The auditor's opinion indicates that the financial statements are O fairly stated. O true and correct. O true and fair. correct. Which of the following describes an accounting estimate? O only disclosed in the notes, not recorded in the statements. O known amount. O calculated based on the company's future budgets. O includes estimation uncertainty. A low volume of cash flow close to year end may indicate O increased profitability. O increased expenses. a going concern risk. O increased revenues. Which of the following factors indicate a lower estimation uncertainty? amount is very subjective. O estimate requires numerous assumptions. objective data is available to support estimate. O complex valuation model used to develop the estimate. The auditor should gather evidence about corporate governance practices to discuss with the audit team. evaluate effectiveness and make a judgement on the fair presentation of the financial statements. discuss with those charged with governance. make a judgement of corporate governance and issue an audit report. Inadequate closing procedures result in financial statements not being reviewed by those charged with governance. O the auditor performing more detailed testing at year end. O transactions being recorded in the appropriate accounting period. O financial statements not being produced. Related party transactions that require disclosure include related party purchase and sale transactions, rent paid to landlord, loans, and loan guarantees. purchase and sale transactions, related party rent paid, related party loans, and loan guarantees. related party purchase and sale transactions, related party rent paid, loans, and loan guarantees. O related party purchase and sale transactions, related party rent paid, related party loans, and shareholder loan guarantees. An unmodified audit opinion reflects that the financial statements are materially misstated. O correct. accurate. O fairly stated. The extensive use of IT systems by a client increases audit risk and the amount of evidence required. reduces audit work. O increases audit risk. reduces audit risk. The extensive use of IT systems by a client increases audit risk and the amount of evidence required. O reduces audit work. O increases audit risk. reduces audit risk. The responsibility for making a going concern assessment is that of those parties charged with governance at the company. auditing the company. O internal controls at the company. O accounting at the company. The performing stage of the audit involves testing of controls, detailed tests of transactions, and detailed substantive tests of year-end balances. O calculating planning materiality, testing of controls, and tests of transactions and balances. calculating final materiality, testing of controls, and tests of transactions and balances. testing of controls (if planning reliance), detailed tests of transactions throughout the year, and detailed substantive tests of year-end balances. The auditor should gather evidence about IT controls to Omake a judgement of reliance on IT controls and issue an audit report. discuss with those charged with governance. O evaluate effectiveness and make a judgement on the potential of material misstatement of the financial statements. O discuss with the audit team. The auditor should gather evidence about IT controls to make a judgement of reliance on IT controls and issue an audit report. O discuss with those charged with governance. O evaluate effectiveness and make a judgement on the potential of material misstatement of the financial statements. O discuss with the audit team. In an economic downturn, the more competitive the client's industry is, the more the auditor is concerned with financing options of the client. O impact on profits of the client. reputation of the client. going concern of the client. The auditor should gather evidence about closing procedures to O make a judgement of reliance on closing procedures and issue an audit report. O discuss with those charged with governance. evaluate effectiveness and make a judgement on the potential of material misstatement of the financial statements. discuss with the audit team. Sufficient, appropriate evidence is obtained through risk assessment, risk response, and reporting. O risk assessment, audit strategy, and risk response. O risk assessment, audit strategy, and execution of the audit. O risk assessment, risk planning, and reporting. The auditor understands the client at the entity, economy, and industry levels to O plan the time required to audit the client. O identify the risks associated with the client. Oplan the audit team required. O identify the risks of material misstatement in the client's financial statements. Related party transactions O increase risk of material misstatement due to fraud and error, and have no impact on the overall financial statements. O decrease risk of material misstatement due to fraud and error, and have no impact on the overall financial statements. O decrease risk of material misstatement due to fraud and error, and may impact the overall financial statements. O increase risk of material misstatement due to fraud and error, and may impact the overall financial statements. The auditor evaluates the IT risks when the client has an established IT system. O it is required by CAS 351. the auditor is formulating an opinion. O the auditor is aware of fraud and error. Internal controls, properly designed and implemented, may O reduce the risk of misstatement as a result of related party transactions. detect overstatement of revenues and understatement of expenses. O reduce the risk of related party transactions. O eliminate the risk of misstatement as a result of related party transactions. Auditors test the adequacy of closing procedures by O reviewing monthly and quarterly financial statements. O discussing with the board of directors. O discussing with management. reviewing annual financial statements