is a source of detection risk? A.Poor client controls. B.Unstable business environment. C.A nonrepresentative sample. D.Inherent risk assessed too high.
C
B3: an auditor assesses control risk because it: A. is relevant to the auditor's understanding of the control enviroment B. Provides assurance that the auditor's materiality levels are appropriate C. Indicates to the auditor where inherent risk may be the greatest D. Affects the level of detection risk that the auditor may accept
D
B3: an auditor plans to apply substantive tests to the details of assets and liability accounts as of an interim date rather than as of the balance sheet date. The auditor should be aware that this practice: A. eliminates the use of certain statistical sampling methods that would otherwise be available. B. presumes that the auditor will reperform the tests as of the balance sheet date C. should be especially considered when there are rapidly changing economic conditions D. potentially increases the risk that errors that exist at the balance sheet date will NOT be detected
D
B3: in a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following? A. the internal audit department's objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee B. the risk that the internal control system will not detect a material misstatement of a financial statement assertion C. the risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion D. the susceptibility of a financial statement assertion to a material misstatement assuming there is no related controls
D
Q4: Disclosure of possible fraud to parties other than the client's senior management and those charged with governance ordinarily is not part of an auditor's responsibility. However, to which of the following outside parties may a duty to disclose possible fraud exist? I. To the SEC when the client reports an auditor change II. To a successor auditor when the successor makes appropriate inquiries III. To a government funding agency from which the client receives financial assistance A.I and II. B.I and III. C.II and III. D.I, II, and III.
D
Q4: Which of the following auditor concerns most likely could be so serious that the auditor concludes that a financial statement audit cannot be performed? A.Management fails to modify prescribed internal controls for changes in information technology. B.Internal control activities requiring segregation of duties are rarely monitored by management. C.Management is dominated by one person who is also the majority shareholder. D.There is a substantial risk of intentional misapplication of accounting principles.
D
Q4: Which of the following circumstances most likely will cause an auditor to consider whether material misstatements due to fraud exist in an entity's financial statements? A.Management places little emphasis on meeting earnings projections of external parties. B.The board of directors oversees the financial reporting process and internal control. C.Control deficiencies previously communicated to management are not corrected. D.Transactions selected for testing are not supported by proper documentation.
D
Q4: Which of the following is least likely to indicate the need to increase the assurance provided by substantive testing? A.A lower acceptable level of detection risk. B.An increase in the assessed control risk. C.A lower acceptable audit risk. D.A decrease in the assessed inherent risk.
D
Q4: Which of the following statements reflects an auditor's responsibility for detecting fraud and errors? A.An auditor is responsible for detecting employee errors and simple fraud, but not for discovering fraudulent acts involving employee collusion or management override. B.An auditor should plan the audit to detect errors and fraud that are caused by departures from the applicable financial reporting framework. C.An auditor is not responsible for detecting fraud unless the application of GAAS would result in such detection. D.An auditor should design the audit to provide reasonable assurance of detecting fraud and errors that are material to the financial statements.
D
RC4: Client risk as defined in the text is: A.the risk of the entity's financial failure. B.the auditor's risk of loss from events arising in connection with financial statements audited and reported upon. C.the risk that audit procedures will fail to detect material misstatements. D.the overall risk of material misstatement.
D
