Tips

Question 1

What is the relationship between audit risk, detection risk, control risk, and inherent risk (high vs low)?

Answer 1

Audit risk is high = Detection Risk Low = Inherent Risk High = Control Risk High

Audit Risk Low = Detection Risk High = Control Risk Low = Inherent Risk Low

Question 2

Is more or less evidence needed when audit risk is high vs low? Vs Detection Risk High Vs Low? Vs Control Risk High vs low? Vs Inherent Risk High vs low?

Answer 2

Audit Risk:

If high more evidence needed
If low less evidence needed

Detection Risk:

If high less evidence needed
If low more evidence needed

Control Risk:

If high more evidence is needed
If low less evidence is needed

Inherent Risk:

If high more evidence is needed
If low less evidence is needed

Question 3

Can inherent and control risk evidence be trusted when assessed as high vs low (need more or less evidence)?

Answer 3

Inherent Risk:

If high then cannot rely on evidence needing more evidence
If low then can rely on evidence needing less evidence

Control Risk:

If high then cannot rely on evidence needing more evidence
If low then can rely on evidence needing less evidence

Question 4

Detection Risk high vs low meaning?

Audit risk high vs low meaning?

Inherent risk high vs low meaning?

Control risk high vs low meaning?

Answer 4

If detection risk = high then less needs to be texted for control to be deemed effective or acceptable

If detection risk = low then more needs to be detected for control to be deemed effective or acceptable

If audit risk = high then more needs to evaluated for audit to be deemed effective or acceptable

If audit risk = low then less needs to be evaluated for audit to be deemed effective or acceptable

If inherent risk = high then more needs to be evaluated to deem control effective or acceptable

If inherent risk = low then less needs to be evaluated to deem control effective or acceptable

If control risk = high then more needs to be evaluated to deem control effective or acceptable

If control risk = low then less needs to be evaluated to deem control effective or acceptable

Question 5

Accounting records are where all the fake transactions exist

Source Documents have all the complete records

Answer 5

AR First = (AR to source existence test)

Source first = (Source to AR completeness test)

Question 6

Soc Type 1 = internal controls over FR

Soc Type 2 = Internal controls over information technology

Type 1 = Design and suitability of internal controls over FR (point in time ex. Balance sheet)

Type 2 = Design and suitability of intern controls and operating effectiveness (period of time Ex. Income statement)

Restricted use to client, regulator, stakeholders anyone who asks except public

Question 7

2 cpas 3 non cpas on board

Question 8

Audit partner/lead partner can be on audit for 5 years then needs to be off for 5 years (and then they can go back)

Other significant roles 7 years on max and 2 years off (and then they can go back)

Question 9

Unqualified= Issuers

Unmodified = Nonissuers