Question

Operating results that are highly sensitive to economic factors is considered to an inherent risk.

                           a. True

                           b. False

         Scanning through the accounting records to look for unusual or large items is not generally considered to be a valid substantive procedure in an audit.

                           a. True

                           b. False

        The detection risk in the audit varies directly in accordance with the risk of material misstatement.

                           a. True

                           b. False

      Which of the following approaches to an audit is most likely to result in a detailed analysis of one or more characteristics of an entire population?

                           a. A horizontal analysis approach

                           b. a test design approach

                           c. a ratio analysis approach

                           d. a data analytical approach

    Assertions with high inherent risk are least likely to involve:

                           a. difficult accounting issues

                           b. Significant judgement by management

                           c. Complex calculations

                           d. Routine transactions

Answer 1

a. True. [Reference: Audit and Accounting Guide: Airlines, AICPA, p. 22]

a. True. [Substantive procedures involves

b. False. [They are inversely proportional. When material misstatements are high, there will be less detection because the chance to detect them will be high]

d. A data analytical approach [It involves studying 100% of populations. Usually uses CAAT]

d. Routine transactions.

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