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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Question
Chapter 9, Problem 27MCQ
To determine
Introduction:
Control risk is the chances of material misstatements in the financial statements arising owing to the absence of, or failure in the functioning of related controls that govern the activities.
To select:
Pick the right option that supports the given condition.
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Students have asked these similar questions
After the audit planning procedures, your audit team decided to place the preliminary audit risk at a high level. Which of the following is correct?
A. The risk the planned further audit procedures will not be able to detect misstatement should be increased.
B. The auditors should plan set the timing of its extensive substantive testing at year-end.
C. The audit materiality levels should be increased.
D. The auditors should plan extensive substantive testing through analytical procedures.
On the basis of audit evidence gathered and evaluated, an auditor decides to increaseassessed control risk from that originally planned. To achieve an audit risk level (AcAR)that is substantially the same as the planned audit risk level (AAR), the auditor will(1) increase inherent risk. (3) decrease substantive testing.(2) increase materiality levels. (4) decrease planned detection risk.
In performing a risk-based audit, when developing audit recommendations, the IT auditor should:
a) Use Computer Assisted Audit Techniques (CAATs) to test transactions.
b) Analyze the inherent risk, residual risk, and the cost of additional controls in relation to the potential for loss.
c) Determine if the risk is material based solely on auditor judgement.
d) Perform substantive procedures to eliminate control risk
Chapter 9 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 9 - Prob. 1TFQCh. 9 - Prob. 2TFQCh. 9 - Prob. 3TFQCh. 9 - Prob. 4TFQCh. 9 - Prob. 5TFQCh. 9 - Prob. 6TFQCh. 9 - Prob. 7TFQCh. 9 - Prob. 8TFQCh. 9 - Prob. 9TFQCh. 9 - Prob. 10TFQ
Ch. 9 - Prob. 11TFQCh. 9 - Prob. 12TFQCh. 9 - Prob. 13TFQCh. 9 - Prob. 14TFQCh. 9 - Prob. 15TFQCh. 9 - Prob. 16TFQCh. 9 - Which of the following statements is true...Ch. 9 - Prob. 18MCQCh. 9 - Prob. 19MCQCh. 9 - Prob. 20MCQCh. 9 - Prob. 21MCQCh. 9 - Prob. 22MCQCh. 9 - Prob. 23MCQCh. 9 - Prob. 24MCQCh. 9 - Which of the following statements is false...Ch. 9 - Prob. 26MCQCh. 9 - Prob. 27MCQCh. 9 - Prob. 28MCQCh. 9 - Prob. 29MCQCh. 9 - Prob. 30MCQCh. 9 - Prob. 31MCQCh. 9 - Prob. 32MCQCh. 9 - Refer to Exhibit 9.1. Which accounts are relevant...Ch. 9 - Prob. 34RSCQCh. 9 - Prob. 35RSCQCh. 9 - An important task ¡n the audit of the revenue...Ch. 9 - Prob. 37RSCQCh. 9 - Prob. 38RSCQCh. 9 - Prob. 39RSCQCh. 9 - Prob. 40RSCQCh. 9 - Prob. 41RSCQCh. 9 - Prob. 42RSCQCh. 9 - Prob. 43RSCQCh. 9 - Prob. 45RSCQCh. 9 - Prob. 46RSCQCh. 9 - Prob. 47RSCQCh. 9 - Stainless Steel Specialties (SSS) is a...Ch. 9 - Prob. 49RSCQCh. 9 - Prob. 50RSCQCh. 9 - Prob. 51RSCQCh. 9 - Prob. 52RSCQCh. 9 - Prob. 53RSCQCh. 9 - Prob. 54RSCQCh. 9 - Prob. 55RSCQCh. 9 - Prob. 56RSCQCh. 9 - Prob. 57RSCQCh. 9 - Prob. 58RSCQCh. 9 - Prob. 59RSCQCh. 9 - Prob. 60RSCQCh. 9 - Prob. 61RSCQCh. 9 - Prob. 62RSCQCh. 9 - Prob. 63RSCQCh. 9 - Prob. 64RSCQCh. 9 - Prob. 65RSCQCh. 9 - Prob. 66RSCQCh. 9 - Prob. 67RSCQCh. 9 - Prob. 68RSCQCh. 9 - Prob. 69RSCQCh. 9 - Prob. 70RSCQCh. 9 - Prob. 71RSCQCh. 9 - Read the following scenario about Strang...Ch. 9 - Prob. 73RSCQCh. 9 - Prob. 74RSCQCh. 9 - ZYNGA (LO Z 3, 4, 5, 6, 8) Refer to the Why It...Ch. 9 - Prob. 76FFCh. 9 - UTSTARCOM, INC. (LO 2, 3, 4, 5, 6, 8) UTStarcom is...Ch. 9 - Prob. 78FFCh. 9 - Prob. 79FF
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Similar questions
- Based on evidence gathered and evaluated, an auditor decides to increase the assessedlevel of control risk from that originally planned. To achieve an overall audit risklevel that is substantially the same as the planned audit risk level, the auditor could(1) decrease detection risk. (3) decrease substantive testing.(2) increase materiality levels. (4) increase inherent risk.arrow_forwardWhich of the following statements is correct concerning analytical procedures used in planning an audit engagement?a. They often replace the tests of controls that are performed to assess control risk.b. They typically use financial and nonfinancial data aggregated at a high level.c. They usually involve the comparison of assertions developed by management to ratios calculated by an auditor.d. They are often used to develop an auditor’s preliminary judgment about materiality.arrow_forwardAn auditor has completed the risk assessment process for the firm and is evaluating the results. If an auditor has determined that there is a material misstatement which is potentially due to fraud, what are the steps or actions that the auditor should take at this point?arrow_forward
- If the auditor plans to assess control risk at less than the maximum and rely on controls, and the nature, timing, and extent of further audit procedures are based on that lower assessment, the auditor musta. Obtain evidence that the controls selected for testing are designed effectively and operated effectively during the entire period of reliance.b. Assess control risk at less than the maximum for all relevant assertions.c. Perform only substantive procedures.d. Provide additional examples of responses to assessed fraud risks relating to fraudulent financial reporting.arrow_forwardAuditors make materiality judgments during the planning/risk assessment phase of the audit to be sure they ultimatelygather sufficient evidence during the audit to provide reasonableassurance that the financial statements are free of material misstatements.The lower the materiality threshold that an auditorhas for an account balance, the more the evidence that the auditormust collect. Auditors often use quantitative benchmarks such as 1% of total assets or 5% of net income to determine whethermisstatements materially affect the financial statements, but ultimatelyit is an auditor’s individual professional judgment as towhether a given misstatement is or is not considered material.a. What is the relationship between the level of riskiness of theclient and the level of misstatement in an account balancethat an auditor would consider material? For example,assume that Client A has weaker controls over accountsreceivable compared to Client B (therefore, Client A is riskierthan Client B).…arrow_forwardAfter a preliminary review of the clients, revenue and receipt transaction cycle, the auditor assessed the preliminary audit risk at a high level, which of the following additional procedures would the auditor most likely perform next: * a. Obtain evidence about the consistency of the application of the client's internal control procedures. b. Increase the overall audit materiality level. c. Perform extensive analytical procedures as substantive test at year-end. d. Increase the volume of evidence that will satisfy the auditor's sufficiency criteria. e. None of the abovearrow_forward
- explain .After documenting internal control in an audit engagement, the auditor may perform tests on Those controls that the auditor plans to rely on. Those controls in which deficiencies were identified. Those controls that have a material effect on the financial statement balances. A random sample of the controls that were reviewed.arrow_forwardThe auditor faces a risk that the audit will not detect material misstatements that occur in the accounting process. To minimize this risk, the auditor relies primarily on 1. substantive tests. 2. tests of controls. 3. internal control. 4. statistical analysis.arrow_forwardThe auditor faces a risk that the examination will not detect material misstatements in the financial statements. In regard to minimizing this risk, the auditor primarily relies on: a. Substantive tests b. Internal control c. Tests of controls d. Statistical analysisarrow_forward
- What is the primary objective of the fraud brainstorming session?a. Determine audit risk and materiality.b. Identify whether analytical procedures should be applied to the revenue accounts.c. Assess the potential for material misstatement due to fraud.d. Determine whether the planned procedures in the audit plan will satisfy the general audit objectives.arrow_forwardWhen the auditor has assessed control risk of a particular area at a reduced level, he or she will then Select one: a. eliminate the need to gather evidence in that area. b. test the effectiveness of the controls in that area. c. proceed to expand the sample sizes in that area. d. negotiate with management to determine which controls will be tested in that area.arrow_forwardThe following are concepts discussedin this chapter:1. Preliminary judgment about 7. Estimated total misstatementmateriality in a segment2. Control risk 8. Planned detection risk3. Risk of fraud 9. Estimate of the combined4. Inherent risk misstatement5. Risk of material misstatements 10. Acceptable audit risk6. Known misstatement 11. Performance materialitya. Identify which items are audit planning decisions requiring professional judgment.b. Identify which items are audit conclusions resulting from application of audit procedures and requiring professional judgment.c. Under what circumstances is it acceptable to change those items in part a. after theaudit is started? Which items can be changed after the audit is 95% completed?arrow_forward
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