chapter 08 - questions.doc - Chapter 8 Audit Planning and Analytical Procedures 8.1 Learning Objective 8-1 1 A measure of how willing the auditor is to

chapter 08 - questions.doc - Chapter 8 Audit Planning and...

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Chapter 8 Audit Planning and Analytical Procedures8.1 Learning Objective 8-11) 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 is theA) inherent risk.B) acceptable audit risk.C) statistical risk.D) financial risk.2) The first phase in planning an audit and designing an audit approach is to3) _______ is the risk that the financial statements contain a material misstatement due to fraud or error prior to the audit.4) In what order should the following steps occur?A.Set preliminary judgment of materiality and performance materiality.B.Understand the clients business and industry.C.Perform preliminary analytical procedures.D.Accept the client and perform initial audit planning.5) The auditor uses knowledge gained from the understanding of the client's business and industry to assessA) client business risk.B) control risk.C) inherent risk.D) audit risk.6) There are three main reasons why an auditor should properly plan audit engagements. Discuss each of these reasons.1
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True – false questions7) When an auditor sets a low acceptable audit risk, it means that he wants to be more certain that the financial statements are notmaterially misstated.8) As acceptable audit risk is decreased, the likely cost of conducting an audit increases.9) Assessing acceptable audit risk, client business risk, and risk of material misstatement helps determine the audit procedures that will be needed.10) A 100 % audit risk is complete certainty.8.2 Learning Objective 8-21) One of the purposes of an engagement letter is to avoid misunderstandings with the client. This is important for2) The auditor is likely to accumulate more evidence when the audit is for a company
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