When an auditor decreases the planned assessed level of control risk because certain control procedures were determined to be more effective than anticipated, the auditor would most likely increase the: a. Extent of tests of details. b.

When an auditor decreases the planned assessed level of control risk because certain control procedures were determined to be more effective than anticipated, the auditor would most likely increase the: a. Extent of tests of details. b.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter5: Professional Auditing Standards And The Audit Opinion Formulation Process

Section: Chapter Questions

Problem 24RQSC

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Question

Extent of tests of details.

Level of inherent risk.

Extent of tests of controls.

Level of detection risk.

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When an audior increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor would most likely increase the: A. extent of tests of control B. level of detection risk C. extent of tests of detail D. Level of inherent risk
Once the auditor detects a control deficiency, which of the following steps must he or shetake first?a. Perform tests of other controls related to the same assertion as the control deemedineffective.b. Evaluate the severity of the deficiency on the auditor’s control risk assessment for thatassertion.c. Modify the planned substantive procedures as a result of the deficiency.d. Test the deficient control, assuming a maximum level of risk.
If the tests of controls indicate certain controls are not as effective as the auditor originally believed, which of the following will result? Select all that apply. O increased number of substantive procedures will be planned O audit planning strategy adjusted O control risk will be increased O detection risk is increased O increased number of control tests will be performed
On the basis of audit evidence gathered and evaluated, an auditor decides to decrease the level of detection risk from that originally planned. Assuming the same planned audit risk level, the change in the planned detection risk most likely resulted from a[n) A. Increase in the assessed control risk B.Increase in materiality levels. C. Decrease in the assessed inherent risk D.Decrease in the assessed citrol risk.
The lower the materiality level, the higher the amount of required evidence from substantive procedures to compensate for increased risk. Further audit procedures include risk assessment procedures, test of controls and substantive tests. Group of answer choices False, True True, False True, True False, False
As the acceptable level of detection risk increases, an auditor may: Oa. Lower the assessed level of inherent risk. O b. Eliminate the assessed level of control risk from consideration as a planning factor. O c. Change the planned timing of substantive tests from year-end to interim. Od. Increase the risk of material misstatement.
Why is the audit team more concerned with controlling the exposure to the risk of overreliancethan with the risk of underreliance?a. Only the risk of overreliance results in an incorrect audit decision.b. The risk of underreliance is not related to the audit team’s study and evaluation of internalcontrol.c. The risk of overreliance can ultimately result in the audit team’s failing to reduce auditrisk to acceptable levels.d. The risk of underreliance can be controlled by performing tests of controls during theinterim period.
Based on evidence gathered and evaluated, an auditor decides to increase the assessedlevel of control risk from that originally planned. To achieve an overall audit risklevel that is substantially the same as the planned audit risk level, the auditor could(1) decrease detection risk. (3) decrease substantive testing.(2) increase materiality levels. (4) increase inherent risk.
When the auditor has assessed control risk of a particular area at a reduced level, he or she will then Select one: a. eliminate the need to gather evidence in that area. b. test the effectiveness of the controls in that area. c. proceed to expand the sample sizes in that area. d. negotiate with management to determine which controls will be tested in that area.
After obtaining an understanding of an entitiy's internal control, an auditor may assess control risk at the maximum level for some assertions because he A. performs tests of controls to restrict detection risk to an acceptable level. B. identifies internal control policies and procedures that are likely to prevent material misstatements. C. believes the internal control policies and procedures are unlikely to be effective. D. determines that the pertinent internal control components are not well documented.
As the acceptable level of detection risk decreases, an auditor may: A. reduce substantive testing by rrelying on the assessment of inherent risk and control risk. B. postpone the planned timing of substantive tests from interim dates to the year-end. C.Eliminate the assessed level of inherent risk from consideration as a planning factor. D. lower the assessed level of control risk
If the auditor uses the primarily substantive apporach instead of the lower control risk approach A. A higher level of understanding of internal control is required. B. The auditor plans to assess control risk at a lower level. C. The auditor plans a heavier reliance on substantive tests. D. The auditor plans to restrict substantive tests.