Materiality and Audit Risk

_________ is the risk that an auditor expresses an inappropriate opinion on the financial statements.

• Fraud

• Inherent Risk

• Audit Risk

• Materiality

Materiality does depend on the decisions of users who rely on the statements to make the decisions

• TRUE

• FALSE

Auditing standards define ________ as the magnitude of misstatements that individually, or when aggregated with other misstatements, could reasonably be expected to influence the economic decisions of users made on the basis of the financial statements.

• Fraud

• Inherent Risk

• Materiality

• Detection Risk

Factor that in assessing inherent risk, exclude :

• Nature of client

• Integrity of management

• Client motivation

• Nature of audit test

There are types of risk, exclude :

• Inherent Risk

• Detection Risk

• Control Risk

• Internal Risk

Which statement is true about effect for audit risk and business risk:

Audit risk : Credibility of an

auditor will be questioned

business risk : Gain of customer

• Audit Risk

• Business Risk

Which one is not the level of audit materiality ?

• Immaterial

• Material

• Very Material

• Detection Risk

Which one is not a preliminary judgements about audit materiality ?

• determining the nature, timing and extent of risk assessment procedures

• Identifying and assessing the risk of material misstatements

• Determining the nature, timing and extent of further audit procedures

• The nature of business entity

Arrange the statement based on stage of audit materiality in audit process

i. involve determining

tolerable misstatement based on planning materiality.

ii. Materiality in planning and performing an Audit states that designing the audit plan, an auditor needs to establish an acceptable level of materiality so as to detect quantitative material misstatements.

iii. completed near the end of

the audit, and the auditor evaluates all the audit evidence gathered.

• i, ii, iii

• ii, i, iii

• iii, ii, i

• ii, iii, i

The factors effecting the auditor's judgement about materiality are as follows:

i. materiality is a relative concept rather than an absolute concept

ii. bases are needed for evaluating materiality

iii. qualitative factors

iv. quantitative factors

• ii, iii, iv

• i, iii, iv

• i, ii, iii

• i, ii, iv