ACC551 Practice 2 Ch4 &5

By setting high detection risk, an auditor will

• eliminate the possibility that fraud will be detected.

• reduce the level of reliance placed on their detailed substantive procedures.

• increase the level of reliance placed on their detailed substantive procedures.

• reduce the level of testing of the client's internal control system.

Which of the following is an example of an item considered qualitatively material?

• a change in an accounting method

• related party transactions

• being in danger of breaching a debt covenant

• all of the above

When Brenda discovered she had a low risk client with low inherent risk and low control risk, how did she set her detection risk?

• low

• high

• medium

• detection risk is not related to inherent risk and control risk

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

• inherent risk and control are high.

• inherent risk and control risk are low.

• the auditor believes there is a high risk that their client's internal controls will not prevent or detect material misstatements.

• there is a high susceptibility of assertions to material misstatements.

Analytical procedures are used at which of the following stages of an audit?

• final review

• planning

• execution

• all of the above

Delaney Humphrey was explaining the importance of documentary evidence. Which assertion was she referring to when she obtained details of the price paid for inventory and traced it to the supplier’s invoice to verify the amount recorded?

• completeness

• accuracy

• classification

• none of the above

Which assertion do auditors test when they test for the adequacy of the allowance for doubtful accounts?

• accuracy, valuation, and allocation

• rights and obligations

• classification

• occurrence

Abe Freed, a struggling public accountant was being coached by his father. His father told him that he was using a poor form of evidence as a basis for his conclusions. What type of evidence was he referring to?

• computational evidence

• verbal evidence

• physical evidence through inspection

• all of the above

Evan Contador was reviewing ways of obtaining electronic evidence at Enbridge Inc. He was considering the different sources of evidence that might qualify and be defined as electronic evidence. Which elements are considered electronic evidence?

• physical evidence gathered through inspection

• computational evidence

• files sent via email to the auditor

• none of the above

Observation involves an auditor

• asking questions to gain an understanding of various matters throughout the audit.

• watching a procedure being carried out by another party.

• checking the mathematical accuracy of client records.

• redoing processes conducted by the client.