WGU - D251 Advanced Auditing Exam Questions With Verified Answers.

WGU - D251 Advanced Auditing Exam Questions With Verified Answers. Performance Materiality is also known as _____________. - answer✔✔Tolerable Error Auditor uses Performance Materiality for ___ _________. - answer✔✔Determining significant accounts, locations, and audit procedures. Performance Materiality is what percent of Planning Materiality? - answer✔✔75% What happens is Performance Materiality is set too high? - answer✔✔Auditor might not perf orm sufficient procedures to detect material misstatements. What happens if Performance Materiality is set too low? - answer✔✔Auditor might perform more substantive procedures than needed. Overall Materiality is also known as _________. - answer✔✔Planning Materiality Auditors use Overall Materiality to ___________. - answer✔✔Determine whether financial statements overall are materially correct. What does Posting Materiality signify? - answer✔✔The misstatements identified throughout the audit that will be co nsidered at the end of the audit in determining whether the financial statements are materially correct. What percentage is Posting Materiality commonly set at? - answer✔✔5% of Planning Materiality What is Materiality? - answer✔✔The magnitude of an omissio n 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? - answer✔✔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 deter mining significant accounts, significant locations, and audit procedures for those accounts and locations? - answer✔✔Performance Materiality An auditor has determined performance materiality has been set too high at the beginning of the audit. Which proced ures should this auditor consider to detect misstatements? - answer✔✔The auditor should perform additional substantive audit procedures. Which risk exists at the overall financial statement level and at the assertion level and can be categorized as involvi ng inherent risk and control risk? - answer✔✔Risk of material misstatement What represents an identified and assessed risk of material misstatement that requires special audit consideration? - answer✔✔Significant risk What is the impact on the amount of ac ceptable audit risk if an auditor believes the chance of financial failure of a client is high? - answer✔✔The acceptable audit risk is reduced. Which factor should lead an auditor to assess inherent risk as high? - answer✔✔The account balance consists of a large number of complex transactions. Which factor would lead an auditor to assess client business risk at a higher level? - answer✔✔The client's use of information technology is incompatible across systems and processes. An auditor determines overall mat eriality 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? - answer✔✔75% of $500,000 At which percentag e do auditors commonly set posting materiality? - answer✔✔5% of planning materiality What is Client Business Risk? - answer✔✔Risks affecting the business operations and potential outcomes of an organization's activities. What does the Risk of Material Miss tatement represent? - answer✔✔The Inherent and Control Risks Who controls the Risk of Material Misstatement? - answer✔✔The Client What happens to Detection and Audit Risk when Risk of Material Misstatement is high? - answer✔✔Detection Risk is lowered to reduce the Audit Risk to an acceptable level. What is Inherent Risk? - answer✔✔The likelihood of material misstatement without consi dering the effects of internal control What is Control Risk? - answer✔✔The risk of a misstatement occurring or not being prevented by internal controls What is audit risk? - answer✔✔The risk that the auditor expresses an inappropriate audit opinion when th e financial statements are materially misstated. What is detection risk? - answer✔✔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? - answer✔✔Audit Risk = Inherent Risk x Control Risk x Detection Risk What is engagement risk? - answer✔✔Risk of potential for loss to the auditor because of being associated with the client. What is the relationship between Audit Risk and Engagement Risk? - answer✔✔Inverse What percentages does Audit Risk use? - answer✔✔1%-5% What amount of evidence is needed as Detection Risk decreases? - answer✔✔More evidence is required with a lower Detection Risk What is a Significant Risk? - answe r✔✔An identified and assessed risk of material misstatement that requires special audit consideration Which has a higher Inherent Risk - Cash or Large Equipment - answer✔✔Cash - Easily stolen What are some factors that increase Inherent Risk? - answer✔✔Easily stolen, complex, estimations, high volume and nonroutine What are the 5 Transaction Assertions? - answer✔✔Occurrence, Completeness, Accuracy, Cutoff and Classification What is the Occurrence Assertion? - answer✔✔Transactions and events that have been r ecorded actually occurred and pertain to the entity. What is the Completeness Transaction Assertion? - answer✔✔All transactions and events that should have been recorded have been recorded. What is the Accuracy Transaction Assertion? - answer✔✔Amounts and other data relating to recorded transactions and events have been recorded appropriately. What is the Cutoff Transaction Assertion? - answer✔✔Transactions and events have been recorded in the correct accounting period. What is the Classification Transactio n Assertion? - answer✔✔Transactions and events have been recorded in the proper accounts. What are the 4 Balance Assertions? - answer✔✔Existence, Rights and Obligations, Completeness, and Valuation and Allocation What is the Existence Balance Assertion? - answer✔✔Assets, liabilities, and equity interests exist at a given date.