Question 1

Control risk is:

Accepted Answer

A)   the risk that a client's system of internal controls will prevent or detect a material misstatement.
B)   the susceptibility of an assertion to a material misstatement assuming there are no related controls.
C)   the risk that a client's system of internal controls will not prevent or detect a material misstatement.
D)   none of the above.

Question 2

When information exceeds an auditor's preliminary materiality assessment, it is deemed to be:

Accepted Answer

A)   performance materiality.
B)   specific materiality.
C)   quantitatively material.
D)   none of the above.

Question 3

Liquidity refers to:

Accepted Answer

A)   the ability of a company to earn a profit.
B)   a comparison of account balances to a single line item.
C)   the ability of a company to pay its debts when they fall due.
D)   none of the above.

Question 4

Analytical procedures are conducted at the planning stage of an audit to enhance the
understanding of the auditor's client.

Accepted Answer

A) True 
 B)False

Question 5

Sami Zubair's client does not have in place appropriate controls for a risk he has identified. What should Sami do?

Accepted Answer

A)   Conduct few or no tests of controls.
B)   Report the weaknesses to those charged with governance.
C)   Increase his reliance on substantive tests.
D)   All of the above.

Question 6

Explain the audit approach used by an auditor when they assess control risk as high.

Accepted Answer

By assessing control risk as high, an au...

Question 7

Inventory turnover measures how many times a year a company collects cash from its
debtors.

Accepted Answer

A) True 
 B)False

Question 8

If the client has one or more appropriate controls in place, the audit strategy is to conduct few
or no tests of controls for the identified risk.

Accepted Answer

A) True 
 B)False

Question 9

Trend analysis involves a comparison of account balances to a single line item.

Accepted Answer

A) True 
 B)False

Question 10

An audit strategy will include increased reliance on tests of controls when:

Accepted Answer

A)   inherent risk and control are high.
B)   inherent risk and control risk are low.
C)   the auditor believes there is a high risk that their client's internal controls will notprevent or detect material misstatements.
D)   there is a high susceptibility of assertions to material misstatements.

Question 11

Qualitative materiality refers to information that:

Accepted Answer

A)   impacts a user's decision-making process due to its magnitude.
B)   impacts a user's decision-making process for a reason other than its magnitude.
C)   is less than an auditor's preliminary materiality assessment.
D)   exceeds an auditor's preliminary materiality assessment.

Question 12

Millie Buenavista made the following two statements concerning inherent risk: (i)  Inherent risk is the risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
(ii)  Inherent risk deals with the susceptibility of the financial statements to material misstatements without considering internal controls.

Accepted Answer

A)   Both statements are correct.
B)   Neither statement is correct.
C)   Only statement (i)  is correct.
D)   Only statement (ii)  is correct.

Question 13

By setting a higher planning materiality level, an auditor increases the quality and quantity of
evidence that needs to be obtained.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements about materiality is incorrect?

Accepted Answer

A)   The preliminary assessment of materiality guides audit planning and testing.
B)   Materiality is used to guide the validity of information contained in the financial statements.
C)   Materiality is a key auditing concept that is assessed during the planning stage of every audit.
D)   Information is considered material if it has no impact on the decision-making process of financial statement users.

Question 15

An auditor has gained a detailed understanding of the client's system of internal controls and has conducted extensive tests of those controls. She later assesses control risk as low.
What is she planning to perform?

Accepted Answer

A)   a combined audit strategy
B)   an audit of financial controls
C)   a substantive audit strategy
D)   a modified audit strategy

Exam 4: Audit Planning II

Sami Zubair's client does not have in place appropriate controls for a risk he has identified. What should Sami do?

Correct Answer
verified

An auditor has gained a detailed understanding of the client's system of internal controls and has conducted extensive tests of those controls. She later assesses control risk as low. What is she planning to perform?

Correct Answer
verified

Trend analysis involves a comparison of account balances to a single line item.

Correct Answer
verified

Analytical procedures are conducted at the planning stage of an audit to enhance the understanding of the auditor's client.

Correct Answer
verified

An audit strategy will include increased reliance on tests of controls when:

Correct Answer
verified

Explain the audit approach used by an auditor when they assess control risk as high.

Correct Answer
verified
By assessing control risk as high, an au...
View Answer

By setting a higher planning materiality level, an auditor increases the quality and quantity of evidence that needs to be obtained.

Correct Answer
verified

Liquidity refers to:

Correct Answer
verified

If the client has one or more appropriate controls in place, the audit strategy is to conduct few or no tests of controls for the identified risk.

Correct Answer
verified

Control risk is:

Correct Answer
verified

When information exceeds an auditor's preliminary materiality assessment, it is deemed to be:

Correct Answer
verified

Correct Answer
verified

Qualitative materiality refers to information that:

Correct Answer
verified

Which of the following statements about materiality is incorrect?

Correct Answer
verified

Inventory turnover measures how many times a year a company collects cash from its debtors.

Correct Answer
verified

Exam 4: Audit Planning II

Sami Zubair's client does not have in place appropriate controls for a risk he has identified. What should Sami do?

Correct AnswerverifiedShow Answer

An auditor has gained a detailed understanding of the client's system of internal controls and has conducted extensive tests of those controls. She later assesses control risk as low. What is she planning to perform?

Correct AnswerverifiedShow Answer

Trend analysis involves a comparison of account balances to a single line item.

Correct AnswerverifiedShow Answer

Analytical procedures are conducted at the planning stage of an audit to enhance the understanding of the auditor's client.

Correct AnswerverifiedShow Answer

An audit strategy will include increased reliance on tests of controls when:

Correct AnswerverifiedShow Answer

Explain the audit approach used by an auditor when they assess control risk as high.

Correct AnswerverifiedBy assessing control risk as high, an au...View AnswerShow Answer

By setting a higher planning materiality level, an auditor increases the quality and quantity of evidence that needs to be obtained.

Correct AnswerverifiedShow Answer

Liquidity refers to:

Correct AnswerverifiedShow Answer

If the client has one or more appropriate controls in place, the audit strategy is to conduct few or no tests of controls for the identified risk.

Correct AnswerverifiedShow Answer

Control risk is:

Correct AnswerverifiedShow Answer

When information exceeds an auditor's preliminary materiality assessment, it is deemed to be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Qualitative materiality refers to information that:

Correct AnswerverifiedShow Answer

Which of the following statements about materiality is incorrect?

Correct AnswerverifiedShow Answer

Inventory turnover measures how many times a year a company collects cash from its debtors.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
By assessing control risk as high, an au...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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