ACCT 555 Week 4 Homework

ACCT 555 Week 4 Homework

9-22 (Objectives 9-1, 9-2) The following questions deal with materiality. Choose the best response.

a. Which one of the following statements is correct concerning the concept of materiality?

b. Which of the following is not correct about materiality?

c. In considering materiality for planning purposes, an auditor believes that misstatements aggregating $10,000 will have a material effect on an entity’s income statement, but that misstatements will have to aggregate $20,000 to materially affect the balance sheet. Ordinarily, it is appropriate to design audit procedures that are expected to detect misstatements that aggregate

9-23 (Objectives 9-6, 9-8) The following questions concern audit risk. Choose the best response.

a. Some account balances, such as those for pensions and leases, are the result of complex calculations. The susceptibility to material misstatements in these types of accounts is defined as

b. Inherent risk and control risk differ from planned detection risk in that they

c. Which of the following best describes the element of inherent risk that underlies the application of auditing standards?

9-24 (Objective 9-9) The following questions deal with audit risk and evidence. Choose the best response.

a. As the acceptable level of detection risk decreases, an auditor may

b. As lower acceptable levels of both audit risk and materiality are established, the auditor should plan more work on individual accounts to

c. Based on evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor could

10-30 (Objectives 10-1, 10-2, 10-7) The following are general questions about internal control. Choose the best response

a. When considering internal control, an auditor must be aware of the concept of reasonable assurance, which recognizes that the

b. Actions, policies, and procedures that reflect the overall attitude of management, directors and owners of the entity about internal control relate to which of the following internal control components?

c. Vendor account reconciliations are performed by three clerks in the accounts payable department on Friday of each week. The accounts payable supervisor reviews the completed reconciliations the following Monday to ensure they have been completed. The work performed by the supervisor is an example of which COSO component?

d. What is the independent auditor’s principal purpose for obtaining an understanding of internal control and assessing control risk in a financial statement audit?

10-33 (Objective 10-3) Following are descriptions of ten internal controls.

Indicate which of the five COSO internal control components is best represented by each internal control.

a. Control environment

b. Risk assessment

c. Control activities

d. Information and communication

e. Monitoring