1. When the ROMM (risk of material misstatement) is assessed as 'higher' by the audit team, the acceptable level of detection risk that the auditor is able to accept will be 'lower,' resulting in less substantive testing completed throughout the remainder of the audit. Instead, the auditor will focus on internal controls.

Group of answer choices

True

False

2. Management bonuses directly correlated to the company's stock performance do not typically increase the level of risk in an audit. This is because their performance is linked to the overall success of the Company, as opposed to their individual performance.

Group of answer choices

True

False

3. A first-year audit engagement is typically riskier than a recurring audit due to the challenges faced by an auditor firm to learn the day-to-day operations and nuances of the business. As such, these higher risk audits are typically staffed with more hours and a more experienced audit team.

Group of answer choices

True

False

4. Qualitative materiality risk factors, such as fraud risks, high risks of bankruptcy, and management incentive programs, typically increase the materiality threshold used in an audit.

Group of answer choices

True

False