1. All of the following are true except:
a. Materiality at the financial statement level is set at a higher level than planning materiality.
b. Planning materiality moves in the same direction as tolerable misstatement.
c. A materiality level where the audit believes errors below that level would not, even when aggregated with all other misstatements, be material to the financial statements is referred to as posting materiality.
d. The FASB, PCAOB, and the U.S. Supreme Court have all agreed to a uniform definition of materiality.
2. All of the following would be considered a limitation of the audit risk model except:
a. The model treats each risk component as a separate and independent factor when the factors are interrelated.
b. Inherent risk is difficult, if not impossible, to formally assess.
c. It is not possible to assess control risk.
d. The model does not support qualitative judgments.
3. Business risk is the risk that:
a. The auditor will fail to detect material misstatements in the financial statements.
b. The control system will fail to detect material misstatements.
c. The client will experience difficulties associated with managing and growing the business.
d. The client will change auditors often.