Audit Exam 2 Questions And Answers
2026 Update!!!
Which of the following concepts are pervasive in
Materiality and audit risk
the application of auditing standards?
The existence of audit risk is recognized by the Obtains reasonable assurance about whether
statement in the auditor's standard report that the financial statements are free of material
the auditor misstatement.
Risk of material misstatement refers to a
combination of which two components of the Inherent risk and control risk.
audit risk model?
As lower acceptable levels of both audit risk and
materiality are established, the auditor should Find smaller errors.
plan more work on individual accounts to
Which of the following characteristics most likely
would heighten an auditor's concern about the Management places substantial emphasis on
risk of intentional manipulation of financial meeting earnings projections.
statements?
Which of the following is a misappropriation of An employee of a consumer electronics store
assets? steals 12 CD players.
Auditing standards require auditors to make
Whether management has any knowledge of
certain inquiries of management regarding
fraud that has been perpetrated on or within the
fraud. Which of the following inquiries is
entity.
required?
Company management falsifies the inventory
Which of the following is an example of
count, thereby overstating ending inventory and
fraudulent financial reporting?
understating cost of sales.
When is a duty to disclose fraud to parties other
In response to inquiries from a successor
than entity's senior management and its audit
auditor.
committee most likely to exist?
, Fraud that involves senior management should
Which of the following is correct concerning
be reported directly by the auditor to the audit
required auditor communications about fraud?
committee regardless of the amount involved.
2026 Update!!!
Which of the following concepts are pervasive in
Materiality and audit risk
the application of auditing standards?
The existence of audit risk is recognized by the Obtains reasonable assurance about whether
statement in the auditor's standard report that the financial statements are free of material
the auditor misstatement.
Risk of material misstatement refers to a
combination of which two components of the Inherent risk and control risk.
audit risk model?
As lower acceptable levels of both audit risk and
materiality are established, the auditor should Find smaller errors.
plan more work on individual accounts to
Which of the following characteristics most likely
would heighten an auditor's concern about the Management places substantial emphasis on
risk of intentional manipulation of financial meeting earnings projections.
statements?
Which of the following is a misappropriation of An employee of a consumer electronics store
assets? steals 12 CD players.
Auditing standards require auditors to make
Whether management has any knowledge of
certain inquiries of management regarding
fraud that has been perpetrated on or within the
fraud. Which of the following inquiries is
entity.
required?
Company management falsifies the inventory
Which of the following is an example of
count, thereby overstating ending inventory and
fraudulent financial reporting?
understating cost of sales.
When is a duty to disclose fraud to parties other
In response to inquiries from a successor
than entity's senior management and its audit
auditor.
committee most likely to exist?
, Fraud that involves senior management should
Which of the following is correct concerning
be reported directly by the auditor to the audit
required auditor communications about fraud?
committee regardless of the amount involved.
