Question

QUESTION 1

Considering the risk of overstatement of receivables due to premature revenue recognition that inflates revenues and receivables, which assertion for the accounts receivable balance is typically relevant?

A. Accuracy

B. Existence

C. Completeness

D. Rights and obligations

QUESTION 2

If an auditor has determined that inherent risk for accounts receivable is high and wishes to verify the balance as accurate, the best corroborating evidence would be ________.

A. a phone call to the client

B. a negative confirmation sent to the entity in question

C. a positive confirmation sent to the entity in question

D. inspection of supporting documents relating to the receivables transactions 3.34 points QUESTION 3

In general, reliance on an IT specialist is appropriate when the financial statement auditor complies with the conditions of AU-C ________.

A. 610

B. 620

C. 600

D. 500

QUESTION 4

When would auditors want to decrease the risk that their audit procedures will not detect a material misstatement?

A. When detection risk is high

B. When detection risk is low

C. When inherent risk is low

D. When control risk is low

Answer 1

1) Solution: Existence

Explanation: Existence for the balance in accounts receivable would be relevant while taking into consideration the risk of overstatement of receivables

2) Solution: a positive confirmation sent to the entity in question

Explanation: The positive confirmation is considered as reliable evidence

3) Solution: 620

Explanation: The reliance on an IT specialist would be proper when the auditor of financial statement complies with the conditions in AU-C620

4) Solution: When detection risk is low

Explanation: When detection risk is low the auditors prefer to reduce the risk that their procedures in audit would not detect a material misstatement