10. Which of the following situations would lead an auditor to test controlsover long-lived assets?Substantive analytical procedures indicated that controls wereeffectively designed.b. Risk assessment procedures indicated that controls were effectivelydesigned.c. . Tęsts of details has decided many errors in recording long-lived assettransactions.d. The auditor 'has decided that the additional effort to test controlswould not exceed the potential reduction in substantive procedures.11. To test the effectiveness of controls over asset impairment, the auditorcould perform which of the following procedures?a. Perform analytical procedures.b. Send confirmations to- the management specialist who performedwork related to the impairment.c. Inquire of management as to its process for determining assessmentimpairment.d. Inspect the asset for potential impairment.12. When auditing intangible assets, the auditor would likely recomputedamortization and determine whether management's recorded amount isreasonable. When performing this procedure which assertion is theauditor primarily gathering evidence for?á. Completenessb. ExistenceC. Valuationd. Rights and obligations.13. As part of auditing equipment, the auditor will inspect new equipmentadditions selected from the client's property ledger. Thè procedure willprovide evidence about which of the following assertions?a. Completenessb. Existencec. Valuationd. Rights and obligations.

Introduction:- Long live assets means, Which are are look forward to contribute future economic…

Answered: 10. Which of the following situations…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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7) In an environment that is highly automated an auditor determines that it is not possible to reduce detection risk solely by using substantive test of transactions. Under these circumstances the auditor most likely would: Perform test of controls to support a lower level of assessed risk. Increase sample size to reduce sampling risk and detection risk. Adjust the materiality level and consider the effect on inherent risk Apply analytical procedures and consider the effect on control risk
3 Which of the following is not one of the tasks undertaken during the phase of the audit? A) Understand internal control B) Asses the risk of material misstatement C) Develop preliminary audit strategies 4021
As the acceptable level of detection risk increases, an auditor may: Oa. Lower the assessed level of inherent risk. O b. Eliminate the assessed level of control risk from consideration as a planning factor. O c. Change the planned timing of substantive tests from year-end to interim. Od. Increase the risk of material misstatement.
When Arthus Andersen audited Enron, they should have recognized an acceptable level of detection risk is inversely related to the: a. Assurance provided by substantive testing b. Risk of misappliction of audit procedure c. Preliminary judgement bout lateriality levels d. Risk of failing to discover material misstatements.
11. Most guidance provided to auditors on materiality addresses its quantitative aspect. Is there a risk that auditors could fail to detect misstatements that are small but qualitatively material?
After the audit planning procedures, your audit team decided to place the preliminary audit risk at a high level. Which of the following is correct? A. The risk the planned further audit procedures will not be able to detect misstatement should be increased. B. The auditors should plan set the timing of its extensive substantive testing at year-end. C. The audit materiality levels should be increased. D. The auditors should plan extensive substantive testing through analytical procedures.
7. Analytical procedures: A. are not a type of audit evidence. B. are not required during the completion phase of the audit. C. performed during the planning phase of the audit are used as a substantive test in support of account balances. D. do not provide reliable evidence unless it is corroborated with other evidence. 8. Reasonable assurance allows for: A. low likelihood that material misstatements will not be prevented or detected by internal controls. B. no likelihood that material misstatements will not be prevented or detected by internal controls. C. moderate likelihood that material misstatements will not be prevented or detected by internal controls. D. high likelihood that material misstatements will not be prevented or detccted by internal controls. 9. Management implements internal controls to ensure that all required footnote disclosures are accurate. Auditors tests those controls to provide evidence supporting the presentation. A. completeness and valuation B.…
Assume that the client’s internal controls over the recording and classifying of fixed asset additions are considered weak because the individual responsible for recording new acquisitions has inadequate technical training and limited experience in accounting. How will this situation affect the evidence you should accumulate in auditing fixed assets as compared with another audit in which the controls are excellent? Be as specific as possible.
In performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions? a. Is depreciation calculation and recording automated? b. Is there periodic physical count and tagging of property, plant and equipment? Is the result of the count reconciled to ledgers and general ledgers? c. Both a and b. d. Neither a nor b.
23. Analytical procedures used to form an overall audit conclusion generally include A. Considering unusual or unexpected account balances that were not previously identified. B. Performing tests of transactions to corroborate management's financial statement assertions. C. Gathering evidence concerning account balances that have not changed from the prior year. D. Retesting controls that appeared to be ineffective during the assessment of control risk.
An auditor discovered the following errors and irregularities while performing tests of controls: Inventory damaged by rain remains in inventory at full cost. Required: What control would have prevented or detected each of the aforementioned errors/irregularities? What tests should the auditor perform to test each control? To which financial statement assertion does the error or irregularity relate?
Audit firms may have a standardized audit programs for auditing long-lived assets but auditors must still customize the audit program based on the assement of the risk of material misstatement. Why/how?

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