(TCO F) In a financial statement audit, inherent risk is evaluated to help an auditor assess...
(TCO F) In a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following?
1 The risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion
2 The risk that the internal control system will not detect a material misstatement of a financial statement assertion
3 The internal audit department's objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee
4 The susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls
Homework Answers
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Answer) option 4 The susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls Inherent risk is used by auditor to asses the risk with regard to material mistatement with either the financial statement line item or audit area. Thus Inherent risk can be considered to be the level of susceptibility to material misstatement that will generally no controls were in place. |
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(TCO F) In a financial statement audit, inherent risk is
evaluated to help an auditor assess...
1.Which of the following is not one of the steps the auditor must perform to assess...
1.Which of the following is not one of the steps the auditor must perform to assess control risk at less than “high” for a financial statement assertion? A) obtain an understanding of internal control B) identify controls that address all relevant assertions in the financial statements C) make a preliminary assessment of control risk based on the design of relevant controls D) test the operating effectiveness of the controls that must be effective to reduce control risk 2.Which of the...
principles of auditing chapter 2 QUESTION 9 In a financial statement audit, inherent risk represents A....
principles of auditing
chapter 2
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Indicate whether the following statement true, it must always be true.) An auditor doesn't need to...
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(TCO H) Audit risk consists of inherent risk, control risk, and detection risk. (a) Please completely define each of the above. (b) Indicate whether each of the statements below is true or false and e...
(TCO H) Audit risk consists of inherent risk, control risk, and detection risk. (a) Please completely define each of the above. (b) Indicate whether each of the statements below is true or false and explain your position. (1) The risk that material misstatement will not be prevented or detected on a timely basis by internal controls can be reduced to 0 by having effective controls in place. (2) Detection risk is a function of the efficiency of an auditing procedure....
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Consider AICPA guidance. Why should an auditor perform risk assessment procedures? Also, what are three risk assessment...
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Principles of auditing chapter 2 QUESTION 17 Match the term with the correct definition Classified into...
Principles of auditing
chapter 2
QUESTION 17 Match the term with the correct definition Classified into general standards, standards of fieldwork, and standards of reporting. One minus detection risk. The underlying accounting data and all related corroborating information available to an auditor. A. Audit Evidence The likelihood that misstatement could occur and not B. Attestation Risk be prevented or detected by internal controls. C. Level of Confidence The probability that an attestor may unknowingly fail to D. Control Risk modify...
Select each of the following terms with the appropriate attributes. No reply is used more than...
Select each of the following terms with the appropriate
attributes. No reply is used more than once.
Creates a reasonable possibility a material misstatement will
not be detected.
Follow a transaction through the system.
GAAS
Inquire, inspect, observe, reperform
Inquiries, analytical procedures, observation
Likelihood auditor's procedures will not detect a material
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Relevant assertions
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Risk tolerance of a financial statement user
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principles of auditing
chapter 2
QUESTION 9 In a financial statement audit, inherent risk represents A. The risk that the auditor fails to modify materially misstated financial statements. B. The risk that misstatements could occur and not be prevented or detected by the system of internal control. C. The susceptibility of an account balance to misstatement that could be material. D. The risk that misstatements could occur and not be detected by the auditor's procedures. QUESTION 10 An auditor strives...
Indicate whether the following statement true, it must always be true.) An auditor doesn't need to understand internal control to assess inherent risk. Risk of material misstatement (RMM) is risk at the auditor level. Preparing accurate financial statements is the responsibility of management. The audit of financial statements is a type of attest service.
Principles of auditing
chapter 2
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Select each of the following terms with the appropriate
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Creates a reasonable possibility a material misstatement will
not be detected.
Follow a transaction through the system.
GAAS
Inquire, inspect, observe, reperform
Inquiries, analytical procedures, observation
Likelihood auditor's procedures will not detect a material
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Merits attention, less than a material weakness
Relevant assertions
Reporting on internal control and financial statements
Risk tolerance of a financial statement user
Tests of controls and planning...
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