Answered: Strong internal control will increase…

Strong internal control will increase the reliability of certain types of evidence and thereby increase the overall quantity of substantive procedures performed by the auditors. True or False

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
When an audior increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most likely increase the: A. extent of tests of control B. level of detection risk C. extent of tests of detail D. Level of inherent risk
The auditors' report is influenced by the idea of materiality.
The audit risk model includes the four risks listed below. Match the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.
The requirement for an attitude of scepticism means that the auditor should A) perform additional tests of controls to increase the probability of discovering fraud or errors. B) plan and conduct the audit with an attitude of distrust in management. C) not be blind to evidence that suggests the documents, books, or records have been altered or are incorrect. D) not consider management's explanation as evidence on any subject
Why is the audit team more concerned with controlling the exposure to the risk of overreliancethan with the risk of underreliance?a. Only the risk of overreliance results in an incorrect audit decision.b. The risk of underreliance is not related to the audit team’s study and evaluation of internalcontrol.c. The risk of overreliance can ultimately result in the audit team’s failing to reduce auditrisk to acceptable levels.d. The risk of underreliance can be controlled by performing tests of controls during theinterim period.