AUD-1 Question Review Flashcards
What is materiality?
Materiality levels are generally considered in terms of the smallest aggregate level of misstatement that could be considered material to any one of the financial statements.
What is most effective in reducing attestation risk?
Examination of evidence.
Examination of evidence would be most effective in reducing attestation risk, which, similar to audit risk, is the risk that the CPA will not identify and report on something that should be identified and reported upon.
What are the three elements of the fraud triangle?
Pressure/Motivation, Opportunity, Rationalization
As the acceptable level of detection risk decreases, the assurance directly provided from: (increases or decreases)
Increases
Which of the following audit risk components may be assessed in non-quantitative terms?
Control risk, detection risk, and inherent risk.
RMM and detection risk are components of audit risk. All may be expressed in quantitative or non-quantitative terms.
Which matter would materiality limits not apply when obtaining written client representations
Instances of fraud involving management.
Why does an auditor assess the level of control risk?
It affects the level of detection risk the auditor may accept.
What must the external auditor be satisfied with prior to utilizing the assistance of internal auditors?
- Objectivity
- Competence
- And that they are applying a systematic and disciplined approach
What items will the external auditor not rely on the internet auditor?
- Assessing RMM
- Evaluating the sufficiency of tests performed
- Evaluation managements assumptions as to substantial doubt as to whether or not th entity is a going concern
- Evaluating significant estimates
- Evaluating the adequacy of disclosures or any other issues that may affect the external auditor’s report on financial statements
