MacBook Air 5 An auditor wishes to limit Audit Risk of material misstatement to 6%. She has assessed that the risk of that material Detection Risk of the audit not detecting material misstatement at 3S% What is the maximum inherent Rik that Substantive Procedures should design for?: 5. misstatements can bypass the entity's internal controls (Control Risk) to be at 28%. She also assesses a. 61.2% b. 48.3% . 38.5% d. 52.3.4% 6. 5 Which of the following is generally true about suffiency in audit evidence? When evidence is appropriate with respect to an account it is also sufficient The amount of evidence that is sufficient for a particular account varies inversely the account. The amount of evidence that is sufficient varies inversely with the acceptable risk of material misstatement. The amount of evidence that is sufficient for a particular account varies inversely with the materiality of the account. a. b. with the inherent risk of c. d. 6 Which of the followi a. b. c. 7. ng should most raise an auditor's concern about the risk of fraudulent financial reporting? Management's hesitation in increasing dividends. Existence of loss contingencies. Large amounts of retained earnings with the existence of loss contingencies. d. Inability of generating positive cash flows from operations despite reported large increases in earnings 6 An engagement letter will NOT include: a. Limitations on consulting with prior auditors. b. Inherent limitations of the audit. c. Auditor's and management's responsibilities d. Objectives and scope of the audit. 8