ACCT 4317 - CH3 MC

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Which of the following concepts are pervasive in the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?

Materiality and Risk.

The existence of audit risk is recognized by the statement in the auditor's standard report that the auditor

obtains reasonable assurance about whether the financial statements are free of material misstatement.

Risk of material misstatement refers to a combination of which two "client" components of the audit risk model?

Inherent risk and control risk.

Auditing standards require auditors to make certain inquiries of management regarding fraud. Which of the following inquiries is required?

Whether management has any knowledge of fraud that has been perpetrated on or within the entity.

Which of the following characteristics most likely would heighten an auditor's concern about the risk of intentional manipulation of financial statements?

Management places substantial emphasis on meeting earnings projections.

Which of the following is a misappropriation of assets?

An employee of a consumer electronics store steals 12 CD players.

Which of the following is an example of fraudulent financial reporting?

Company management falsifies inventory count tags, thereby overstating ending inventory and understating cost of sales.

When is a duty to disclose fraud to parities other than the client's senior management and its audit committee most likely to exist?

In response to inquiries from a successor auditor.

Tolerable misstatement is

materiality allocated to a specific account.

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

find smaller errors.

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