Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 32MCQ
To determine
Introduction: Audit evidence is the proof that an auditor tries to seek from an organization in order to claim that the assertions related to financial transactions are correct.
To select: The correct statement regarding thehigh level of risk of material misstatement due to management estimates in accounting.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
When evaluating audit findings, the auditor should consider any potential bias in management's
judgement. Which if the these is not included in an auditor's concerns.
1. Management's bias in estimation calculations
2. Management's bias in accounting policies
3. Management's bias in detection risk
4. Management's bias in adjusting entry calculations
In a financial statement audit, inherent risk represents
a. The risk that misstatements could occur and not be detected by the auditor's procedures.
b. The risk that misstatements could occur and not be prevented or detected by the system of internal control.
c. The risk that the auditor fails to modify materially misstated financial statements.
d. The susceptibility of an account balance to misstatement that could be material.
The risk that a client's financial statements are susceptible to material misstatements is
a. control risk
b. inherent risk
c. audit risk
d. none of the above
Chapter 6 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 6 - Prob. 1TFQCh. 6 - Prob. 2TFQCh. 6 - Prob. 3TFQCh. 6 - Prob. 4TFQCh. 6 - Prob. 5TFQCh. 6 - Prob. 6TFQCh. 6 - Prob. 7TFQCh. 6 - Prob. 8TFQCh. 6 - Prob. 9TFQCh. 6 - Prob. 10TFQ
Ch. 6 - Prob. 11TFQCh. 6 - Prob. 12TFQCh. 6 - Prob. 13TFQCh. 6 - Prob. 14TFQCh. 6 - Prob. 15TFQCh. 6 - Prob. 16TFQCh. 6 - Prob. 17TFQCh. 6 - Prob. 18TFQCh. 6 - Prob. 19TFQCh. 6 - Prob. 20TFQCh. 6 - Prob. 21MCQCh. 6 - Prob. 22MCQCh. 6 - Prob. 23MCQCh. 6 - Prob. 24MCQCh. 6 - Prob. 25MCQCh. 6 - Prob. 26MCQCh. 6 - Prob. 27MCQCh. 6 - Prob. 28MCQCh. 6 - Prob. 29MCQCh. 6 - Prob. 30MCQCh. 6 - Prob. 31MCQCh. 6 - Prob. 32MCQCh. 6 - Prob. 33MCQCh. 6 - Prob. 34MCQCh. 6 - Prob. 35MCQCh. 6 - Prob. 36MCQCh. 6 - Prob. 37MCQCh. 6 - Prob. 38MCQCh. 6 - Prob. 39MCQCh. 6 - Prob. 40MCQCh. 6 - Prob. 41RSCQCh. 6 - Prob. 42RSCQCh. 6 - Prob. 43RSCQCh. 6 - Prob. 44RSCQCh. 6 - Refer to Exhibit 6.2 and describe the differences...Ch. 6 - Prob. 46RSCQCh. 6 - Prob. 48RSCQCh. 6 - Prob. 49RSCQCh. 6 - Prob. 50RSCQCh. 6 - Prob. 51RSCQCh. 6 - Prob. 52RSCQCh. 6 - Prob. 53RSCQCh. 6 - Indicate how the auditor could use substantive...Ch. 6 - Prob. 55RSCQCh. 6 - Prob. 56RSCQCh. 6 - Prob. 57RSCQCh. 6 - Prob. 58RSCQCh. 6 - Prob. 59RSCQCh. 6 - Prob. 60RSCQCh. 6 - Prob. 61RSCQCh. 6 - Prob. 62RSCQCh. 6 - Prob. 63RSCQCh. 6 - Prob. 64RSCQCh. 6 - Prob. 65RSCQCh. 6 - Prob. 66RSCQCh. 6 - Prob. 67RSCQCh. 6 - Prob. 68RSCQCh. 6 - Prob. 69FFCh. 6 - Prob. 70FFCh. 6 - Prob. 71FFCh. 6 - Prob. 72FFCh. 6 - MINISCRIBE (LO 1, 2) As reported in the Wall...
Knowledge Booster
Similar questions
- When evaluating an internal control deficiency as part of a financial statement audit, the primary difference between a significant deficiency and a material weakness depends on: Multiple Choice whether there is a reasonable possibility that the company's internal control system will fail to prevent or detect and correct a misstatement of an account balance or disclosure. whether a misstatement has actually occurred as a result of the deficiency or the deficiencies. the magnitude of the potential misstatement resulting from the deficiency or the deficiencies. All of the choices are correct.arrow_forwardWith respect to fraudulent financial reporting, which one of the following statements is not correct? a.The risk that the auditor will not detect misstatement due to management fraud is greater than those due to employee fraud. b.It is difficult for the auditor to determine if misstatements in accounting estimates are caused by fraud or error. c.When the audit is properly planned and performed in accordance with ISAs, material misstatements are guaranteed to be detected by the auditor. d.Excessive pressure on management to meet expectations of third parties creates incentives forarrow_forwardtch 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.arrow_forward
- Master accountingarrow_forwardWhich report would not be appropriate for a public accounting firm to provide on financial reporting controls?a. Unqualified—no material weaknesses found.b. Disclaimer of opinion—unable to perform all necessary procedures.c. Disclaimer of opinion—significant deficiencies exist.d. Adverse—material weaknesses exist.arrow_forwardThe risk of a material misstatement in the financial statements arising due to error or omission as a result of factors other than the failure of controls is called: a. Control Risk b. Inherent Risk c. Audit Risk d. Detection Riskarrow_forward
- From the options given below which of the following is not the reason of inherent limitation of audit? a. Limitation in accounting system O b. Use of human judgment O c. Poor planning O d. Human errorsarrow_forwardWhich statement is false? a. If control risk is assessed as low, the auditor cannot plan on relying on the controls to increase substantive procedures for account balances. b. The auditor will not perform tests of controls; instead, the auditor must plan for substantive procedures, without relying on the client's internal controls. c. Based on obtaining an understanding through risk assessment procedures, the auditor assesses control risk ranging from high (weak controls) to low (strong controls). d. Assessing control risk as high means the auditor does not have confidence that internal controls will prevent or detect material misstatements; assessing control risk as low has the opposite implication.arrow_forwardDetection risk is the risk that a client's system of internal controls will not prevent or detect a material misstatement. O the auditor's procedures will not be effective in detecting a material misstatement. O an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. the financial statements are susceptible to a material misstatement.arrow_forward
- would you say that material mistakes found in a financial statement could lead to the auditors being held liable?arrow_forwardWhich is not a Risk Assessment Procedure? a. Ratio Analysis b. Observation of Activities c. Account Receivable confirmations d. Inspection of Documents e. Inquiry of Internal Auditorsarrow_forwardWhen evaluating whether accounting estimates made by management are reasonable, the audit team would be most interested in which of the following?a. Key factors that are consistent with prior periods.b. Assumptions that are similar to industry guidelines.c. Measurements that are objective and not susceptible to bias.d. Evidence of a conservative systematic bias.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage