chap 9 identification of significant risks

Question 1

what are 3 categories that are identified as significant risks?

Answer 1

1. nonroutine transactions 2. matters that require significant judgement 3. fraud risk

Question 2

what is a significant risk?

Answer 2

represents an identified and assessed risk of material misstatement that, in the auditors professional judgement, requires special audit consideration

Question 3

what two things do auditing standard require the auditor to do in relation to significant risks?

Answer 3

1. obtain an understanding of the entitys controls relevenant to significant risks to evaluate the design and implemention of those controls 2. perform substantive tests related to assertions deemed to have significant risks

Question 4

when auditors identify a potential risk of material mistatmwent due to fraud, auditing standards requires the auditor to do what?

Answer 4

consider that risk a significant risk which triggers required responses to those risks

Question 5

significant risk also relate to matters that require significant judgment because they include the development of accounting estimates for which significant measurement of ____ exists

Answer 5

uncertainty

Question 6

classes of transactions or account balances that are based on the development accounting estimates often require significant judgement that is subjective or complex because it is based on what?

Answer 6

assumptions about future events

Question 7

what risk represents an identified and assessed risk of material misstatement that, in the auditors professional judgement, requires special audit consideration?

Answer 7

a significant risk

Question 8

what is a nonroutine transaction?

Answer 8

transactions that are unusuaul , either due to size or nature, and that are infrequent in occurrence

Question 9

auditing standards require the auditor to determine whether any of the risks identified are, in the auditors professional judgment, a _____ risk

Answer 9

significant

Question 10

T/F transactions or balances that are based on accounting estimates basesd on assumptions about future events are frequently identifed as significant risks

Answer 10

T

Question 11

T/F identification of significant risks due to fraud or error is a core element of effective audit planning

Answer 11

T

Question 12

what is a nonroutine transaction that are likely to be considered significant risk?

Answer 12

related party transactions

Question 13

what are 2 reasons nonroutine transactions may increase the risk of material misstatement ?

Answer 13

1. they involve a greater extent of managment intervention, including more reliance on manual vs. automated data collection and processing 2. they can involve complex calculations or unusual accounting principals not subject to effective internal controls due to their infrequent nature

Question 14

transactions that are unusuaul , either due to size or nature, and that are infrequent in occurrence are considered?

Answer 14

nonroutine transactions

Question 15

significant risk often relate to what types of transactions?

Answer 15

nonroutine