Week 4 Homework Solutions - 9-21 The auditor should revise...

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Unformatted text preview: 9-21 The auditor should revise the components of the audit risk model when the evidence accumulated during the audit indicates that the auditor's original assessments of inherent risk or control risk are too low or too high or the original assessment of acceptable audit risk is too low or too high. The auditor should exercise care in determining the additional amount of evidence that will be required. This should be done without the use of the audit risk model. If the audit risk model is used to determine a revised planned detection risk, there is a danger of not increasing the evidence sufficiently. Multiple Choice Questions From CPA Examinations 9-22 a. (4) b. (4) c (1) 9-23 a. (1) b. (1) c. (1) 9-28 a. The following terms are audit planning decisions requiring professional judgment: Preliminary judgment about materiality Acceptable audit risk Tolerable misstatement Inherent risk Risk of fraud Control risk Planned detection risk b. The following terms are audit conclusions resulting from application of audit procedures and requiring professional judgment: Estimate of the combined misstatements Estimated total misstatement in a segment c. It is acceptable to change any of the factors affecting audit planning decisions at any time in the audit. The planning process begins before the audit starts and continues throughout the engagement. 10-19 In a walkthrough of internal control, the auditor selects one or a few documents for the initiation of a transaction type and traces them through the entire accounting process. At each stage of processing, the auditor makes inquiries and observes current activities, in addition to examining completed documentation for the transaction or transactions selected. Thus, the auditor combines observation, documentation, and inquiry to conduct a walkthrough of internal control. PCAOB Standard 2 requires the auditor to perform at least one walkthrough for each major class of transactions. 10-30 a. (3) b. (3) c. (4) d. (4) ...
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This note was uploaded on 11/20/2011 for the course ACCT 555 555 taught by Professor Brandonpei during the Winter '10 term at Keller Graduate School of Management.

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