Question 1

During the planning process,the auditor determines the overall audit strategy for the audit.This strategy establishes the scope,timing,and direction of the audit and guides the auditor when he prepares the audit plan.

Accepted Answer

The overall audit strategy determines the scope, timing, and direction of the audit and guides the preparation of the audit plan.

Question 2

The audit plan will be used to gather sufficient appropriate evidence to reduce audit risk to a near zero level.

Accepted Answer

The audit plan is designed to gather sufficient appropriate evidence to reduce audit risk to an acceptable level, but not necessarily to a near zero level as there is always some level of inherent risk in any audit.

Question 3

Audit risk determines the amount of evidence gathered.The amount of evidence gathered determines the audit fees.

Accepted Answer

This statement is true. Audit risk is the risk of material misstatement in the financial statements, and the level of audit risk determines the amount of evidence that the auditor gathers. The higher the audit risk, the more evidence the auditor needs to gather to reduce the risk to an acceptably low level. This, in turn, affects the audit fees, as more evidence gathering requires more audit hours and resources, which increases the cost of the audit.

Question 4

A material misstatement is an error or fraud in the financial statements that might cause a user of the financial statements to change his opinion about the company.

Accepted Answer

The answer of A material misstatement is an error or...

Question 5

Which of the following statements is correct about the objective of the audit process?
A)Generally accepted auditing standards require the auditor to obtain reasonable assurance about whether the financial statements are free from material misstatements.
B)Assurance is obtained by the auditor when he has obtained sufficient appropriate audit evidence to reduce audit risk to an acceptably low level.
C)A misstatement is an error or fraud in the financial statements that might cause a user of the financial statements to change his decision about the company.
D)Sufficient appropriate audit evidence refers to the persuasiveness of the evidence gathered.

Accepted Answer

The objective of an audit is to obtain reasonable assurance that the financial statements are free from material misstatements, as required by generally accepted auditing standards.

Question 6

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America or international financial reporting standards.

Accepted Answer

According to the generally accepted accounting principles, management is responsible for ensuring that the financial statements are prepared accurately and presented fairly.

Question 7

The purpose of the audit is to increase the level of confidence that users of financial statements can place on financial statements.

Accepted Answer

The purpose of an audit is to provide assurance to users of financial statements that the financial statements are presented fairly and in accordance with relevant accounting standards. By doing so, the level of confidence that users can place on the financial statements is increased.

Question 8

The auditing standards determine how an auditor describes if the procedures for an audit are present.

Accepted Answer

Auditing standards guide how an auditor conducts an audit, including planning, executing, and reporting on the findings, rather than describing if procedures are present.

Question 9

The auditing standards describe how an auditor determines if the preconditions for an audit are present.Which of the following would be a precondition for an audit?
A)The auditor obtains the agreement of management that it acknowledges and understands its responsibility for the preparation of the financial statements in accordance with the financial reporting framework.
B)The auditor obtains the agreement from management that it acknowledges and understands its responsibility for internal controls so financial statements can be prepared free of material misstatement.
C)The auditor obtains the agreement of management that it agrees to provide the auditor with all information that management is aware of that might be relevant to the preparation of the financial statements.
D)The auditor determines whether the financial reporting framework (the set of internal control standards)used by the client to prepare the financial statements is acceptable.

Accepted Answer

The answer of The auditing standards describe how an auditor...

Question 10

Relevant assertions are assertions made by the auditor about the financial statements of the company that have a reasonable possibility of containing a misstatement that would cause the statements to be misstated.

Accepted Answer

Relevant assertions are made by management, not the auditor, about the financial statements and are those that have a reasonable possibility of containing a misstatement that could affect the financial statements.

Question 11

The auditor should document the audit strategy in the audit report containing the key decisions about the scope,timing,and conduct of the audit.

Accepted Answer

The audit strategy should be documented in the working papers, not in the audit report. The audit report should only contain the overall conclusion and results of the audit.

Question 12

Which of the following are the three main parts of the audit process?
A)(1)The planning process, (2)The testing process,and (3)The reporting process.
B)(1)The planning process, (2)The testing process,and (3)The decision process.
C)(1)The planning process, (2)The evaluation process,and (3)The decision process.
D)(1)The risk assessment process, (2)The testing process,and (3)The decision process.

Accepted Answer

The answer of Which of the following are the three...

Question 13

The auditing standards describe how an auditor determines if the preconditions for an audit are present.Which of the following would be a precondition for an audit?
A)The auditor obtains the agreement of management that it acknowledges and understands its responsibility for the issuing of the financial statements in accordance with the financial reporting framework.
B)The auditor obtains the agreement from management that it acknowledges and understands its responsibility for internal controls so financial statements can be prepared free of material misstatement.
C)The auditor obtains the agreement of management that it agrees to provide the auditor with all information that management is aware of that might be relevant to the preparation of the financial statements.
D)The auditor determines whether the financial reporting framework (the set of accounting standards)used by the client to prepare the financial statements is acceptable.

Accepted Answer

The answer of The auditing standards describe how an auditor...

Question 14

Which of the following statements is correct about the objective of the audit process?
A)Generally accepted auditing standards require the auditor to obtain assurance about whether the financial statements are free from all misstatements.
B)Reasonable assurance is obtained by the auditor when he has obtained sufficient appropriate audit evidence to reduce audit risk to an acceptably low level.
C)A misstatement is an error or fraud in the financial statements that might cause a user of the financial statements to change his decision about the company.
D)Sufficient appropriate audit evidence refers to the persuasiveness of the evidence gathered.

Accepted Answer

The objective of the audit process is for the auditor to provide reasonable assurance (and not absolute assurance) that the financial statements are free from material misstatements. Material misstatements are those that could influence the decisions of the financial statement users. Reasonable assurance is obtained when the auditor has gathered sufficient appropriate audit evidence to reduce audit risk to an acceptably low level. Audit risk is the risk that the auditor may unknowingly fail to modify the opinion on the financial statements that are materially misstated.

Question 15

In the planning stage,one of the objectives of the auditor is to identify and assess the risk of material misstatement.

Accepted Answer

Identifying and assessing the risk of material misstatement is one of the main objectives of the auditor during the planning stage of an audit.

Question 16

Which of the following statements is correct about the objective of the audit process?
A)Generally accepted auditing standards require the auditor to obtain assurance about whether the financial statements are free from all misstatements.
B)Assurance is obtained by the auditor when he has obtained sufficient appropriate audit evidence to reduce audit risk to an acceptably low level.
C)A material misstatement is an error or fraud in the financial statements that might cause a user of the financial statements to change his decision about the company.
D)Sufficient appropriate audit evidence refers to the persuasiveness of the evidence gathered.

Accepted Answer

The answer of Which of the following statements is correct...

Question 17

Because client information is confidential (according to many state statutes),the predecessor auditor will not respond to the request for information about the client without the client's written permission.

Accepted Answer

The answer of Because client information is confidential (according to...

Question 18

Which of the following statements is correct about the objective of the audit process?
A)Generally accepted auditing standards require the auditor to obtain assurance about whether the financial statements are free from all misstatements.
B)Assurance is obtained by the auditor when he has obtained sufficient appropriate audit evidence to reduce audit risk to an acceptably low level.
C)A misstatement is an error or fraud in the financial statements that might cause a user of the financial statements to change his decision about the company.
D)Sufficient appropriate audit evidence refers to the quantity and quality of the evidence gathered.

Accepted Answer

The answer of Which of the following statements is correct...

Question 19

Audit risk is defined as
A)the risk that the auditor issues an opinion saying that the financial statements are not materially misstated when they are.
B)the risk that the auditor fails to issue an opinion saying that the financial statements are materially misstated when they are.
C)the risk that the auditor does not detect a material misstatement in the financial statements.
D)the risk that the auditor does detect a material misstatement in the financial statements but fails to report the material misstatement.
E)the risk that the auditor issues an opinion saying that the financial statements are materially misstated when they are not.

Accepted Answer

The answer of Audit risk is defined as
A)the risk that...

Question 20

When an accounting firm establishes a system of quality control,the firm's objective is to obtain assurance that the firm complied with applicable legal and regulatory requirements.

Accepted Answer

The primary objective of establishing a system of quality control for an accounting firm is to provide it with reasonable assurance that the firm and its personnel comply with professional standards and applicable legal and regulatory requirements, and that reports issued by the firm or engagement partners are appropriate in the circumstances. Compliance with legal and regulatory requirements is a part of this broader objective, not the sole objective.

Quiz 2: The Audit Planning Process: Understanding the Risk of Material Misstatement

During the planning process,the auditor determines the overall audit strategy for the audit.This strategy establishes the scope,timing,and direction of the audit and guides the auditor when he prepares the audit plan.

The audit plan will be used to gather sufficient appropriate evidence to reduce audit risk to a near zero level.

Audit risk determines the amount of evidence gathered.The amount of evidence gathered determines the audit fees.

A material misstatement is an error or fraud in the financial statements that might cause a user of the financial statements to change his opinion about the company.

Which of the following statements is correct about the objective of the audit process?

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America or international financial reporting standards.

The purpose of the audit is to increase the level of confidence that users of financial statements can place on financial statements.

The auditing standards determine how an auditor describes if the procedures for an audit are present.

The auditing standards describe how an auditor determines if the preconditions for an audit are present.Which of the following would be a precondition for an audit?

Relevant assertions are assertions made by the auditor about the financial statements of the company that have a reasonable possibility of containing a misstatement that would cause the statements to be misstated.

The auditor should document the audit strategy in the audit report containing the key decisions about the scope,timing,and conduct of the audit.

Which of the following are the three main parts of the audit process?

The auditing standards describe how an auditor determines if the preconditions for an audit are present.Which of the following would be a precondition for an audit?

Which of the following statements is correct about the objective of the audit process?

In the planning stage,one of the objectives of the auditor is to identify and assess the risk of material misstatement.

Which of the following statements is correct about the objective of the audit process?

Because client information is confidential (according to many state statutes),the predecessor auditor will not respond to the request for information about the client without the client's written permission.

Which of the following statements is correct about the objective of the audit process?

Audit risk is defined as

When an accounting firm establishes a system of quality control,the firm's objective is to obtain assurance that the firm complied with applicable legal and regulatory requirements.