Auditing Chapter 5 Test Questions with Verified Answers (Rated 100%)
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Auditing Chapter 5
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Auditing Chapter 5
Auditing Chapter 5 Test Questions with Verified Answers (Rated 100%)
In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider certain qualitative aspects of the deviations. The auditor most likely would give broader consideration to the implicatio...
Auditing Chapter 5 Test Questions with Verified Answers (Rated 100%)
In addition to evaluating the frequency of deviations in tests of controls, an auditor should also consider
certain qualitative aspects of the deviations. The auditor most likely would give broader consideration to
the implications of a deviation if it were:
the only deviation discovered in the sample.
identical to a deviation discovered during the prior year's audit.
caused by an employee's misunderstanding of instructions.
initially concealed by a forged document. - Answers initially concealed by a forged document.
When relating the identified risks to relevant assertions, the auditor, using professional judgment and
materiality, should consider:
whether the risks are of a magnitude that could result in a material misstatement of the financial
statements.
the likelihood that the risks could result in a material misstatement of the financial statements.
I only
II only
Both I and II
Neither I nor II - Answers Both I and II
,In a test of purchase orders, the auditor selected a random sample of 60 items out of a population of
1,200 purchase orders. The auditor discovered $4,000 in overstatement in the sample. The company's
materiality is $65,000. The tolerable misstatement for purchases is $50,000. What should the auditor do
next?
Pass on the exceptions
Propose an adjustment to purchases
Consider expanding the size of the sample
Project the detected error to the entire population - Answers Project the detected error to the entire
population
The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the:
allowable risk of tolerable misstatement.
preliminary estimates of materiality levels.
efficiency of the audit.
effectiveness of the audit - Answers effectiveness of the audit
In attribute sampling, a 25% change in which of the following factors will have the smallest effect on the
size of the sample?
Tolerable rate of deviation
,Number of items in the population
Degree of assurance desired
Planned assessed level of control risk - Answers Number of items in the population
The sample size of a test of controls varies inversely with:
expected population deviation rate.
tolerable rate.
both expected population deviation rate and tolerable rate.
neither expected population deviation rate nor tolerable rate. - Answers tolerable rate.
On the basis of audit evidence gathered and evaluated, an auditor decides to increase the assessed level
of control risk from that originally planned. To achieve an overall audit risk level that is substantially the
same as the planned audit risk level, the auditor would:
An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the
statistical methods:
, can more easily convert the sample into a dual-purpose test useful for substantive testing.
eliminate the need to use judgment in determining appropriate sample sizes.
afford greater assurance than a nonstatistical sample of equal size.
provide an objective basis for quantitatively evaluating sample risk. - Answers provide an objective basis
for quantitatively evaluating sample risk.
Which of the following courses of action would an auditor most likely follow in planning a sample of
cash disbursements if the auditor is aware of several unusually large cash disbursements?
Set the tolerable rate of deviation at a lower level than originally planned
Stratify the cash disbursements population so that the unusually large disbursements are selected
Increase the sample size to reduce the effect of the unusually large disbursements
Continue to draw new samples until all the unusually large disbursements appear in the sample -
Answers Stratify the cash disbursements population so that the unusually large disbursements are
selected
In considering materiality for planning purposes, an auditor believes that misstatements aggregating
$10,000 would have a material effect on an entity's income statement, but that misstatements would
have to aggregate $20,000 to materially affect the balance sheet. Ordinarily, it would be appropriate to
design auditing procedures that would be expected to detect misstatements that aggregate:
$10,000.
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