Question

If the auditor’s assessment of audit risk is low (e.g., 1% rather than 5%), what is the effect on the amount of substantive testing performed by the auditor?

a. Increase in substantive testing.

b. Decrease in substantive testing

c. No change in substantive testing.

Which of the following is the control is not effective and would likely change the auditor’s planned assessment of control risk in performing tests of account balances?

a. Tolerable failure rate.

b. Allowable risk of assessing control risk too low.

c. Expected failure rate.

d. Allowance for sampling error

Lithgow and Harris, CPAs, are performing the audit of Wild Flower Grocery Stores. Lithgow and Harris relate annual revenue to sales per square feet and sales

per customer. What type of analysis are Lithgow and Harris most likely performing?

a. Ratio analysis.

b. Critical analysis.

c. Reasonableness tests.

d. Nonstatistical analysis

Which one of the following risks is not a risk associated with cash?

a. Large volume of transactions.

b.Importance of meeting debt covenants.

c.Complex valuation issues.

d.Easy to manipulate

Answer 1

Answer:-

1. No change in substantive (if the auditor risk is rather 1% to 5% there is no change substantive of testing performed in auditor risk.)

2. Tolerable failure rate ( the assessment of control risk in performing test of account balance are not effective control in the tolerable rate is failure)

3. Reasonableness test (lithglow and Harris are likely to performing thie reasonableness test to analysis the annual revenue sales to per square feet and sales )

4.complex valuation issues. (The complex valuation issues risk is not risk to associated the cash)