WGU - D251 Advanced Auditing UPDATED ACTUAL Questions
and CORRECT Answers
Performance Materiality is also known as ________ _. Tolerable Error
Auditor uses Performance Materiality for _______ _. Determining significant accounts, locations, and audit procedures.
Performance Materiality is what percent of Planning 75%
Materiality?
What happens is Performance Materiality is set too high? Auditor might not perform sufficient procedures to detect material misstatements.
What happens if Performance Materiality is set too low? Auditor might perform more substantive procedures than needed.
Overall Materiality is also known as _____ _. Planning Materiality
Auditors use Overall Materiality to _______ _. Determine whether financial statements overall are materially correct.
What does Posting Materiality signify? The misstatements identified throughout the audit that will be considered at the
end of the audit in determining whether the financial statements are materially
correct.
What percentage is Posting Materiality commonly set at? 5% of Planning Materiality
What is Materiality? The magnitude of an omission or misstatement of accounting information that, in
light of surrounding circumstances, makes it probable that the judgment of a
reasonable person relying on the information would have been changed or
influenced by the omission or misstatement.
What makes a fact Material? If there is a substantial likelihood that a reasonable investor would have viewed
the fact as having significantly altered the total mix of information made available.
What is the materiality level that an auditor uses for Performance Materiality
determining significant accounts, significant locations,
and audit procedures for those accounts and locations?
An auditor has determined performance materiality has The auditor should perform additional substantive audit procedures.
been set too high at the beginning of the audit. Which
procedures should this auditor consider to detect
misstatements?
Which risk exists at the overall financial statement level Risk of material misstatement
and at the assertion level and can be categorized as
involving inherent risk and control risk?
, What represents an identified and assessed risk of Significant risk
material misstatement that requires special audit
consideration?
What is the impact on the amount of acceptable audit risk The acceptable audit risk is reduced.
if an auditor believes the chance of financial failure of a
client is high?
Which factor should lead an auditor to assess inherent The account balance consists of a large number of complex transactions.
risk as high?
Which factor would lead an auditor to assess client The client's use of information technology is incompatible across systems and
business risk at a higher level? processes.
An auditor determines overall materiality of $500,000 75% of $500,000
would be material to the income statement and
$1,000,000 would be material to the balance sheet. Which
amount would an auditor typically assess performance
materiality to be for this client?
At which percentage do auditors commonly set posting 5% of planning materiality
materiality?
What is Client Business Risk? Risks affecting the business operations and potential outcomes of an
organization's activities.
What does the Risk of Material Misstatement represent? The Inherent and Control Risks
Who controls the Risk of Material Misstatement? The Client
What happens to Detection and Audit Risk when Risk of Detection Risk is lowered to reduce the Audit Risk to an acceptable level.
Material Misstatement is high?
What is Inherent Risk? The likelihood of material misstatement without considering the effects of internal
control
What is Control Risk? The risk of a misstatement occurring or not being prevented by internal controls
What is audit risk? The risk that the auditor expresses an inappropriate audit opinion when the
financial statements are materially misstated.
What is detection risk? Risk that the auditors' procedures will lead them to conclude that a material
misstatement does not exist in an assertion when in fact such misstatement does
exist.
What is the audit risk model? Audit Risk = Inherent Risk x Control Risk x Detection Risk
and CORRECT Answers
Performance Materiality is also known as ________ _. Tolerable Error
Auditor uses Performance Materiality for _______ _. Determining significant accounts, locations, and audit procedures.
Performance Materiality is what percent of Planning 75%
Materiality?
What happens is Performance Materiality is set too high? Auditor might not perform sufficient procedures to detect material misstatements.
What happens if Performance Materiality is set too low? Auditor might perform more substantive procedures than needed.
Overall Materiality is also known as _____ _. Planning Materiality
Auditors use Overall Materiality to _______ _. Determine whether financial statements overall are materially correct.
What does Posting Materiality signify? The misstatements identified throughout the audit that will be considered at the
end of the audit in determining whether the financial statements are materially
correct.
What percentage is Posting Materiality commonly set at? 5% of Planning Materiality
What is Materiality? The magnitude of an omission or misstatement of accounting information that, in
light of surrounding circumstances, makes it probable that the judgment of a
reasonable person relying on the information would have been changed or
influenced by the omission or misstatement.
What makes a fact Material? If there is a substantial likelihood that a reasonable investor would have viewed
the fact as having significantly altered the total mix of information made available.
What is the materiality level that an auditor uses for Performance Materiality
determining significant accounts, significant locations,
and audit procedures for those accounts and locations?
An auditor has determined performance materiality has The auditor should perform additional substantive audit procedures.
been set too high at the beginning of the audit. Which
procedures should this auditor consider to detect
misstatements?
Which risk exists at the overall financial statement level Risk of material misstatement
and at the assertion level and can be categorized as
involving inherent risk and control risk?
, What represents an identified and assessed risk of Significant risk
material misstatement that requires special audit
consideration?
What is the impact on the amount of acceptable audit risk The acceptable audit risk is reduced.
if an auditor believes the chance of financial failure of a
client is high?
Which factor should lead an auditor to assess inherent The account balance consists of a large number of complex transactions.
risk as high?
Which factor would lead an auditor to assess client The client's use of information technology is incompatible across systems and
business risk at a higher level? processes.
An auditor determines overall materiality of $500,000 75% of $500,000
would be material to the income statement and
$1,000,000 would be material to the balance sheet. Which
amount would an auditor typically assess performance
materiality to be for this client?
At which percentage do auditors commonly set posting 5% of planning materiality
materiality?
What is Client Business Risk? Risks affecting the business operations and potential outcomes of an
organization's activities.
What does the Risk of Material Misstatement represent? The Inherent and Control Risks
Who controls the Risk of Material Misstatement? The Client
What happens to Detection and Audit Risk when Risk of Detection Risk is lowered to reduce the Audit Risk to an acceptable level.
Material Misstatement is high?
What is Inherent Risk? The likelihood of material misstatement without considering the effects of internal
control
What is Control Risk? The risk of a misstatement occurring or not being prevented by internal controls
What is audit risk? The risk that the auditor expresses an inappropriate audit opinion when the
financial statements are materially misstated.
What is detection risk? Risk that the auditors' procedures will lead them to conclude that a material
misstatement does not exist in an assertion when in fact such misstatement does
exist.
What is the audit risk model? Audit Risk = Inherent Risk x Control Risk x Detection Risk
