You recently graduated from COSU and joined a CPA firm as a staff accountant. You have...

 

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You recently graduated from COSU and joined a CPA firm as a staff accountant. You have been assigned to audit Beluga, Inc. At lunch on of Beluga's accountants said to you that he is having some trouble with basic audit concepts, and this bothers him since he thinks he may want to take the CPA exam in some point in the future. He asks you the following questions of which you need to respond with a CORRECT or INCORRECT for each question. Is inherent risk the possibility of material misstatement before considering the client's internal control? Am I right that the risk of material misstatement is composed of the three components of audit risk? In our company I thought our control risk is lower this ear that it was last - year; does that mean that there is an increase in the risk of material misstatement? Is it right to say that there would be no detection risk if we didn't have an audit? A. Correct B. Incorrect Auditors simply assess detection risk rather than restrict it, right? Am I right that absent any other changes, an increase in the risk of material misstatement results in an increase in audit risk? Does the term "audit risk" refer to the possibility that the auditors may e unknowingly fail to appropriately modify their opinion on financial statements that are materially or immaterially misstated? Do both inherent risk and control risk exist independently of the audit of financial statements? You recently graduated from COSU and joined a CPA firm as a staff accountant. You have been assigned to audit Beluga, Inc. At lunch on of Beluga's accountants said to you that he is having some trouble with basic audit concepts, and this bothers him since he thinks he may want to take the CPA exam in some point in the future. He asks you the following questions of which you need to respond with a CORRECT or INCORRECT for each question. Is inherent risk the possibility of material misstatement before considering the client's internal control? Am I right that the risk of material misstatement is composed of the three components of audit risk? In our company I thought our control risk is lower this ear that it was last - year; does that mean that there is an increase in the risk of material misstatement? Is it right to say that there would be no detection risk if we didn't have an audit? A. Correct B. Incorrect Auditors simply assess detection risk rather than restrict it, right? Am I right that absent any other changes, an increase in the risk of material misstatement results in an increase in audit risk? Does the term "audit risk" refer to the possibility that the auditors may e unknowingly fail to appropriately modify their opinion on financial statements that are materially or immaterially misstated? Do both inherent risk and control risk exist independently of the audit of financial statements?

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