Audit Risk

Question 1

audit risk

Answer 1

the risk the auditor expresses an inappropriate audit opinion when the f/s are materiality misstated

the concept of audit risk is applicable at the financial statement level

Question 2

high level of assurance corresponds to a _____of audit risk

Answer 2

low level

Question 3

audit risk model

Answer 3

not applicable at the f/s level

applicable at the level of an individual audit area only

Question 4

audit risk =

Answer 4

AR=IRCRDR
or
AR=RMM*DR

Question 5

inherent risk (ir)

Answer 5

the probability that a material misstatement would occur in the absence of internal controls

Question 6

Control risk (CR)

Answer 6

the probability that a material misstatement that occurred in the first place would not be detected and corrected by internal controls that are applicable

Question 7

Detection risk (DR)

Answer 7

the probability that a material misstatement that was not prevented or detected and corrected by internal control was not detected by the auditors substantive audit procedures (an undetected material misstatement exists in a relevant assertion).

we set ir and cr. DR is by default.

Question 8

risk of material misstatement (RMM)

Answer 8

IR*CR

Question 9

we set AR. then we determine RMM and then we solve for X (Which is DR).

we set AR as a target, we assess IR, we asses CR and then DR is there by default.

Answer 9

v

Question 10

The relationship between control risk and detection risk is

Answer 10

inverse.