CA Inter Audit Lec 63 & 64

315.1

Audit risk is a function of the

• a) risks of material misstatement and detection risk.

• b) audit risk and detection risk.

• c) control risk and detection risk.

• d) inherent risk and detection risk.

315.4

The assessment of risks is a

• a) matter capable of precise measurement rather than matter of professional judgment

• b) matter of professional judgement, rather than a matter capable of precise measurement.

• c) matter of professional judgement as well as capable of precise measurement sometimes.

• None of the above

315.5

The assessment of the risks of material misstatement may be expressed in

• a) quantitative terms, such as in percentages, or in non-quantitative terms.

• b) quantitative terms, such as in percentages,

• c) non-quantitative terms.

• d) None of the above

315.18

Which of the following is correct:

• a) The auditor is not expected to, and cannot, reduce audit risk to zero and cannot therefore obtain absolute assurance that the financial statements are free from material misstatement due to fraud or error.

• b) The auditor is expected to and can reduce audit risk to zero and can therefore obtain absolute assurance.

• c) The auditor is not expected to, and cannot, reduce audit risk to zero and cannot therefore obtain reasonable assurance that the financial statements are free from material misstatement due to fraud or error.

• d) The auditor is expected to and can reduce audit risk to zero and can therefore obtain reasonable assurance that the financial statements are free from material misstatement due to fraud or error.

315.20

The susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls is-

• a) Control Risk

• b) Inherent Risk

• c) Detection Risk

• d) Audit Risk

315.2

Components of risk of material misstatement at the assertion level are:

• a) Inherent risk and detection risk

• b) inherent risk and control risk

• c) control risk and detection risk

• d) inherent risk, control risk and detection risk

315.3

Risk of material misstatement may be defined as the risk

• a) that the financial statements are materially misstated after audit.

• b) that the financial statements are materially misstated during audit.

• c) that the financial statements are materially misstated prior to audit.

• d) All of the above

315.13

Risk of material misstatement has ________ components

• a) one

• b) two

• c) three

• d) four

315.10

For a given level of audit risk, the acceptable level of detection risk bears _____ relationship to the assessed risks of material misstatement at the assertion level.

• a) direct

• b) Inverse

• c) no

• d) none of the above

315.7

____ refer to the audit procedures performed to obtain an understanding of the entity and its environment, including the entity’s internal control, to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels.

• a) Audit assessment procedures

• b) substantive procedures

• c) test of control

• d)Risk assessment procedures