ADVANCED AUDITING D251 - UNIT 2 |47 QUESTIONS AND ANSWERS 2023.

Which phrase or term regarding materiality is used by the Supreme Court of the United States and is not found in the FASB Concepts Statements No. 2? - Probably that the judgment of a reasonable person - Significantly altered the total mix of information available - Magnitude of an omission or misstatement - In light of surrounding circumstances 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 - Planning - Specific - Posting Planning What describes 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? - Performance Materiality - Overall Materiality - Tolerable error - Posting Materiality Posting materiality When materiality judgements 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 modifies the audit opinion to note the change in the materiality judgements - The auditor takes no action - The auditor repeats all audit procedures performed prior to the change in the materiality judgements - The auditor reassess those previous audit decisions The auditor reassesses those previous audit decisions Which factor would result in control risk being assessed at a higher level? - Controls are well designed - The control environment is operating effectively - Accounting staff are well trained and educated - There is a lack of supervision of accounting personnel There is a lack of supervision of accounting personnel Which technique is used to analyze year-to-year comparisons of account balances? - Ratio analysis - Reasonableness test - Variance analysis - Trend Analysis Trend Analysis Which term describes the numerical depiction of the relationship between control risk, inherent risk, and detection risk? - Risk of material misstatement - Data modeling - Risk assessment process - 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 - Declining a merger with another company - Having a stable product - 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? - Direct - Inverse -Correlational - None Inverse What is the typical range for the setting of audit risk? - 0% to 10% - 1% to 5% - 0% to 5% - 1% to 10% 1% to 5% Which risk result would likely be achieved from using a 1% level of detection risk? - A high detection risk and low audit risk - A low detection risk and high audit risk - A low detection risk and low audit risk - A high detection risk and high audit risk A low detection risk and 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 - Substantive Analytical Procedures - Tests of details of balances - Test of Controls In which audit procedure would sampling be appropriate? - Analytics - Inquiry - Observation - Confirmation Confirmation What is sampling risk? - When the sample does not contain characteristics representative of the population such that inferences made about that population are incorrect - When the auditor incorrectly applies sampling methodology - 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 - 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 errors in the population - Risk of incorrect acceptance - Risk of incorrect rejection - Risk of excess sample size Risk of incorrect acceptance What is a factor of nonsampling risk? - Using nonstatistical sampling - Using a random sample selection - Not carrying out the appropriate audit procedure - Having a sample that does not represent the population Not carrying out the appropriate audit procedures Why do some auditors restrict the use of nonstatistical sampling? - It is less efficient. - It is less effective. - It is less risky. - It is less objective. 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 Which statistical sampling method is most commonly used to test control procedures? -Dollar-unit sampling -Ratio estimation sampling -Attribute sampling -Variable sampling Attribute Sampling What varies directly with the sample size? -The expected failure rate -The non-sampling risk -The tolerable failure rate -The risk of overreliance The expected failure rate Which approach is using a systematic selection when selecting a sample for attribute testing? -Every nth item is selected after a random start. -All items are selected on a day or week. -An item is arbitrarily selected with no conscious bias. -Each item in the population has an equal chance of selection. -Every nth item is selected after a random start What should an auditor do when the results of sample testing conclude that there is a misstatement in excess of the tolerable misstatement? -Propose adjustments to the client -Disclose the misstatement in the client's financial statements -Throw out the sample -Issue a disclaimer of opinion Propose adjustments to the client Which monetary amount is set by an auditor in order to obtain an appropriate level of assurance that the set monetary amount is not exceeded by the actual misstatement in the population? -Expected -Factual -Projected -Tolerable Tolerable