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6 - 4 3 . Answer the following questions relating to the assessment of the risk of material misstatements. a . Which of the following

6-43. Answer the following questions relating to the assessment of the risk of material
misstatements.
a. Which of the following is most likely to be close to the upper end of the spectrum of inher-
ent risk?
(1) A relevant assertion.
(2) A significant risk.
(3) A reasonably possible misstatement.
(4) An inherent risk factor.b. Absent other changes, an increase in the likelihood of occurrence will have what effect on
an assertion's placement on the spectrum of inherent risk?
(1) Decrease.
(2) Increase.
(3) Indeterminate.
(4) No effect.
c. Absent other changes, an increase in likelihood of occurrence and a decrease in its
magnitude will have what effect on an assertion's placement on the spectrum of inher-
ent risk?
(1) Decrease.
(2) Increase.
(3) Indeterminate.
(4) No effect.
d. The spectrum of inherent risk is a concept most directly relating to:
(1) Determination of materiality levels.
(2) Only audits of small public companies.
(3) Significant risks relating to accounts, transactions, and balances.
(4) Whether inherent risk should be considered on an audit.
e. In identifying significant risks, which is least likely to be considered?
(1) Inherent risk factors.
(2) Internal control.
(3) Likelihood relating to inherent risk.
(4) Magnitude relating to inherent risk.
f. Which of the following is correct relating to significant risks?
(1) Analytical procedures are applied in identifying them.
(2) Detection risk determines their existence.
(3) Their existence depends upon a consideration of their likelihood and magnitude.
(4) They exist when their likelihood of occurrence is at least remote.

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