Professional Documents
Culture Documents
Midterm Test 1
Midterm Test 1
MSV: 11221698
Lớp : Kiểm toán CLC 64A
A) quantity of evidence.
B) quality of evidence.
C) sufficiency of evidence.
D) meaning of evidence.
No2. Determine whether each of the following statements is true or false and
provide a brief explanation?
1. Assessing acceptable audit risk, client business risk, and risk of material
misstatement helps determine the audit procedures that will be needed. T
2. As acceptable audit risk is decreased, the likely cost of conducting an audit
increases. T
3. When a successor auditor contacts a company's previous auditor, the
predecessor auditor is required to respond fully and without limit to the request for
information. F
- Because the predecessor auditor is required to respond to the request of the
successor auditor for Information, but the response can be limited to stating that no
information will be provided when there are actual or potential legal problems
between the client and the predecessor.
4. Many risks are common to all clients in certain industries. T
5. Transactions with related parties must be disclosed in the financial statements if
they are deemed to be material. T
6. Management's philosophy and operating style influence the risk of material
misstatements in the financial statements. T
7. In order to be meaningful, a company's ratios should be compared to their prior
year's ratios, not industry benchmarks. F
- Because an auditor may compare the company’ current ratio with industry
average to identify any potential liquidity issues.
8. A high detection risk equates to a low amount of audit evidence needed. F
- Because if detection risk is set at high, to lower assuance is needed from audit
risk.
No 3. Tracy Keulen, the sole owner of a small bakery, has been told that the business
should have financial statements reported on by an independent Registeraccountant
(RA). Keulen, having some bookkeeping experience, has personally prepared the
company’s financial statements and does not understand why such state- ments
should be examined by an RA. Keulen discussed the matter with petra Dassen, an
RA, and asked Dassen to explain why an audit is considered important.
Required:
No 4.
Dracule Industries is a privately owned business that sells medical product and
devices to hospitals, clinics and the public. Certain changes have occurred in
Dracule Industries during the year undergoing the audit. Harker needs to evaluate
the effect these changes have on audit risk. Audit risk at the financial statement level
is influenced by the risk of material misstatement; which include factors related to
management, the industry and the entity or a combination thereof. For each of the
following changes that have occurred during the year under audit identify the
appropriate audit response for the list of responses. Each response can be used once,
more than once or not at all.
Answers:
1.a
2.a
3.b
4.b
5.b
6.b
7.b
8.a