Acc 403 Final Exam
* Question 1
6 out of 6 points | | | An auditor who audits a business cycle that has low inherent risk should:Answer | | | | | Selected Answer: | increase the tolerable misstatement for the area. | Correct Answer: | increase the tolerable misstatement for the area. | | | | | * Question 2
6 out of 6 points | | | The five steps in applying materiality are listed below in random order. 1. | Estimate the combined misstatement. | 2. | Estimate the total misstatement in the segment. | 3. | Set preliminary judgment about materiality. | 4. | Allocate preliminary judgment about materiality to segments. | 5. | Compare combined estimate with preliminary judgment about materiality. |
The first three steps in correct sequence would be:Answer | | | | | Selected Answer: | 3, 4, 2 | Correct Answer: | 3, 4, 2 | | | | | * Question 3
6 out of 6 points | | | Auditors are responsible for determining whether financial statements are materially misstated, so upon discovering a material misstatement they must bring it to the attention of:Answer | | | | | Selected Answer: | the client's management. | Correct Answer: | the client's management. | | | | | * Question 4
6 out of 6 points | | | If it is probable that the judgment of a reasonable person will be changed or influenced by the omission or misstatement of information, then that information is, by definition of FASB Statement No. 2:Answer | | | | | Selected Answer: | material. | Correct Answer: | material. | | | | | * Question 5
6 out of 6 points | | | Likely misstatements can result from:Answer | | | | | Selected Answer: | Computation of the sampling error for the cash account | Differences between management's and an auditor's judgment about account balances | Projections of misstatements based on an auditor's tests of asample from a population | No | Yes | Yes | | Correct Answer: |
6 out of 6 points | | | An auditor who audits a business cycle that has low inherent risk should:Answer | | | | | Selected Answer: | increase the tolerable misstatement for the area. | Correct Answer: | increase the tolerable misstatement for the area. | | | | | * Question 2
6 out of 6 points | | | The five steps in applying materiality are listed below in random order. 1. | Estimate the combined misstatement. | 2. | Estimate the total misstatement in the segment. | 3. | Set preliminary judgment about materiality. | 4. | Allocate preliminary judgment about materiality to segments. | 5. | Compare combined estimate with preliminary judgment about materiality. |
The first three steps in correct sequence would be:Answer | | | | | Selected Answer: | 3, 4, 2 | Correct Answer: | 3, 4, 2 | | | | | * Question 3
6 out of 6 points | | | Auditors are responsible for determining whether financial statements are materially misstated, so upon discovering a material misstatement they must bring it to the attention of:Answer | | | | | Selected Answer: | the client's management. | Correct Answer: | the client's management. | | | | | * Question 4
6 out of 6 points | | | If it is probable that the judgment of a reasonable person will be changed or influenced by the omission or misstatement of information, then that information is, by definition of FASB Statement No. 2:Answer | | | | | Selected Answer: | material. | Correct Answer: | material. | | | | | * Question 5
6 out of 6 points | | | Likely misstatements can result from:Answer | | | | | Selected Answer: | Computation of the sampling error for the cash account | Differences between management's and an auditor's judgment about account balances | Projections of misstatements based on an auditor's tests of asample from a population | No | Yes | Yes | | Correct Answer: |