Question

1. Consider the following statements:

       I. Clearly trivial and not material are terms that can be used interchangeably.

      II. The higher the dollar amount of (performance) materiality the less audit evidence is required.

      a. I is true;   II is true

      b. I is true;   II is false

      c. I is false; II is true

      d. I is false; II is false

2. Consider the following statements:

        I. Per auditing standards, the successor [new] audit firm is required to initiate communication

            with the predecessor [old] audit firm.

       II. The predecessor auditor might communicate, to the successor auditor, information related to

            client management’s integrity.

      a. I is true;   II is true

      b. I is true;   II is false

      c. I is false; II is true

      d. I is false; II is false

3. “A letter that formalizes the contract between the auditor and the entity and outlines the

      responsibilities of both parties” is referred to as a(n):

      a audit letter.

      b. contact letter.

      c. engagement letter.

      d. management letter.

4. Certain accounts and transactions affect both the Income Statement and the Balance Sheet. If

      $25,000 is considered to be material to the income statement, but $30,000 is material to the

      balance sheet, the auditor should set overall materiality at which of the following dollar amounts?

      a. $25,000

      b.    30,000

     c.    55,000

      d.    None of the above. The answer is _____

5. Which of the following best describes the amount of misstatement an auditor is willing to accept and

       still not say the account balance is materially misstated?

      a. Tolerable misstatement.

      b. Overall financial statement materiality

      c. A clearly trivial amount

      d. Significant materiality

6. While performing an audit, the auditor should allow for some misstatement of lessor value than the

       assessed materiality level so in total the misstatements might not result in a material misstatement

       to the financial statements. In order to do so, the auditor sets which of the following lower than the

       materiality level (s)?

      a. Test of controls.

      b. Difference in comparison of current year amounts to prior-year amounts.

      c. Performance materiality.

      d. Sampling Unit.

                   See CPA Exam Review [try Mod 2 #42]

7. Per auditing standards, if the outside CPA firm plans to use internal auditors on the financial audit,

      the outside auditor must consider whether the internal auditor is:

      a. competent and involved

      b. competent and objective

      c. educated    and involved

    d. educated    and objective

8. One type of substantive procedures is called:

      a. Analytical review

      b. Financial review

      c. Test of accounts

      d. Test of deletions

9. As “materiality goes down”, the amount of desired audit evidence:

      a. Goes down.

      b. Goes up.

      c. Stays the same.

10. Materiality factors include:

      a. Qualitative considerations and cost considerations

      b. Qualitative considerations and Quantitative considerations

      c. Judgmental considerations and cost considerations

      d. Judgmental considerations and Quantitative considerations

Answer 1

Question - (1)

Answer -

(I) - Clearly trivial and not material are terms that can be used interchangeably.

Explanation:

The Given statement is False because, "Clearly trivial" is not another expression for "not material."

.

(II) - The higher the dollar amount of (performance) materiality the less audit evidence is required.

Explanation:

The Given statement is True because, the lower the dollar amount of the performance materiality the more audit evidence is required and the higher the dollar amount of the performance materiality the less audit evidence is required.

Hence, Option - (c) - I is false; II is true, is Correct.