If inherent risk is high and a reasonable level of assurance has been gained from control testing, whattype of testing will be performed by the auditor?O extensive procedures focused on estimate errorsO some substantive proceduresO overall analytical reviewno more testing, the auditor will rely on the results of the control tests

The inherent audit risk is a risk that exists due to any error or omissions in the financial…

If inherent risk is high and a reasonable level of assurance has been gained from control testing, what type of testing will be performed by the auditor? extensive procedures focused on estimate errors O some substantive procedures O overall analytical review no more testing, the auditor will rely on the results of the control tests

If inherent risk is high and a reasonable level of assurance has been gained from control testing, what type of testing will be performed by the auditor? extensive procedures focused on estimate errors O some substantive procedures O overall analytical review no more testing, the auditor will rely on the results of the control tests

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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Similar questions

In an environment that is highly automated, an auditor determines that it is not possible toreduce detection risk solely by using substantive tests of transactions. Under these circumstances, the auditor most likely woulda. Perform tests of controls to support a lower level of assessed control risk.b. Increase the sample size to reduce sampling risk and detection risk.c. Adjust the materiality level and consider the effect on inherent risk.d. Apply analytical procedures and consider the effect on control risk
Risk assessment procedures include audit evidence such as inquiries, inspection and observation, and confirmation. The auditor’s assessment of control risk of the client could affect the extent of the auditor’s evidence gathering procedures. Group of answer choices True, True True, False False, True False, False
If control risk is assessed at the maximum, the auditor is required to obtain knowledge about the: Design of Control Policies and Procedures Yes O No OYes O No Whether Control Policies and Procedures Have been Implemented No Yes Yes No
When the risk of material misstatement due to fraud is considered high in a particular area, which of the following is a likely response? Perform tests on an interim basis throughout the period. Obtain more reliable evidence by expanding tests to include all transactions. a. b. C. d. Obtain additional corroborative information. Design tests of controls to substantiate weaknesses.
What are the risks if the auditor concludes controls are operating effectively based on the sample and Control Risk is set too low?
Which of the following describes the circumstances that exist when an auditor assesses control risk as high? O controls are not properly designed or implemented O good internal controls are in place auditor will test the controls to verify they were effective throughout the period O auditor should test the controls
Which of the following is consistent with an assessed level of control risk at below the maximum level after completing the auditors consideration of the client's internal control over receivables? * a. Increased materiality level in selecting receivables to be confirmed and use a positive confirmation letter. b. Increased materiality level in selecting receivables to be confirmed and use a negative confirmation letter. c. Decrease materiality level in selecting receivables to be confirmed and use a negative confirmation letter. d. Decrease materiality level in selecting receivables to be confirmed and use a positive confirmation letter. e. None of the above
Which of the following is an incorrect statement? a. The amount of audit work should vary inversely with the likelihood of material misstatements existing in the accounting records. b. The better the organization’s control structure, the less likely it is that material misstatements will be present c. Complex or unusual transactions are more likely to be recorded in error than recurring or routine transactions are d. If misstatements are likely to occur in the recording process, the auditor should develop procedures to detect misstatements.
Risk of incorrect rejection is defined as _______. the risk that the auditor concludes that a material misstatement does not exist when it does exist the risk that the auditor concludes that a material misstatement exists when it does not exist the risk that an auditor incorrectly rejects a client the risk that management may reject the audit opinion issued by the auditor An advantage of statistical sampling _______. is that it allows an auditor to measure control risk is that it allows an auditor to measure sampling risk is that it allows an auditor to measure inherent risk is that it is cheaper to perform, resulting in lower audit fees for the client
Recall the definition of inherent risk. Why is it important for internal auditors to focus on inherent risk during the planning phase of an assurance engagement?
The process of looking at a procedure or process being performed by others by the auditor is called what ? Observation Inquiry Inspection None of the given options
When is the timing of substantive procedures most flexible? detection risk is assessed as low O there is a lack of an effective control environment O controls have been tested and are determined to be ineffective O controls have been tested and are determined to be effective