AUDIT REPORT HCT

Audit risk is a product of (select all options that apply)

• Inherent Risk

• Detection Risk

• Control Risk

• Internal Risk

________ is defined as an auditor’s exposure to financial loss and damage to professional reputation through litigation or adverse publicity.

• Inherent Risk

• Detection Risk

• Control Risk

• Engagement Risk

Detection risk is a combination of which 2 risks

• Inherent Risk

• Sampling Risk

• Control Risk

• Non Sampling Risks

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

• Fraud

• Inherent Risk

• Audit Risk

• Materiality

What is the definition of audit risk?

• The risk that auditors will not be able to complete the audit within the allocated time frame

• The risk that financial statements contain material misstatements that are not detected by the auditor

• The risk that auditors will not properly consider relevant laws and regulations during the audit

How does audit risk relate to materiality?

• Audit risk and materiality are unrelated concepts

• Higher materiality levels increase audit risk

• Higher audit risk levels decrease materiality

What is the purpose of assessing audit risk?

• To determine the materiality levels for financial statements

• To evaluate the effectiveness of internal controls

• To identify risks of material misstatements in the financial statements

What is detection risk?

• The risk that auditors will fail to detect misstatements in the financial statements

• The risk that auditors will not properly assess the design and implementation of internal controls

• The risk that auditors will not be able to meet the required audit deadlines

How does detection risk affect the level of substantive procedures?

• Higher detection risk requires a higher level of substantive procedures

• Higher detection risk requires a lower level of substantive procedures

• Detection risk does not affect the level of substantive procedures

Which of the following is a component of audit risk?

• Sampling risk

• Compliance risk

• Operational risk