1. When is materiality first assessed during an audit?

when documenting internal controls

during the risk assessment phase

at the end of the audit

during the execution of the audit

2. Which of the following accurately describes audit risk?

audit risk is typically assessed at 95%

the risk that the auditor will issue the wrong opinion

controlled by the entity's management

audit risk can be entirely eliminated

3. If a client sells valuable goods, inventory is more likely to be stolen. This causes the auditor to consider the risk that inventory is overstated but still recorded on the books. In this circumstance, the auditor will assess inherent risk at the inventory account balance level as

high.

low.

moderate to low.

non-existent.

4. Audit risk will be set higher for a company

with numerous financial statement users.

with a significant going concern issue.

with ineffective internal controls.

where management is known for its integrity.

5. Which of the following information sources would generally be considered reliable? Select all that apply.

information generated by an independent reputable external source

information from the entity that has proven accurate in the past

audited information

information generated by an accounting system with ineffective internal controls

information generated using inconsistent accounting methods

6. Information that impacts the decision-making process of users of the financial statements is the definition of the term

significance.

management assertion.

materiality.

audit opinion.