5. Risk that the auditors procedures will lead them to conclude that a material misstatement does not exist in an assertion when in fact such misstatement does exist. (audit procedures fail to catch the misstatement).

a. control risk

b. audit risk

c. inherent risk

d. detection risk

6. The auditors of Smith Electronics believe that inherent risk is 100%, and there is a 40% risk that material misstatement could have bypassed the client's system of internal control (control risk). Detection risk is 1.25 or 125%. What is audit risk?

a. .05

b. .5

c. 500,000

d. 5

7. Audit Evidence is least reliable if:

a. obtained from inside the company

b. obtained directly from auditor observation

c. documented in media form

d. is an original documents

8. Types of audit evidence do not include

a. computations

b. physical evidence

c. data interrelationships

d. client misrepresentations and misappropriations