1) Which of the following statements regarding inherent risk is correct? A) Inherent risk is unaffected by the auditor's experience with client's organization. B) Most auditors set a low inherent risk in the first year of an audit and increase it if experience shows that it was incorrect. C) Most auditors set a high inherent risk in the first year of an audit and reduce it in subsequent years as they gain more knowledge about the company. D) Inherent risk is dependent upon the strengths in client's internal control system.2) Auditors begin their assessments of inherent risk during audit planning. Which of the following would not help in assessing inherent risk during the planning phase? 3) Which of the following is not a primary consideration when assessing inherent risk? 1) The person responsible for reconciling sales invoices to customer orders does not access to thecompany's master price list in order to correctly compute sales. This is an example of a(n): 2) You are performing the audit of internal control for Clifton Company. Which of the following would represent a material weakness in internal control?
A) The company's audit committee has experienced unusual turnover of members. B) The company's CFO was indicted for embezzling from the company. C) Bank reconciliations are done monthly. D) The CEO retired after twenty years of service to the company3) The employee in charge of authorizing credit to the company's customers does not fully understand the concept of credit risk. This lack of knowledge would constitute: 4) When assessing whether the financial statements are auditable, the auditor must consider:
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- Fall '15