D251 ADVANCED AUDITING |142 QUESTIONS WITH 100% CORRECT ANSWERS.

Which phrase or term regarding materiality is used by the Supreme Court of the United States and is not found in FASB Concepts Statements No. 2 in light of surrounding circumstances significantly altered the total mix of information available magnitude of an omission or misstatement probable that the judgment of a reasonable person significantly altered the total mix of information available Which materiality does an auditor use when determining whether the financial statements overall are materially correct? performance materiality Specific materiality planning materiality Posting materiality performance materiality What describes the misstatements identified throughout the audit that will be considered at the end of the audit in determining whether the financial statements overall are materially correct? Posting materiality Tolerable error Overall materiality Performance materiality Posting materiality When materiality judgments change during the audit opinion formulation process, what happens to previous audit decisions that were based on evidence obtained using the initial materiality setting? The auditor repeats all audit procedures performed prior to the change in the materiality judgments. The auditor reassesses those previous audit decisions. The auditor takes no action. The auditor modifies the audit opinion to note the change in the materiality judgments. The auditor reassesses those previous audit decisions. Which factor would result in control risk being assessed at a higher level? Controls are well designed. Accounting staff are well trained and educated. There is a lack of supervision of accounting personnel. The control environment is operating effectively. There is a lack of supervision of accounting personnel. Which technique is used to analyze year-to-year comparisons of account balances? Trend analysis Ratio analysis Variance analysis Reasonableness test Trend analysis Which term describes the numerical depiction of the relationship between control risk, inherent risk, and detection risk? Risk assessment process Risk of material misstatement Data modeling Audit risk model Audit risk model Which risk factor suggests a heightened level of risk of material misstatement? Having key personnel of a company depart Having a stable product Declining a merger with another company Having few immaterial related-party transactions Having key personnel of a company depart What is the relationship between the risk of material misstatement and audit risk? Correlational Direct None Inverse Inverse What is the typical range for the setting of audit risk? 0% to 5% 0% to 10% 1% to 10% 1% to 5% 1% to 5% Which risk result would likely be achieved from using a 1% level of detection risk? A high detection risk and a low audit risk A low detection risk and a low audit risk A low detection risk and a high audit risk A high detection risk and a high audit risk A low detection risk and a low audit risk Which tests are eliminated when an auditor chooses not to rely on a client's internal controls because the control design is ineffective? Inquiries Tests of control Tests of details of balances Substantive analytical procedures Tests of control In which audit procedure would sampling be appropriate? Observation Inquiry Confirmation Analytics Confirmation What is sampling risk? When the sample does not contain characteristics representative of the sample such that inferences made about that sample are incorrect When the auditor incorrectly applies sampling methodology When the sample does not contain characteristics representative of the population such that inferences made about that population are incorrect When the sample size is larger than needed When the sample does not contain characteristics representative of the sample such that inferences made about that sample are incorrect What is the auditor most concerned with when performing sampling? Risk of incorrect rejection Risk of incorrect acceptance Risk of errors in the population Risk of excess sample size Risk of incorrect acceptance What is a factor of nonsampling risk? Using nonstatistical sampling Having a sample that does not represent the population Using a random sample selection Not carrying out the appropriate audit procedure Not carrying out the appropriate audit procedure Why do some auditors restrict the use of nonstatistical sampling? It is less risky. It is less objective. It is less efficient. It is less effective. It is less objective. What is the level at which the control's failure to operate would cause an auditor to conclude that the control is not effective and would likely change the auditor's planned assessment of control risk in performing tests of account balances? Allowable risk of assessing the control risk as too low Tolerable failure rate Expected failure rate Allowance for sampling error Tolerable failure rate