A3 - Responding to the Assessed Risks of Material Misstatement

Question 1

How is a “significant risk” defined?

Answer 1

As having high inherent risk

Question 2

What are the two types of substantive procedures?

Answer 2

Tests of details and substantive analytical procedures

Question 3

T/F: Assessing control risk may be performed concurrently during an audit with obtaining an understanding of the entity’s internal control

Answer 3

True

Question 4

Which audit techniques most likely would provide an auditor with the most assurance about the effectiveness of the operation of internal control?

Answer 4

Observation of client personnel

Question 5

T/F: Determining whether internal controls are operating effectively is a part of obtaining an understanding of internal control

Answer 5

False; effective operation of internal control is not a part of obtaining an understanding