Question 13
When control risk is deemed high, the auditor should: (Select the correct answer.)
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a. Perform sufficient and appropriate substantive procedures that reduce detection risk to a low level. |
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b. Perform sufficient and appropriate substantive procedures that reduce inherent risk to a low level. |
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c. Perform fewer sufficient and appropriate substantive procedures in order to increase detection risk. |
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d. Resign from the audit engagement. |
Question 14
An auditor determines that management integrity is high, the RMM is low, and the client’s internal controls are effective. Which of the following conclusions can be reached regarding the need to obtain direct evidence regarding the account balances? (Select the correct answer.)
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a. Direct evidence of account balances is not needed. |
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b. Direct evidence of account balances can be limited to material account balances, and the extent of testing should be sufficient to corroborate the auditor’s assessment of low risk. |
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c. Direct evidence gathering can be limited to analytical procedures. |
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d. Direct evidence should be gathered for all account balances, regardless of the auditor’s assessment of control risk. |
13) Option 'A' is correct.
When control risk is deemed high, the auditor should perform sufficient and appropriate substantive procedures that reduce detection risk to a low level
An increased in the assessed level of control risk means that the assessed risk of material misstatement has also increased. and this requires a corresponding decrease in the detection risk to maintain the same level of audit risk, Increasing the extent of tests of details will result in a reduction in detection risk.
14)
Option 'B' is correct
Direct Evidence of account balances can be limited to material account balances, and the extent of testing should be sufficient to corroborate the auditor's assessment of Low risk
Question 13 When control risk is deemed high, the auditor should: (Select the correct answer.) a....
Control 2: If a company’s control risk is initially assessed as low, the auditor needs to gather evidence on the operating effectiveness of the controls. For the following control activity listed, do the following two tasks: a. Describe the test of control that the auditor would use to determine the operating effectiveness of the control. b. Briefly describe how substantive tests of account balances should be modified if the auditor finds that the control is not working as planned. In...
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