Practice Problems Ch. 9 (ACCT-422)

Practice Problems Ch. 9 (ACCT-422) - auditor is also likely...

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Solutions to Chapter 9 Practice Problems 9-22 a. (4) b. (4) c (1) 9-23 a. (1) b. (1) c. (1) 9-24 a. (2) b. (3) c. (1) 9-29 Acceptable audit risk is a measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued. a. True. A CPA firm should attempt to use reasonable uniformity from audit to audit when circumstances are similar. The only reasons for having a different audit risk in these circumstances are the lack of consistency within the firm, different audit risk preferences for different auditors, and difficulties of measuring audit risk. b. True. Users who rely heavily upon the financial statements need more reliable information than those who do not place heavy reliance on the financial statements. To protect those users, the auditor needs to be reasonably assured that the financial statements are fairly stated. That is equivalent to stating that acceptable audit risk is lower. Consistent with that conclusion, the
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Unformatted text preview: auditor is also likely to face greatest legal exposure in situations where external users rely heavily upon the statements. Therefore, the auditor should be more certain that the financial statements are correctly stated. c. True. The reasoning for c is essentially the same as for b. d. True. The audit opinion issued by different auditors conveys the same meaning regardless of who signs the report. Users cannot be expected to evaluate whether different auditors take different risk levels. Therefore, for a given set of circumstances, every CPA firm should attempt to obtain approximately the same audit risk. 9-33 Risk Factor Related Audit Risk Model Component 1. Acceptable audit risk 2. Control risk 3. Acceptable audit risk 4. Inherent risk 5. Planned detection risk 6. Acceptable audit risk 7. Inherent risk 8. Inherent risk 9. Planned detection risk 10. Control risk...
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Practice Problems Ch. 9 (ACCT-422) - auditor is also likely...

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