If tests of controls induce the auditor to change the assessed level of control risk for Property, Plant, and Equipment from moderate to high, and audit risk andinherent risk remain constant, the acceptable level of detection risk OOO*********Owould most likely change from low to moderate.would most likely change from moderate to high.would most likely change from moderate to low.would be unchanged, because the auditor has control over detection risk.cannot be determined because inherent risk is not given.

The detection risk is the level of risk of an auditor which is occurred in the analysis of financial…

If tests of controls induce the auditor to change the assessed level of control risk for Property, Plant, and Equipment from moderate to high, and audit risk and inherent risk remain constant, the acceptable level of detection risk

If tests of controls induce the auditor to change the assessed level of control risk for Property, Plant, and Equipment from moderate to high, and audit risk and inherent risk remain constant, the acceptable level of detection risk

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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Question

If tests of controls induce the auditor to change the assessed level of control risk for Property, Plant, and Equipment from moderate to high, and audit risk and
inherent risk remain constant, the acceptable level of detection risk

O
O
O
*********
O
would most likely change from low to moderate.
would most likely change from moderate to high.
would most likely change from moderate to low.
would be unchanged, because the auditor has control over detection risk.
cannot be determined because inherent risk is not given.

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After obtaining an understanding of an entitiy's internal control, an auditor may assess control risk at the maximum level for some assertions because he A. performs tests of controls to restrict detection risk to an acceptable level. B. identifies internal control policies and procedures that are likely to prevent material misstatements. C. believes the internal control policies and procedures are unlikely to be effective. D. determines that the pertinent internal control components are not well documented.
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.
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? O 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
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Which of the following is correct about control risk? Select one: a. None of the others b. The risk that a material misstatement could occur in a relevant assertion and not be prevented or detected on a timely basis by the entity’s internal control. c. It is an alternative to substantive testing d. It is the same as inherent risk.
Explain and Analyze whether or not the auditor is able to rely on previous audits' assessments of automated application controls, given the effectiveness of general controls.
While planning a specific audit, the PRIMARY purpose of assessing risks of the area under review is to provide reasonable assurance that material items will be adequately covered during the audit work. a) True b) False
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The difference between assessing control risk for IT control activities versus assessing control risk for manual control activities is best described as follows: Multiple Choice О in a manual environment it is important for the auditor to gain an understanding of the internal control activity before assessing control risk. О in an IT environment, it is not important to gain an understanding of the internal control activity before assessing control risk. О In an IT environment, it is likely that control risk will be assessed as low on largely all audit engagements. О the assessment process that needs to be undertaken for IT controls is essentially the same as would be taken for manual controls.