Audit Planning

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

• Inherent risk

• Audit risk

• Control risk

• Detection risk

Factor that in assessing inherent risk, exclude:

• Nature of client

• Client motivation

• Integrity of management

• Nature of audit test

The risk of material misstatement refers to:

• control risk and acceptable audit risk

• combination of control risk and inherent risk

• inherent risk

• none of the above

Auditors are responsible for determining whether financial statements are materially misstated. Upon discovering a material misstatement they must bring it to the attention of:

• audit firm's managing partner

• audit firm's manager

• client's management

• regulators

The auditor’s preliminary judgment about materiality is the maximum amount by which the auditor believes the financial statements could be misstated and still not affect the decisions of reasonable users.

• True

• False

If an auditor establishes a relatively high level for materiality, then the auditor will accumulate...

• more evidence than if a lower level had been set.

• lesser evidence than if a lower level had been set.

If planned detection risk is reduced, the amount of evidence the auditor accumulates will be...

• increased

• decreased

• unchanged

Auditor will make use of analytical review to identify any strange movements in balances indicating risk areas and to identify anomalous figures indicating potential misstatements.

• True

• False

Which THREE of the following are objectives of audit planning?

• To ensure appropriate attention is devoted to the important areas of the audit

• To assign work to members of the audit team

• To determine the scope of the engagement

• To identify potential problems and resolve them on a timely basis

Which THREE of the following would normally be included in the overall audit strategy?

• Details of economic factors and industry conditions

• Confirmation of management's responsibility for the financial statements

• Identification of specific audit risks

• The results of initial analytical procedures