A2 - Responding to Assessed Risks of Material Misstatement

Question 1

When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs:

Answer 1

Tests of controls and limited tests of current year property and equipment transactions.

Question 2

To obtain audit evidence about control risk, an auditor selects tests from a variety of techniques including:

Answer 2

Inquiry, inspecting documents, observation, and reperformance. These are all tests that may be used to evaluate the operating effectiveness of a control as well.

Question 3

The objective of tests of details of transactions performed as tests of controls is to:

Answer 3

Evaluate whether internal controls operated effectively

Question 4

In an environment that is highly automated, an auditor determines that it is not possible to reduce detection risk solely by substantive tests of transactions. Under these circumstances, the auditor most likely would:

Answer 4

Perform TESTS OF CONTROLS to support a lower level of assessed control risk.

Question 5

If an auditor wishes to perform a test of controls over a procedure that leaves no audit trail, then the auditor mus use:

Answer 5

Observation and Inquiry to test the control

Question 6

If an auditor’s risk assessment is based on the effective operations of control, the auditor will likely:

Answer 6

Identify specific internal controls that are likely to detect or prevent material misstatements.

Question 7

What should an auditor do when control risk is assessed at the maximum level?

Answer 7

Document the assessment