Ch05

What is the purpose of audit evidence in financial statement audits?

• To obtain reasonable assurance on the accuracy of financial statements

• To evaluate the effectiveness of internal controls

• To identify potential fraud or misstatements

• To assess the reliability of management representations

What are the components of audit risk?

• Inherent risk and control risk

• Detection risk and control risk

• Risk of material misstatement and detection risk

• Audit risk and control risk

What is the purpose of external confirmation in auditing?

• To confirm the existence of accounts

• To verify the debtor's ability to pay

• To assess control effectiveness

• To physically examine tangible assets

What is the nature of analytical procedures in auditing?

• Assessing relationships between financial and nonfinancial data

• Physically examining tangible assets

• Reperforming procedures originally performed by the client

• Recalculating mathematical accuracy

When should analytical procedures be performed in the audit process?

• During audit engagement planning and at the conclusion of the audit

• Only during audit engagement planning

• Only at the conclusion of the audit

• Throughout the entire audit process

What is the purpose of tests of details of balances in auditing?

• To determine whether there are misstatements in the ending balance of an account

• To assess the validity and proper accounting of specific types of transactions

• To assess the accuracy and appropriateness of financial statement disclosures

• To evaluate the reasonableness of financial statement amounts

What is the purpose of observation as an audit procedure?

• To assess control effectiveness

• To verify the debtor's ability to pay

• To physically examine tangible assets

• To evaluate the reasonableness of financial statement amounts

What is the purpose of professional skepticism in auditing?

• To maintain a questioning mindset and critically assess audit evidence

• To assess the reliability of audit evidence

• To evaluate the reasonableness of financial statement amounts

• To ensure the accuracy and reliability of financial statements

What is the purpose of professional skepticism in auditing?

• To maintain a questioning mindset and critically assess audit evidence

• To assess the reliability of audit evidence

• To evaluate the reasonableness of financial statement amounts

• To ensure the accuracy and reliability of financial statements

When should analytical procedures be performed in the audit process?

• During audit engagement planning and at the conclusion of the audit

• Only during audit engagement planning

• Only at the conclusion of the audit

• Throughout the entire audit process