Enter answers below:

1 Point Each

True / False Question	Answer
1
2
3
4
5

5 Points Each

Problem	Answer
1
2
3

TRUE / FALSE

1) The professional standards consider calculating depreciation expense a "routine" transaction.

2) The most reliable form of documentary evidence generally is considered to be documents created by the client.

3) A vendor's invoice is an example of documentary evidence created by a third party and held by the client.

4) When the risk of material misstatement for an account is high, the auditors may perform additional substantive procedures to restrict detection risk to a lower level.

5) Valuation of equipment carried at $70,000 could best be established by physically inspecting the equipment.

Problem #1

MW & Co., CPAs, is planning its audit procedures for its tests of the valuation of inventories of EC Manufacturing Co. The auditors on the engagement have assessed inherent risk and control risk for valuation of inventories at 80% and 40%, respectively. Calculate the appropriate level of detection risk for the audit of this assertion, given that the auditors wish to restrict audit risk for the assertion to 5%

THE ANSWER MUST BE A PERCENTAGE WITH 2 DECIMAL PLACES EXAMPLE = 21.56%

Problem #2

MW & Co., CPAs, is planning its audit procedures for its tests of the valuation of inventories of EC Manufacturing Co. The auditors on the engagement have assessed inherent risk and control risk for valuation of inventories at 100% and 25%, respectively. Calculate the appropriate level of detection risk for the audit of this assertion, given that the auditors wish to restrict audit risk for the assertion to 3%

THE ANSWER MUST BE A PERCENTAGE WITH 2 DECIMAL PLACES EXAMPLE = 21.56%

Problem #3

Auditors have assessed inherent risk for a particular assertion at 70% and control risk at 15%. In addition, they have performed audit procedures that they believe have a 15% risk of failing to detect a material misstatement in the assertion. Calculate the audit risk.

Audit Risk =

THE ANSWER MUST BE A PERCENTAGE WITH 2 DECIMAL PLACES EXAMPLE = 21.56%