Audit risk is defined as which of the following in a financial statement audit?

	A.	The risk that the financial statements as a whole are materially misstated.
	B.	The risk that the auditor may not appropriately modify the opinion on materially misstated financial statements.
	C.	The risk that management will not appropriately address financial statements that the auditor determines are materially misstated.
	D.	A mathematical percentage based on how likely it is that the auditor will determine whether the financial statements are misstated.

37. Which of the following is a characteristic of an overall audit strategy?

	A.	It is developed at a high level.
	B.	It is very detailed.
	C.	It is the responsibility of junior staff members.
	D.	It cannot be developed prior to extensive risk assessment procedures.

38. Which of the following fraud-related items should be discussed at the engagement team meeting?

	A.	All the possible opportunities for fraud that exist at the financial statement date.
	B.	Reasons why management or employees are unlikely to commit fraud.
	C.	How related inquiries can be disguised to trip up any employees committing fraud.
	D.	Who has the motivation/incentive to intentionally misstate the financial statements.

39. Under AU-C 250B.06, the auditor's responsibilities for compliance with laws and regulations are split into what two categories?

	A.	Those with and those without a direct effect on financial statements.
	B.	Those required by the auditing standards and those required by the Yellow Book.
	C.	Those related to abuse and those not related to abuse.
	D.	Those related to fraud and those related to misappropriation of assets.

40. Which of the following could increase the efficiency of schedules prepared by the client (PBC)?

	A.	The client should receive the PBC list after fieldwork has begun.
	B.	Keep communication with the client limited so as not to distract them from the task.
	C.	Make sure not to ask for schedules on insignificant accounts since they may not be used.
	D.	Request for information on the simplest accounts first as they are quicker to complete.