AUD MCQ 3.3

Question 1

Inherent risk

Answer 1

is the suspectiblity of a relevant assertion to a material misstatements assuming there are no releated internal control policies or porcedures

Question 2

Control risk

Answer 2

Is the risk that a material misstatement will not be detected or prevented on a timely basis by the entity’s internal control

Question 3

Detection risk

Answer 3

is the risk that the audit procedures implemented will not detect a material misstatement that’s exists in a relevant assertion. It is a function of the effectiveness of audit procedures and of he manner in which they are applied . It does not arise from the risk factors relating to fraud

Question 4

RMM risk

Answer 4

Risk of material misstatement includes both inherent risk and control risk. If both inherent risk and control risk are high, then RMM is high and auditor would minimize detection risk by performing more reliable auditing procedures ,such as confirmation of a large complex sale.

Question 5

Test of controls

Answer 5

The increase in test of control would be done if the substantive test procedures alone are insufficient to detect the risk of material misstatement