
QUIZ 2 AT

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University
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Medium
Quen Ross
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10 questions
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1.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
The risk that financial statements are likely to be misstated materially without regard to the effectiveness of internal control is which type of risk?
Inherent risk
Audit risk
Client risk
Control risk
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Inherent risk is defined as the susceptibility of an account balance or class of transactions to error that could be material assuming that there were no related internal controls. Of the following conditions, which one does not increase inherent risk?
The client has entered into numerous related party transactions during the year under audit.
Internal control over shipping, billing and recording of sales revenue is weak.
The client has lost a major customer accounting for approximately 30% of annual revenue.
The board of directors approved a substantial bonus for the president and chief executive officer, and also approved an attractive stock option plan for themselves.
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following descriptions best describes inherent risk?
Auditors fail to discover a material misstatement in the course of their audit and do not modify their audit opinion.
A company’s internal control fails to identify a material misstatement in a timely fashion.
Auditing procedures fail to find a material misstatement.
The possibility that a material misstatement will occur in any given account before considering internal control.
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The risk that the audit will fail to uncover a material misstatement is eliminated
If a client has strong internal controls.
If a client follows generally accepted accounting principles (GAAP).
When the auditor has complied with the generally accepted auditing standards (GAAS).
Under no circumstances.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The probability that an auditor’s procedures leading to the conclusion that a material error does not exist in an account balance when, in fact, such error does exist if referred to as
Prevention risk
Inherent risk
Control risk
Detection risk
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following characteristics most likely would likely would heighten an auditor’s concern about risk of intentional manipulation of financial statements?
Turnover of senior accounting personnel is low.
Insiders recently purchased additional shares of the entity’s stock.
Management places substantial emphasis on meeting earnings projections.
The rate of change in the entity’s industry is slow.
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
An audit plan is a
Detailed plan if analytical procedures and all substantive tests to be performed in the course of the audit.
Document that provides an overview of the company and a general plan for the audit work to be accomplished, timing of the work, and other matters of concern to the audit.
Generic document that auditing firms have developed to lead the process of the audit through a systematic and logical process.
Budget of the time that should be necessary to complete each phase of the audit procedures.
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