1. A decrease in planned audit evidence is caused by a ________ risk of material misstatement and a ________ detection risk.

A. higher, lower

B. lower, lower

C. lower, higher

D. higher, higher

2. Grant is the audit firm for the Bona Brothers audit. When Grant is assessing Bona Brothers inherent risk, which of the following is the least likely source of information Grant would consider?

A. The nature of client's business.

B. The effectiveness of internal controls.

C. The existence of related parties.

D. The susceptibility to misappropriation of assets.

E. Results of previous audits.

3. Audit evidence gathered by the PPC audit team would generally considered appropriate when PPC is the audit firm for the Duff Co. audit.

A. it is relevant to the assertion being tested.

B. it has been obtained by random selection.

C. it consists of oral statements made by managers of Duff Co. under audit.

D. it consists of written statements made by managers of Duff Co. under audit.

E. there is enough of it to afford a reasonable basis for an opinion on financial statements.

4. BCD is the audit firm for the Dunder Mifflin audit. If Dunder Mifflin failed to accrue (make an adjusting journal entry for) an unpaid invoice for goods received prior to the end of their fiscal year, it would represent a

A. projected misstatement.

B. known misstatement.

C. possible misstatement.

D. tolerable misstatement.

E. likely misstatement.

5. Which of the following is a correct relationship?

A. Audit evidence and performance materiality have a direct relationship.

B. Audit risk and performance materiality have a direct relationship.

C. Audit risk and detection risk have an inverse relationship.

D. Control risk and detection risk have a direct relationship.

E. Detection risk and inherent risk have an inverse relationship.