Extra

Question 1

Inherent risk and control risk are the ____

Answer 1

client’s risks.

Question 2

Audit Risk Model

Answer 2

Audit Risk = Control Risk x Inherit Risk x Detection Risk

Question 3

The audit strategy chosen depends on the auditor’s _________

Answer 3

preliminary inherent and control risk assessment (that is, the auditor’s overall assessment of the risk of material misstatement).

Question 4

By assessing control risk as high, an auditor will adopt a predominantly _______

Answer 4

substantive audit strategy.

Question 5

When assessing control risk as low, an auditor will generally plan to perform a _________

Answer 5

combined audit strategy where the auditor obtains a detailed understanding of the client’s system of internal controls and plans to rely on that system to identify, prevent, and detect material misstatements.

Question 6

Combined audit strategy

Answer 6

strategy used when the auditor obtains a detailed understanding of their client’s system of internal controls and plans to rely on that system to identify, prevent, and detect material misstatements

Question 7

Substantive audit strategy

Answer 7

strategy used when the auditor does not plan to rely on the client’s controls and increases the reliance on detailed substantive procedures that involve intensive testing of year-end account balances and transactions from throughout the year

Question 8

Substantive audit strategy Steps

Answer 8

Understand IC
Assess CR as High
Substantive Testing

Question 9

Combined audit strategy

Answer 9

Understand IC
Assess CR as Low
Test Controls
Substantive Testing

Question 10

Inherent risk

Answer 10

the susceptibility of the financial statements to a material misstatement without considering internal controls

Question 11

Audit risk

Answer 11

the risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated

Question 12

Control risk

Answer 12

the risk that a client’s system of internal controls will not prevent or detect a material misstatement

Question 13

Detection risk

Answer 13

the risk that the auditor’s testing procedures will not be effective in detecting a material misstatement

Question 14

Audit Assertions (CAVE)

Answer 14

Completness
Accuracy and Cut-off
Valuation
Existence

Question 15

Evidence Types

Answer 15

Confirmations
Documentary
Representations
Verbal
Computational
Physical
Electronic

Question 16

Gathering Procedures

Documentary

Answer 16

Inspection

Internally Generated
External Held by Client

Question 17

Gathering Procedures

Verbal

Answer 17

Enquiry

Question 18

Gathering Procedures

Computational

Answer 18

Recalculate / re-perform / Analytical Procedures

Question 19

Gathering Procedures

Physical

Answer 19

Observation / Inspection

Question 20

Gathering Procedures

Eletronic

Answer 20

Observation / Inspection

Question 21

Evidence is the information used to decide

Answer 21

Free of material misstatement

Fair presentation

Question 22

Types of Audit evidence

Answer 22

Sufficient appropriate audit evidence
External confirmations
Documentary evidence
Representations
Verbal evidence
Computational evidence
Physical evidence
Electronic evidence