Auditing: A Risk Based-Approach to Conducting a Quality Audit
Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Chapter 8, Problem 18MCQ
To determine

Introduction:

A purchase transaction happens when cash is paid for an acquisition.

To select:

Find out the right option that is considered relevant to the given statement.

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Inherent risk is: a. the risk of a misstatement occurring irrespective of any internal controls put in place by management. b. the risk that the auditor's testing procedures will not detect a material misstatement. c. assessed as high when there are no internal controls tested or relied upon by the auditor. d. assessed as low when there are good internal controls in place. Choose the correct answer and explain why it is the correct answer
Which statement is false?   a. If control risk is assessed as low, the auditor cannot plan on relying on the controls to increase substantive procedures for account balances.     b. The auditor will not perform tests of controls; instead, the auditor must plan for substantive procedures, without relying on the client's internal controls.     c. Based on obtaining an understanding through risk assessment procedures, the auditor assesses control risk ranging from high (weak controls) to low (strong controls).     d. Assessing control risk as high means the auditor does not have confidence that internal controls will prevent or detect material misstatements; assessing control risk as low has the opposite implication.
What is risk of incorrect acceptance?     A. The risk that the auditor concludes that a material misstatement exists when it does not exist.   B. The risk that the auditor concludes that a material misstatement does not exist when it actually does not.   C. The risk that the auditor concludes that a material misstatement does not exist when it does exist.   D. The risk that the auditor concludes that a material misstatement exists when it actually does.
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