ACC 406 t/f Questions and Answers|2025 Revised
Update | 100% Correct Complete Solutions
The FASB definition of materiality is stated in explicit quantitative terms.
False
Preliminary judgments about materiality are set for planning purposes and
may be changed as the audit progresses.
True
In audit planning, the auditor should recognize that there may be several
levels of materiality.
True
The auditor's preliminary judgment about materiality cannot be made
before the financial statement date, when annual amounts become known.
False
Materiality judgments involve both quantitative and qualitative
considerations.
True
Industry-wide data is relevant to the development of analytical procedures
for a specific client.
True
, Inquiries of management are usually sufficient to resolve significant
differences between results and expectations that are the result of analytical
procedures.
False
Analytical procedures often provide the auditor with clues about whether
an account is more likely to be overstated or understated.
True
The primary reason for performing analytic procedures in audit planning is
to identify accounts that may contain misstatements and to design an audit
that will respond to the risk of material misstatement.
True
Free Cash Flow = Cash Flow from Operations - Capital Expenditures.
True
Inventory Turnover (in days) = Inventory / Cost of Goods Sold x 365
True
Return on Equity = Assets Turnover x Profit Margin.
False
Gross Operating Cycle = AR Turnover x Inventory Turnover.
False
Update | 100% Correct Complete Solutions
The FASB definition of materiality is stated in explicit quantitative terms.
False
Preliminary judgments about materiality are set for planning purposes and
may be changed as the audit progresses.
True
In audit planning, the auditor should recognize that there may be several
levels of materiality.
True
The auditor's preliminary judgment about materiality cannot be made
before the financial statement date, when annual amounts become known.
False
Materiality judgments involve both quantitative and qualitative
considerations.
True
Industry-wide data is relevant to the development of analytical procedures
for a specific client.
True
, Inquiries of management are usually sufficient to resolve significant
differences between results and expectations that are the result of analytical
procedures.
False
Analytical procedures often provide the auditor with clues about whether
an account is more likely to be overstated or understated.
True
The primary reason for performing analytic procedures in audit planning is
to identify accounts that may contain misstatements and to design an audit
that will respond to the risk of material misstatement.
True
Free Cash Flow = Cash Flow from Operations - Capital Expenditures.
True
Inventory Turnover (in days) = Inventory / Cost of Goods Sold x 365
True
Return on Equity = Assets Turnover x Profit Margin.
False
Gross Operating Cycle = AR Turnover x Inventory Turnover.
False
