The use of performance materiality should: A. reduce the probability that the sum of immaterial and/or...
The use of performance materiality should:
A. reduce the probability that the sum of immaterial and/or undetected misstatements in the financial statements is greater than materiality for the financial statements as a whole.
B. increase the probability that the sum of immaterial and/or undetected misstatements in the financial statements is greater than materiality for the financial statements as a whole.
C. reduce the probability that the sum of immaterial and/or undetected misstatements in the financial statements is less than materiality for the financial statements as a whole.
D. increase the probability that the sum of immaterial and/or undetected misstatements in the financial statements is less than materiality for the financial statements
If management is preoccupied with meeting specific accounting numbers, this is a negative factor that should influence client acceptance and retention and is associated with _______.
A. the integrity of management
B. competence issues within the audit firm
C. independence issues within the audit firm
D. special circumstances
Which of the following is a negative factor influencing client acceptance and retention with respect to competence issues?
A. The audit firm does not have the affiliation with specialists to meet client needs.
B. The client has a weak accounting system with few internal controls.
C. The audit firm has conflict of interest issues that cannot be resolved prior to client acceptance. D. There are significant regulatory reporting requirements with close monitoring by regulators. 2.5 points
Which overview defines audit strategy?
A. The determination of the amount of time to spend testing the client’s internal controls and conducting detailed testing of transactions and account balances.
B. Gaining an understanding of the client, including identifying risk factors.
C. Performing tests of controls and detailed substantive testing of transactions and accounts.
D. Evaluation of results of the detailed testing in light of the auditor’s understanding of the client and forming an opinion on the fair presentation of the client’s financial statements.
Homework Answers
1) Solution: reduce the probability that the sum of immaterial and/or undetected misstatements in the financial statements is greater than materiality for the financial statements as a whole.
Explanation: The performance materiality must decrease the probability that aggregate of undetected and/or immaterial misstatements in the financial statements exceeds the materiality for the financial statements as a whole.
2) Solution: the integrity of management
Explanation: When the management is preoccupied with meeting certain numbers in accounting, and is associated with the management integrity.
3) Solution: The audit firm has conflict of interest issues that cannot be resolved prior to client acceptance.
Explanation: The independence and interest conflict issues exist which would be resolved prior to the acceptance from client.
4) Solution: The determination of the amount of time to spend testing the client's internal controls and conducting detailed testing of transactions and account balances
Explanation: Audit Strategy refers to determining the time to be spend for testing the internal controls by client and conducting testing of transactions and account balances in detail
Add Answer to:
The use of performance materiality should:
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