Question 21

3 pts

Audit risk is best defined as the _______.

Group of answer choices

risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated

element that helps form risk assessment

application of risk assessment procedures

risk of noncompliance with laws and regulations

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Question 22

3 pts

Which of the following is an amount set by the auditor that is used to make decisions about the extent of audit procedures for a particular class of transaction, account balance, or disclosure?

Group of answer choices

Planning materiality

Qualitative materiality

Overall materiality

Performance materiality

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Question 23

3 pts

From a definitional perspective, information is considered material if it _______.

Group of answer choices

only includes qualitative evidence

impacts the decision-making process of users of the financial statements

includes income statement benchmarks

is diverse in nature

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Question 24

3 pts

MNE and Associates used the benchmark of 5% of income (earnings) before income tax and came up with $9.5 million as their planning materiality for Garden, Inc. MNE also determined that planning materiality using a benchmark of 1% total assets resulted in $23 million. How should MNE decide which planning materiality amount to use?

Group of answer choices

Ultimately, the auditors must use their professional judgment to decide on the planning materiality amount, along with qualitative factors in the final assessment.

The auditors would average the two amounts because the use of two benchmarks provides greater precision.

The auditors would use the largest amount in order to detect larger material misstatements.

The auditors would use the smaller amount in order to keep with the principle of conservatism.

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Question 25

3 pts

The auditor can set detection risk as high if _________.

Group of answer choices

inherent risk is high and control risk is low

inherent risk and control risk are low

inherent risk and control risk are high

inherent risk is low and control risk is high

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Question 26

3 pts

What is control risk?

Group of answer choices

The assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration

The risk that a client's internal controls will not prevent or detect a material misstatement on a timely basis.

An audit risk assessment that involves the identification of accounts and related assertions most at risk of material misstatement

A risk that management's assertion, or claim, that recorded inventory exists

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Question 27

3 pts

Higher inherent risk traits are found where _______.

Group of answer choices

transactions or account balances are easily confirmed with reliable sources

the client's location has minimal risk of being affected by a natural disaster

transactions or account balances are derived from significant estimates

the client's industry is thriving

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Question 28

3 pts

The audit risk model is presented as _______.

Group of answer choices

AR = f (IR * CR) / DR

AR = f (IR * CR * DR)

AR = f (IR + CR - DR)

AR = f (IR + CR + DR)

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Question 29

3 pts

What are tests of controls?

Group of answer choices

Audit procedures designed for the determining the amount of time spent testing the client's internal controls and conducting detailed testing of transactions and account balances.

Audit controls for developing an audit plan that details the nature, extent, and timing of audit procedures to be performed.

Audit timelines of when audit activities occur for the audit of a client that uses a calendar year-end.

Audit procedures designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level.

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Question 30

3 pts

An audit plan details the nature, extent, and timing of audit procedures to be performed. The "extent" of audit procedures is best defined as _______.

Group of answer choices

what type of procedure will be used

when the procedure will be performed

how much testing will be done

the reliability and relevance of evidence obtained in the audit