WGU D251 ADVANCED AUDITING 2024 NEWEST TEST AND
PRACTICE QUESTIONS WITH DETAILED VERIFIED
ANSWERS (100% CORRECT) GRADE A+
Examples of client business risks - (correct answer) lacks personnel or expertise
to deal with industry changes; uncertain likelihood of success of new offerings;
incompatible information technology across systems; poorly implemented new
business strategy
Audit Risk Model Formula - (correct answer) Audit Risk = Inherent Risk x Control
Risk x Detection Risk
Inherent risks - (correct answer) Normal risks of doing business, not always
controllable. Such as cash is high risk of theft, subjective valuation for book value of
assets, high volume of non-routine transactions
Control risk - (correct answer) The risk that a material misstatement that could
occur in an account will not be prevented or detected on a timely basis by internal
controls
Detection risk - (correct answer) The risk of not detecting material misstatements;
the only part of the audit risk formula an auditor can control
Audit sampling - (correct answer) looking at less than 100% of the transactions that
occurred during the audit period; used to test operations of controls and accuracy of
account balances
Data analytics tools - (correct answer) Software programs that can test 100% of
the population to use qualitative and quantitative techniques and processes to identify
risk areas and patterns
Nonsampling risk - (correct answer) Risk that the auditor reaches an erroneous
conclusion for any reason not related to sampling risk
Sampling risk - (correct answer) Risk that auditor's conclusion based on a sample
might be different than would be reached if procedure was applied to entire population
Risk of incorrect acceptance of internal controls - (correct answer) Risk that
auditor will conclude internal controls are effective when they are not; also known as
assessing control risk too low or the risk of over-reliance
Performance Materiality - (correct answer) Tolerable error; used to determine
significant accounts, locations, and audit procedures for those accounts and locations
, What should an auditor do if they discover performance materiality has been set too
high? - (correct answer) Perform additional substantive procedures
Overall materiality - (correct answer) Planning materiality; used as a guide and
decision aid to assist in making consistent judgments; determining whether financial
statements over all are materially correct.
Posting materiality - (correct answer) Misstatements identified throughout the
audit to be considered at the end of the audit to determine if the financial statements
are overall materially correct
Considerations when setting materiality - (correct answer) statement items users
will focus on; nature of client and industry; size of client; client financing; benchmark
volatility
Client business risks - (correct answer) Risks affecting the business operations
and potential outcomes of an organization's activities; likely pervasive across
organization; can affect risk of material misstatement
Risk of incorrect rejection of internal controls - (correct answer) Risk that auditor
will conclude the internal controls are not effective when they are; also known as
assessing control risk too high or risk of under-reliance
Risk of incorrect acceptance of book value - (correct answer) Risk auditor will
conclude account balance does not contain material misstatement when it does
Risk of incorrect rejection of book value - (correct answer) Risk auditor will
conclude the account balance contains material misstatement when it does not
Statistical sampling - (correct answer) Probability sampling method; uses an
objective method to determine sample size and select items
Nonstatistical sampling - (correct answer) Uses auditor's judgment to select
sample of items
Attributes sampling - (correct answer) Used to estimate the rate of control
procedure failures based on a sample audited for an attribute (characteristic)
Stratification - (correct answer) Dividing a population into subgroups
Monetary Unit Sampling (MUS) - (correct answer) Sampling method based on
attributes, but involving dollar misstatements rather than control failure rates
PRACTICE QUESTIONS WITH DETAILED VERIFIED
ANSWERS (100% CORRECT) GRADE A+
Examples of client business risks - (correct answer) lacks personnel or expertise
to deal with industry changes; uncertain likelihood of success of new offerings;
incompatible information technology across systems; poorly implemented new
business strategy
Audit Risk Model Formula - (correct answer) Audit Risk = Inherent Risk x Control
Risk x Detection Risk
Inherent risks - (correct answer) Normal risks of doing business, not always
controllable. Such as cash is high risk of theft, subjective valuation for book value of
assets, high volume of non-routine transactions
Control risk - (correct answer) The risk that a material misstatement that could
occur in an account will not be prevented or detected on a timely basis by internal
controls
Detection risk - (correct answer) The risk of not detecting material misstatements;
the only part of the audit risk formula an auditor can control
Audit sampling - (correct answer) looking at less than 100% of the transactions that
occurred during the audit period; used to test operations of controls and accuracy of
account balances
Data analytics tools - (correct answer) Software programs that can test 100% of
the population to use qualitative and quantitative techniques and processes to identify
risk areas and patterns
Nonsampling risk - (correct answer) Risk that the auditor reaches an erroneous
conclusion for any reason not related to sampling risk
Sampling risk - (correct answer) Risk that auditor's conclusion based on a sample
might be different than would be reached if procedure was applied to entire population
Risk of incorrect acceptance of internal controls - (correct answer) Risk that
auditor will conclude internal controls are effective when they are not; also known as
assessing control risk too low or the risk of over-reliance
Performance Materiality - (correct answer) Tolerable error; used to determine
significant accounts, locations, and audit procedures for those accounts and locations
, What should an auditor do if they discover performance materiality has been set too
high? - (correct answer) Perform additional substantive procedures
Overall materiality - (correct answer) Planning materiality; used as a guide and
decision aid to assist in making consistent judgments; determining whether financial
statements over all are materially correct.
Posting materiality - (correct answer) Misstatements identified throughout the
audit to be considered at the end of the audit to determine if the financial statements
are overall materially correct
Considerations when setting materiality - (correct answer) statement items users
will focus on; nature of client and industry; size of client; client financing; benchmark
volatility
Client business risks - (correct answer) Risks affecting the business operations
and potential outcomes of an organization's activities; likely pervasive across
organization; can affect risk of material misstatement
Risk of incorrect rejection of internal controls - (correct answer) Risk that auditor
will conclude the internal controls are not effective when they are; also known as
assessing control risk too high or risk of under-reliance
Risk of incorrect acceptance of book value - (correct answer) Risk auditor will
conclude account balance does not contain material misstatement when it does
Risk of incorrect rejection of book value - (correct answer) Risk auditor will
conclude the account balance contains material misstatement when it does not
Statistical sampling - (correct answer) Probability sampling method; uses an
objective method to determine sample size and select items
Nonstatistical sampling - (correct answer) Uses auditor's judgment to select
sample of items
Attributes sampling - (correct answer) Used to estimate the rate of control
procedure failures based on a sample audited for an attribute (characteristic)
Stratification - (correct answer) Dividing a population into subgroups
Monetary Unit Sampling (MUS) - (correct answer) Sampling method based on
attributes, but involving dollar misstatements rather than control failure rates
