Concept explainers
Introduction: The concept ofmateriality is where small transaction or amount matters that can change the decision of the users. Materiality misstatement concept includes omissions that are considered as material. They effect the financial decisions of the users.
To Select: State whether the given condition is true or false.
Answer to Problem 1CYBK
The given statement isfalse.
Explanation of Solution
The given statement states that the auditor bases materiality solely on quantitative factors but this is not true as auditor focuses onboth the factors for materiality such as quantitative and qualitative. Identification and material misstatements assess the standard that is requiredby the auditor in the financial statements through understanding the client’s environment, related areas, and internal control.
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Chapter 7 Solutions
EBK AUDITING: A RISK BASED-APPROACH
- Generally, which of the following audit procedures is the least expensive to perform? A. Analytical procedures B. Tests of details of balance C. Substantive tests of transactions D. Tests of controls E. Risk assessment proceduresarrow_forwardWhich is not a Risk Assessment Procedure? a. Ratio Analysis b. Observation of Activities c. Account Receivable confirmations d. Inspection of Documents e. Inquiry of Internal Auditorsarrow_forwarda) Explain why determination of materiality is a matter of auditor judgment. Refer to both qualitative and quantitative materiality assessments. b) impacts on the auditor's assessment of preliminary materialityarrow_forward
- Explain what is meant by the term acceptable audit risk. Whatis its relevance to evidence accumulation?arrow_forwardWhich one below is not an example of auditors'substantive testing? Select one: a. Controls testing. b. Tests of transactions. c. Tests of balances. d. Substantive analytical procedures.arrow_forwardWhat are going-concern uncertainties? What is the auditors’ responsibility for evaluating goingconcern uncertainties?arrow_forward
- what are Audit Assumptions?arrow_forwardIn testing for lower-of-cost-or-market, the auditor is gathering evidence to support which of the following assertions? a. Accuracy. b. Rights and obligations. c. Valuation. d. Pricing.arrow_forwardWhich of the following statements is correct regarding detection risk and the audit risk model? OA. The two components of detection risk are test of details risk and inherent risk. B. Detection risk is equal to risk of material misstatement divided by audit risk. OC. There is an inverse relationship between the risk of material misstatement and detection risk. OD. There is a direct relationship between control risk and detection risk.arrow_forward
- The size of the subset of items the auditor examines is primarily a function of materiality and the desired level of assurance for the account or assertion being examined * True Falsearrow_forwardAssumptions of "going concern" are within the purview of the auditor.arrow_forwardAuditing is based on the assumption that financial data and statements are A. Verifiable B. Consistently applied C. Presented fairly D. In conformity with appropriate criteriaarrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning