Question 1

A.Under a lower assessed level of control risk approach, what audit strategy components does the auditor specify?
B.Under a primarily substantive approach, what audit strategy components does the auditor specify?

Accepted Answer

A. Under a lower assessed level of contr...

Question 2

The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated is:

Accepted Answer

A)   analytical procedures risk.
B)   control risk.
C)   tests of details risk.
D)   inherent risk.
E)   audit risk.F) C) and D)
G) A) and B)

Question 3

The auditor has some control over:

Accepted Answer

A)   the actual level of control risk.
B)   the assessed level of control risk.
C)   both the actual level and the assessed levels of control risk.
D)   neither the actual level nor the assessed level of control risk.
E)   the projected level of control risk.F) A) and E)
G) B) and D)

Question 4

For which of the following accounts is the primarily substantive testing strategy least likely?

Accepted Answer

A)   bonds payable
B)   trade accounts payable
C)   equipment
D)   capital stock
E)   machineryF) A) and B)
G) B) and E)

Question 5

An inaccurate version of the audit risk model would imply that:

Accepted Answer

A)   detection risk is inversely related to inherent risk.
B)   detection risk can be determined from audit risk, inherent risk and control risk.
C)   detection risk is inversely related to audit risk.
D)   audit risk is related to all other risks in the model.
E)   increases in the acceptable level of control risk will cause decreases in detection risk.F) C) and D)
G) A) and E)

Question 6

The actual level of control risk, but not inherent risk, is directly controllable by the auditor.

Accepted Answer

A) True 
 B)False

Question 7

A risk components matrix or its equivalent is necessary whenever the auditor uses:

Accepted Answer

A)   quantitative expressions for risk.
B)   nonqualitative expressions for risk.
C)   the risk model in planning an audit.
D)   a lower assessment of control risk or inherent risk.
E)   nonquantitative expressions for risk.F) A) and E)
G) A) and D)

Question 8

The auditor has some control over:

Accepted Answer

A)   the assessed level of inherent risk.
B)   the actual level of inherent risk.
C)   both the actual level and the assessed levels of inherent risk.
D)   neither the actual level nor the assessed level of inherent risk.
E)   the projected level of inherent risk.F) A) and B)
G) A) and C)

Question 9

The auditor has chosen the preliminary strategy of lower assessed control risk. Which of the following is not a validly specified component of this strategy?

Accepted Answer

A)   use a planned assessed level of control risk of moderate or low
B)   plan tests of controls, probably testing computer controls embedded in the client's system
C)   plan restrictive substantive tests
D)   plan few, if any, tests of controls
E)   use a planned assessed level of analytical procedures risk at a high levelF) A) and D)
G) A) and E)

Question 10

The assessment of inherent risk requires consideration of matters that have a pervasive effect on assertions for all or many accounts and matters that may pertain only to assertions for specific accounts. Which of the following is an example of a "specific account" matter?

Accepted Answer

A)   going concern problems such as lack of sufficient working capital.
B)   profitability of the entity relative to the industry.
C)   sensitivity of operating results to economic factors.
D)   complexity of calculations.
E)   management turnover, reputation, and accounting skills.F) A) and C)
G) C) and D) D

Question 11

If inherent risk is assessed as low, control risk is assessed as low and analytical procedures risk is very low, the acceptable levels of test of details risk would be:

Accepted Answer

A)   Maximum
B)   High
C)   Moderate
D)   Low
E)   So low that substantive tests of details may not be necessary.F) B) and D)
G) A) and B)

Question 12

The risk that the auditor will not detect a material misstatement that exists in an assertion is:

Accepted Answer

A)   control risk.
B)   audit risk.
C)   inherent risk.
D)   rejection risk.
E)   detection risk.F) A) and E)
G) D) and E)

Question 13

For each one of the following risk factors relating to misstatements arising from fraudulent reporting, identify the appropriate category.
1.Inability to generate cash flows from operations while reporting earnings and earnings growth.
2.High degree of competition or market saturation, accompanied by declining margins.
3.High turnover of senior management, counsel, or board members.
4.Difficulty in determining the organization or individual(s) that control(s) the entity.
5.Strained relationship between management and the current or predecessor auditor.
6.Declining industry with increasing business failures and significant declines in customer demand.

Accepted Answer

1.Operating characteristics and financial stability.
2.Industry conditions that involve the economic and regulatory environment in which the entity operates.
3.Management's characteristics and influence over the control environment.
4.Operating characteristics and financial stability.
5.Management's characteristics and influence over the control environment.
6.Industry conditions that involve the economic and regulatory environment in which the entity operates.

Question 14

The auditor has chosen the preliminary strategy of primarily substantive testing. Which of the following is not a validly specified component of this strategy?

Accepted Answer

A)   set control risk at a high level
B)   plan tests of controls, probably testing computer controls embedded in the client's system
C)   plan few, if any, tests of controls
D)   plan extensive substantive tests
E)   plan to obtain a minimum understanding of relevant portions of internal controls.F) A) and E)
G) A) and B) B

Question 15

Inherent risk cannot be greater for some assertions than for others.

Accepted Answer

A) True 
 B)False

Question 16

Match between columns
                        Premises: Plan few, if any, tests of controls.
Plan to obtain a minimum understanding of relevant portions of internal controls.
Obtain extensive knowledge of the client’s business processes relevant to the assertion.
Use a planned assessed level of control risk of moderate or low.

Accepted Answer

The Answer of A Primarily Substantive Approach and A Lower is...

Question 17

Which of the following risk factors is an example of an assertion specific inherent risk factor?

Accepted Answer

A)   Management override of internal controls.
B)   The impact of technological developments.
C)   Inadequate accounting skills.
D)   Management turnover.
E)   Contentious accounting issues.F) C) and D)
G) A) and B)

Question 18

The more certain the auditor wants to be of expressing the correct opinion, the lower will be the acceptable audit risk.

Accepted Answer

A) True 
 B)False

Question 19

Auditors are required to perform risk assessment procedures in every audit to assess the risk of fraud due to both misappropriation and fraudulent financial reporting.

Accepted Answer

A) True 
 B)False

Question 20

The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity's internal controls is:

Accepted Answer

A)   control risk.
B)   audit risk.
C)   inherent risk.
D)   rejection risk.
E)   detection risk.F) B) and C)
G) All of the above

Exam 9: Audit Risk, Including the Risk of Fraud

A.Under a lower assessed level of control risk approach, what audit strategy components does the auditor specify? B.Under a primarily substantive approach, what audit strategy components does the auditor specify?

Correct Answer
verified
A. Under a lower assessed level of contr...
View Answer

The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated is:

Correct Answer
verified

The auditor has some control over:

Correct Answer
verified

For which of the following accounts is the primarily substantive testing strategy least likely?

Correct Answer
verified

An inaccurate version of the audit risk model would imply that:

Correct Answer
verified

The actual level of control risk, but not inherent risk, is directly controllable by the auditor.

Correct Answer
verified

A risk components matrix or its equivalent is necessary whenever the auditor uses:

Correct Answer
verified

The auditor has some control over:

Correct Answer
verified

The auditor has chosen the preliminary strategy of lower assessed control risk. Which of the following is not a validly specified component of this strategy?

Correct Answer
verified

The assessment of inherent risk requires consideration of matters that have a pervasive effect on assertions for all or many accounts and matters that may pertain only to assertions for specific accounts. Which of the following is an example of a "specific account" matter?

Correct Answer
verified
D

If inherent risk is assessed as low, control risk is assessed as low and analytical procedures risk is very low, the acceptable levels of test of details risk would be:

Correct Answer
verified

The risk that the auditor will not detect a material misstatement that exists in an assertion is:

Correct Answer
verified

The auditor has chosen the preliminary strategy of primarily substantive testing. Which of the following is not a validly specified component of this strategy?

Correct Answer
verified
B

Inherent risk cannot be greater for some assertions than for others.

Correct Answer
verified

match the audit strategy with the audit strategy components listed below. (Items may be used more than once.)

Which of the following risk factors is an example of an assertion specific inherent risk factor?

Correct Answer
verified

The more certain the auditor wants to be of expressing the correct opinion, the lower will be the acceptable audit risk.

Correct Answer
verified

Auditors are required to perform risk assessment procedures in every audit to assess the risk of fraud due to both misappropriation and fraudulent financial reporting.

Correct Answer
verified

The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity's internal controls is:

Correct Answer
verified

Exam 9: Audit Risk, Including the Risk of Fraud

A.Under a lower assessed level of control risk approach, what audit strategy components does the auditor specify? B.Under a primarily substantive approach, what audit strategy components does the auditor specify?

Correct AnswerverifiedA. Under a lower assessed level of contr...View AnswerShow Answer

The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated is:

Correct AnswerverifiedShow Answer

The auditor has some control over:

Correct AnswerverifiedShow Answer

For which of the following accounts is the primarily substantive testing strategy least likely?

Correct AnswerverifiedShow Answer

An inaccurate version of the audit risk model would imply that:

Correct AnswerverifiedShow Answer

The actual level of control risk, but not inherent risk, is directly controllable by the auditor.

Correct AnswerverifiedShow Answer

A risk components matrix or its equivalent is necessary whenever the auditor uses:

Correct AnswerverifiedShow Answer

The auditor has some control over:

Correct AnswerverifiedShow Answer

The auditor has chosen the preliminary strategy of lower assessed control risk. Which of the following is not a validly specified component of this strategy?

Correct AnswerverifiedShow Answer

The assessment of inherent risk requires consideration of matters that have a pervasive effect on assertions for all or many accounts and matters that may pertain only to assertions for specific accounts. Which of the following is an example of a "specific account" matter?

Correct AnswerverifiedD

If inherent risk is assessed as low, control risk is assessed as low and analytical procedures risk is very low, the acceptable levels of test of details risk would be:

Correct AnswerverifiedShow Answer

The risk that the auditor will not detect a material misstatement that exists in an assertion is:

Correct AnswerverifiedShow Answer

The auditor has chosen the preliminary strategy of primarily substantive testing. Which of the following is not a validly specified component of this strategy?

Correct AnswerverifiedB

Inherent risk cannot be greater for some assertions than for others.

Correct AnswerverifiedShow Answer

match the audit strategy with the audit strategy components listed below. (Items may be used more than once.)

Which of the following risk factors is an example of an assertion specific inherent risk factor?

Correct AnswerverifiedShow Answer

The more certain the auditor wants to be of expressing the correct opinion, the lower will be the acceptable audit risk.

Correct AnswerverifiedShow Answer

Auditors are required to perform risk assessment procedures in every audit to assess the risk of fraud due to both misappropriation and fraudulent financial reporting.

Correct AnswerverifiedShow Answer

The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity's internal controls is:

Correct AnswerverifiedShow Answer

Correct Answer
verified
A. Under a lower assessed level of contr...
View Answer

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D

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B

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