8. In class we discussed the following example: Current ratio Year 3 Year 2 Year 1 Unaudited 5 3 3 In the beginning stage of an auditor, the above ratio might suggest to the auditor which of the following: a. The company's financial picture has improved. b. Some current assets might be UNDERstated. c. Some current liabilities might be UNDERstated. d. Some current liabilities might be OVERstated Answer 9. Consider the following statements: I. Evidence considered in a financial statement audit is based on procedures stated in Generally Accepted Auditing Standards. II. A "trivial amount" would be considered nonmaterial. a. I is true; b. I is true; c. I is false; d. I is false; Answer II is true II is false II is true II is false 10. In class in discussing the audit risk model we considered several cases as follows [Detection Risk rounded]: Case Audit Inherent Risk Risk Control Risk I .05 II .05 -60 .60 .60 .30 Detection Risk .139 222 What would be the required level of detection risk for case II. Compared with Case I would the auditor expect to do more or less audit work (substantive testing) in case II? a. 278; less audit work. b. e. .278; more audit work. none of the above. d. c. 516; less audit work. .516; more audit work. Answer