D251 Advanced Auditing UPDATED Exam
Questions and 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 - Correct Answer- 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 - Correct Answer- 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 - Correct Answer- 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. -
Correct Answer- 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. - Correct Answer- 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 - Correct Answer- 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 - Correct Answer- 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 - Correct Answer- Having key personnel of
a company depart
, What is the relationship between the risk of material misstatement and audit risk?
Correlational
Direct
None
Inverse - Correct Answer- Inverse
What is the typical range for the setting of audit risk?
0% to 5%
0% to 10%
1% to 10%
1% to 5% - Correct Answer- 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 - Correct Answer- A low detection risk and a low
audit risk
Questions and 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 - Correct Answer- 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 - Correct Answer- 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 - Correct Answer- 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. -
Correct Answer- 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. - Correct Answer- 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 - Correct Answer- 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 - Correct Answer- 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 - Correct Answer- Having key personnel of
a company depart
, What is the relationship between the risk of material misstatement and audit risk?
Correlational
Direct
None
Inverse - Correct Answer- Inverse
What is the typical range for the setting of audit risk?
0% to 5%
0% to 10%
1% to 10%
1% to 5% - Correct Answer- 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 - Correct Answer- A low detection risk and a low
audit risk
