1. Inherent risk will:

Select one:

a. have a direct effect on the level of audit work completed

b. always be set at the same level as audit risk

c. be reduced by increased audit testing

d. be assessed after control risk is assessed

2.

Which of the following would increase inherent risk?

Select one:

a. None of the given answers are correct

b. The appointment of a very successful mining CEO to head the new retail division

c. The suspension of a management compensation scheme for executives that was based on the companys share price

d. All key operating decisions are approved by the audit committee

3. Leo is the eldest son of the factory foreman of one of your firms major audit clients, Precision Machinery Limited. During vacation work, Leo is assigned to the audit of Precision Machinery. Leos work comprised testing the internal controls of the cash payments system. List any professional standards and regulatory requirements breached and discuss possible alternative courses of action the auditor should have taken in order to properly discharge their professional responsibilities.

Breaches: