1) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the A) inherent risk. B) acceptable audit risk. C) statistical risk. D) financial risk. 2) The first phase in planning an audit and designing an audit approach is to A) accept the client and perform initial audit planning. B) set the preliminary judgment of materiality. C) understand the client's business and industry. D) perform preliminary audit procedures. 3) is the risk that the financial statements contain a material misstatement due to fraud or error prior to the audit. A) Inherent risk B) Client business risk C) Acceptable audit risk D) Risk of material misstatement 4) The auditor uses knowledge gained from the understanding of the client's business and industry to assess A) client business risk. B) control risk inherent risk D) audit risk 5) When selecting staff for the audit engagement, A) only staff members who are CPAs should be assigned to the audit. B) only managers and above need to have appropriate competence and capabilities to perform the audit. C) continuity of staff members from year to year should not be a factor. D) staff assigned to the audit must be knowledgeable about the client's industry 6) In order to obtain an understanding of the client's business, the audit firm will consider A) inherent and control risk of the client. B) audit risk to the CPA firm. C) the client's business risk and the risk of material misstatements in the financial statements. D) the CPA firm's potential ongoing revenue from the audit client. 7) Which of the following is part of planning? A) Set materiality for the financial statements as a whole. B) Estimate total misstatement in the segment. C) Estimate the combined misstatement. D) Compare the combined estimated with preliminary judgment