Auditing: A Risk Based-Approach to Conducting a Quality Audit
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
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Chapter 7, Problem 18MCQ
To determine

Introduction: Detection risk is the probability that an auditor fails to find material misstatements which might exist in the financial statements. There can be misstatements due to fraud or errors.

To choose:The option which best defines the meaning of detection risk

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Which of the following statements is correct regarding detection risk and the audit risk model? OA. The two components of detection risk are test of details risk and inherent risk. B. Detection risk is equal to risk of material misstatement divided by audit risk. OC. There is an inverse relationship between the risk of material misstatement and detection risk. OD. There is a direct relationship between control risk and detection risk.
Which of the following is appropriate about risk assessment? A. The assessed level of inherent and control risk can be sufficiently low, thus resulting to eliminating the need for substantive tests. B. Audit risk may be more effectively determined by assessing inherent and control risk separately. C. Detection risk is eliminated if an auditor were to examine 100 percent off the account balance or class of transactions. D. There is an iverse relationship between detection risk and the combined level of inherent and control risk
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.
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