Question

6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk remains the same, detection risk has an inverse relationship to inherent risk and control risk. The auditor may make separate or combined assessments of inherent risk and control risk. Detection risk cannot be changed at the auditor's discretion The greater the inherent and control risks the auditor believes exist, the less detection risk that can be accepted. (d) 7. Inherent risk and control risk differ from detection risk in that inherent risk and control risk are: (a) Functions of the client and its environment whereas detection risk is not. Changed at the auditor's discretion whereas detection risk is not. Considered at the individual account balance level whereas detection risk is not. Elements of audit risk whereas detection risk is not. (b) (c) (d) 8. Which of the following is the best explanation of the difference, if any, between audit objectives and audit procedures? (a) Audit procedures establish broad general goals; audit objectives specify the detailed work to be performed. Audit objectives define specific desired accomplishments; audit procedures provide the means of achieving audit objectives. Audit procedures and audit objectives are essentially the same. (b) (c) (d) Audit objectives are tailor made for each assignment; audit procedures are generic in application.

Answer 1

Answer 6. The correct option is (a). If Individual audit risk remains the same, detection risk has an inverse relationship to inherent risk and control risk.

This statement is incorrect because detention risk doesn’t have inverse relationship to inherent risk and control risk.

Answer 7. . The correct option is (a). ) Functions of the client and its environment whereas detection risk is not.

When auditor fails to detect a risk during auditing the financial statement of company, then that risk called detection risk which is not a function during the audit of a client.

Answer 8. The correct option is (b) . Audit objectives define specific desired accomplishments; audit procedures provide the means of achieving audit objectives

We can achieve audit objectives only through effective audit procedures. Audit procedures are the means to get audit objectives.

Answer 9. The correct option (d ) Obtaining confirmation from an independent source.

Auditor should test each accounting estimates except above method.

Answer 10. The correct option is (c) . A potential conflict of interest always exists between the auditor and the management of the enterprise under audit

During the audit a auditor assumed that management is neutral i.e. he is neither honest or dishonest. The audit that is done by the auditor recognizes that there could be a potential of material misstatement due to fraud or error, which does not take into account of any past experience with the organization and the auditors belief about management integrity and honesty.