1. By reducing information risk, an audit facilitates which economic factor of production

a. Labor b. Land c. Management ability d. Financial capital allocation2

2. Consider the charity CARE [assume that it is a USA Not-for-profit entity]. An audit of CARE would follow auditing standards issued by:

a. AICPAs Auditing Standards Board b. Financial Accounting Standards Board c. International Auditing and Assurance Standards Board d. Public Company Accounting Oversight Board e. Securities and Exchange Commission

3. Consider the following statements: I. Conceptually, to DECREASE the level of DETECTION RISK, the auditor does MORE substantive testing (i.e. more audit work). II. Regarding the Audit Risk Model, Detection Risk would vary indirectly with Inherent Risk. a. I is true; II is true. b. I is true; II is false. c. I is false; II is true. d. I is false; II is false.

4. Consider the following statements: I. When considering a preliminary judgment of materiality, if the auditor sets a HIGHER dollar amount for materiality, rather than a LOWER dollar amount, MORE evidence (i.e. substantive testing) is required. II. A Nonmaterial amount would be considered always trivial.

a. I is true; II is true b. I is true; II is false c. I is false; II is true d. I is false; II is false