LSU ACCT 3222: Questions With Complete Solutions
What are the three risk phases of an audit? Right Ans - 1. risk assessment
phase
2. risk response phase
3. reporting phase
gaining an understanding of the client, identifying risk factors, developing an
audit strategy, and setting planning materials Right Ans - risk assessment
phase
performing tests of contrails and detailed substantive testing of transactions
and accounting, concentrating effort where the risk of material misstatement
is greatest Right Ans - risk response phase
evaluation of the results of the detailed testing in light of the auditor's
understanding of the client and forming an opinion on the fair presentation of
the client's financial statements Right Ans - reporting phase
the determination of the amount of time spent testing the client's internal
controls and conducting detailed testing of transactions and account balances
Right Ans - audit strategy
In which phase do you develop the audit strategy? Right Ans - risk
assessment phase
In which phase do you perform testing? Right Ans - risk response phase
In which phase do you evaluate the results of testing? Right Ans - reporting
phase
In which phase do you perform an opinion? Right Ans - reporting phase
if something affects a decision made by an average prudent investor or
reasonable person it is ___ Right Ans - material
Name the two main factors of Materiality. Right Ans - Qualitative and
Quantitative
, information of misstatements that impact a user's decision-making process
for a reason other than its magnitude; nature Right Ans - qualitative
materiality
information or misstatements that exceed the magnitude of an auditor's
preliminary materiality assessment, which is a percentage of an appropriate
benchmark; magnitude Right Ans - quantitative materiality
What are the 3 general steps to determining materiality throughout the audit?
Right Ans - 1. Determine planning (overall) materiality
2. Determine performance materiality
3. Reevaluate materiality throughout the entire audit and at the conclusion of
the audit
the higher the amount for materiality, the _____ audit evidence
the lower the amount for materiality, the ___ audit evidence Right Ans - less
audit evidence (less work)
more audit evidence (more work)
Name two common assertions made by management. Right Ans -
completeness
existence of FS items
an attitude that includes a questioning mind, being alert to conditions that
may indicate possible misstatement due to fraud or error, and critical
assessment of audit evidence Right Ans - professional skepticism
the susceptibility of an assertion to a misstatement that could be material,
either individually or when aggregated with other misstatements, before
disclosure of items included in the financial statements Right Ans -
inherent risk
statement of representations, explicit or implied, made by management
regarding the recognition, and disclosure of items included in the financial
statements Right Ans - assertions
What is audit risk? Right Ans - risk auditors will give the wrong opinion
What are the three risk phases of an audit? Right Ans - 1. risk assessment
phase
2. risk response phase
3. reporting phase
gaining an understanding of the client, identifying risk factors, developing an
audit strategy, and setting planning materials Right Ans - risk assessment
phase
performing tests of contrails and detailed substantive testing of transactions
and accounting, concentrating effort where the risk of material misstatement
is greatest Right Ans - risk response phase
evaluation of the results of the detailed testing in light of the auditor's
understanding of the client and forming an opinion on the fair presentation of
the client's financial statements Right Ans - reporting phase
the determination of the amount of time spent testing the client's internal
controls and conducting detailed testing of transactions and account balances
Right Ans - audit strategy
In which phase do you develop the audit strategy? Right Ans - risk
assessment phase
In which phase do you perform testing? Right Ans - risk response phase
In which phase do you evaluate the results of testing? Right Ans - reporting
phase
In which phase do you perform an opinion? Right Ans - reporting phase
if something affects a decision made by an average prudent investor or
reasonable person it is ___ Right Ans - material
Name the two main factors of Materiality. Right Ans - Qualitative and
Quantitative
, information of misstatements that impact a user's decision-making process
for a reason other than its magnitude; nature Right Ans - qualitative
materiality
information or misstatements that exceed the magnitude of an auditor's
preliminary materiality assessment, which is a percentage of an appropriate
benchmark; magnitude Right Ans - quantitative materiality
What are the 3 general steps to determining materiality throughout the audit?
Right Ans - 1. Determine planning (overall) materiality
2. Determine performance materiality
3. Reevaluate materiality throughout the entire audit and at the conclusion of
the audit
the higher the amount for materiality, the _____ audit evidence
the lower the amount for materiality, the ___ audit evidence Right Ans - less
audit evidence (less work)
more audit evidence (more work)
Name two common assertions made by management. Right Ans -
completeness
existence of FS items
an attitude that includes a questioning mind, being alert to conditions that
may indicate possible misstatement due to fraud or error, and critical
assessment of audit evidence Right Ans - professional skepticism
the susceptibility of an assertion to a misstatement that could be material,
either individually or when aggregated with other misstatements, before
disclosure of items included in the financial statements Right Ans -
inherent risk
statement of representations, explicit or implied, made by management
regarding the recognition, and disclosure of items included in the financial
statements Right Ans - assertions
What is audit risk? Right Ans - risk auditors will give the wrong opinion
