A high-risk condition for the fraud risk factor 'opportunity' would be:

Select one:

large amounts of cash on hand.

known or expected future layoffs.

behaviour indicating displeasure or dissatisfaction with the company or its treatment of an employee.

that the company is close to its debt covenants.

Essential to both management and auditors is a chain of evidence in the accounting system provided by coding, cross references, and documentation connecting account balances and other summary results with original data. This chain of evidence is referred to as the:

Select one:

audit trail.

control trail.

tracing trail.

accounting trail.

The auditor has determined that, as the assessment of control risk is high, the audit strategy adopted will be the predominantly substantive approach. What is the cost of this audit likely to be?

Select one:

Cannot be determined.

High.

Low.

Moderate.

If the auditor decides to seek a further reduction in control risk, this will require them to:

Select one:

expand the scope of substantive testing during interim work.

perform additional tests of control.

rely exclusively on analytical procedures.

increase, proportionately, assessed inherent risk.

The auditor is performing substantive procedures several months before the end of the year. This most likely means that:

Select one:

detection risk is set at high.

inherent risk is set at high.

control risk is set at maximum.

none of the abov

In evaluating the sample results, the planned control risk will be supported when the projected deviation rate is:

Select one:

greater than or equal to the expected population deviation rate.

greater than or equal to the tolerable deviation rate.

less than or equal to the expected population deviation rate.

less than or equal to the tolerable deviation rate

The subsequent event that is an example of a condition occurring after the reporting date is:

Select one:

determining the proceeds of assets sold before the end of the reporting period.

realisation of recorded year-end receivables at a different amount than recorded.

purchase of a business.

settlement of recorded year-end estimated product warranty liabilities at a different amount than recorded.

The initial phase of a financial statement audit involves the acceptance decision for the client in question. Which of the following is not a consideration during this phase of the audit?

Select one:

Preparation of the engagement letter.

Determining the existence of related parties.

Ethical considerations.

Client evaluation.

Which of the following is not one of the risk assessment procedures auditors do in obtaining an understanding the entity?

Select one:

Discussions with management.

Inspecting relevant documents.

Performing substantive procedures.

Observing processes in action.

Which of these would generally be considered the least appropriate form of evidence?

Select one:

Pre-numbered sales invoices prepared by the accounts receivable clerk.

The auditor's computation of earnings per share.

Correspondence from the client's solicitor concerning litigation.

The auditor's inspection of new machinery acquisitions for the current year where the client is a computer manufacturer.