Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 9, Problem 37DQP
To determine
State the effect on control risk, inherent risk, acceptable audit risk, and planned evidence for the given independent events.
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The audit risk model includes the four risks listed below. Match the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.
tch the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.
its components. The firm of Pack & Peck evaluates the risk of material isstate-
-1,4-2, 4-3
4-27 When planning a financial statement audit, a CPA must understand au sk
its components. The firm of Pack & Peck evaluates the risk of materiai
ment (RMM) by disaggregating RMM into its two components: inherentisk and
control risk.
Required:
For each illustration, select the component of audit risk that is most directly illus-
trated. The components of audit risk may be used once, more than once, or not at all
Components of Audit Risk:
a. Control risk
b. Detection risk
c. Inherent risk
Component
of Audit Risk
Illustration
1. A client fails to discover employee fraud on a timely basis because bank accounts
are not reconciled monthly.
2. Cash is more susceptible to theft than an inventory of coal.
3. Confirmation of receivables by an auditor fails to detect a material misstatement.
4. Disbursements have occurred without proper approval.
5. There is inadequate segregation of duties.
6. A…
Chapter 9 Solutions
Auditing And Assurance Services
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Provide two examples of factors that might...Ch. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQ
Ch. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - Prob. 14RQCh. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - Prob. 17RQCh. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - Prob. 20RQCh. 9 - Prob. 21RQCh. 9 - Prob. 22RQCh. 9 - Prob. 23RQCh. 9 - Prob. 24RQCh. 9 - Prob. 25.1MCQCh. 9 - Prob. 25.2MCQCh. 9 - Prob. 25.3MCQCh. 9 - Prob. 26.1MCQCh. 9 - Prob. 26.2MCQCh. 9 - Prob. 26.3MCQCh. 9 - Prob. 27.1MCQCh. 9 - Prob. 27.2MCQCh. 9 - Prob. 27.3MCQCh. 9 - Prob. 28.1MCQCh. 9 - Prob. 28.2MCQCh. 9 - Prob. 28.3MCQCh. 9 - Prob. 29DQPCh. 9 - Prob. 30DQPCh. 9 - Prob. 31DQPCh. 9 - Prob. 33DQPCh. 9 - Prob. 34DQPCh. 9 - Prob. 35DQPCh. 9 - Prob. 36DQPCh. 9 - Prob. 37DQPCh. 9 - Prob. 39C
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Similar questions
- When control risk is assessed at less than high for all financial statements assertions, an auditor should document the auditor’s A B C D · Understanding of the entity’s internal control structure Yes Yes No Yes · Conclusion that control risk is less than high No Yes Yes Yes · Basis for the conclusion that control risk is less than high Yes Yes No No Group of answer choices B C A Darrow_forwarddetermine whether statement 1 and 2 are true or false 2. S1- Studying the relationship of financial information with another information, whether financial or non-financial, is an example of an analytical procedure. S2-To reduce audit risk to an acceptable low level, the auditor should determine overall responses assessed risks at the assertion level a. False, False b. True, False c. False, True d. True, Truearrow_forwardHaving an audit performed on the company's financial statements BEST illustrates which of the following? () Signalling Information asymmetry C Moral hazard Cheap talkarrow_forward
- Identify just one audit risk area of listed public company from the ASX200 that is Mirvac Group. Explain the potential impact of that audit risk on the company’s financial statements with datas (statics).arrow_forwardWhen control risk is assessed at less than high for all financial statements assertions, an auditor should document the auditor’s A B C D · Understanding of the entity’s internal control structure Yes Yes No Yes · Conclusion that control risk is less than high No Yes Yes Yes · Basis for the conclusion that control risk is less than high Yes Yes No No a. D b. B c. C d. Aarrow_forwardFor risk enabled and risk managed organizations, the conclusion on risk maturity is the first step in being able to provide assurance on risk management processes, management of key risks and reporting of risks. If Panda Company used the RBIA, then: a. The actions that are being taken to add, delete or modify existing responses where they do not currently bring risk within the risk appetite b. Agree all the risk management responses and risk management processes on which objective assurance from internal audit is required c. Produce an audit plan which lists all audits to be carried out over a specified period - usually a year. d. The internal audit activity's assurance strategy is therefore to provide assurance on these areas.arrow_forward
- 4. Overall risk management arrangements are the main preoccupation of the internal auditor who is concerned with all those controls fundamental to the achievement of organizational objectives. It is main . On internal and external .... audit? A. Similarity B. Difference С. No D. Equality connectio n 5. From taking care of risk perspective what should be done if the Impact of risk is high and likelihood of risk is high ? A. Terminate B. Transfer С. Тake more D. Communi catearrow_forwardThe acceptable audit risk for the financial statements overall tends to be low and is set by the auditor at the beginning of the audit. How low audit risk is set is impacted by which of the following factors? (Several choices may be correct.) OG. Whether the entity has a strong tone at the top OC. The risk the client may no longer continue to be a going concern OB. The number of users relying on the financial statements O E. Past issues with management integrity O A. The attitude of the organization toward controls O F. Expansion of the client into new markets OD. Changes to the industry in which the client operatesarrow_forwardWhich of the following is driving the need for assurance maps?a. Risk managers.Incorrect. b. Board members. c. Internal auditors. d. Compliance practitioners.arrow_forward
- An audit can have significant effect on A. Financial risk B. Business risk C. Information risk D. Solvency riskarrow_forwardAn assurance service is defined as a service thata. Provides auditing services to nonfinancial information.b. Reviews unaudited financial information.c. Improves the quality of information for decision makers.d. Reduces the risk in management decision making.arrow_forward4. Overall risk management arrangements are the main preoccupation of the internal auditor who is concerned with all those controls fundamental to the achievement of organizational objectives. It is main ... On internal and external audit? A. Similarity B. Difference C. No D. Equality connection 5. From taking care of risk perspective what should be done if the Impact of risk is high and likelihood of risk is high ? A. Terminate B. Transfer C. Tolerate D. Communica te 6. From taking care of risk perspective what should be done if the Impact of risk is low and likelihood of risk is low? A. Terminate B. Transfer C. Tolerate D. Communica tearrow_forward
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