Increases/Decreases in audit risk, explain.
AR = providing the wrong opinion on the financial statements.
AR = IR x CR x DR
IR = Risk of material transactions occurring
AR = IR x CR x APR x RIA
CR = Risk of controls failing to detect m.m.
RIA = AR
1. Identify three general categories of misstatements and give an example of each.
Any three of the following:
Invalid transactions are recorded. An example would be if fictitious sales to non-existent
customers are recorded.
ii. Valid transaction
Which of the following situations indicates a potential material weakness in internal control over acquisitions
a. The person who approves purchases also signs the cheques.
The following account is
. In evaluating the adequacy of the allowance for doubtful accounts, an auditor is most likely to review the aging
of receivables as evidence and support for management's financial statement assertion of
Answers a. Existence or occurrence
Which of the following is an advantage of statistical sampling?
a. It requires auditors to be exact in their judgements on risk and
. If the association of population items with random numbers is diffic
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What is inherent risk
the probability that material misstatements could have occurred. is the probability that material
misstatements have occurred in transactions within the accounting system used to develop
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What best describes the engagement letter
A contract between an auditor and new client, that will set 4 terms of engagements:
auditor responsibility, client responsibility, reporting frame and form, other matters like
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The characteristics of the ethical theories:
-Monistic Theory- theory that assume universal principles apply regardless of the
specific facts of situation:
a. Deontological (duty based) Th. By Kant, assumes that there are univ
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What does reducing information risk mean-auditing as an information risk reducing
activity. This definition follows from the information hypothesis that is used to explain
the demand for external audits. Under the information
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The characteristics under which a public accountant (PA) is associated with a
- PA performs services in respect of that information
- PA consents to use his name in information
- 3rd party assumes that PA
One of the auditor's primary concerns with regard to internal
The impact the controls have on the accuracy of
the accounting records
Which of the following statements is true?
There is a