View Policies Current Attempt in Progress The most significant risks auditors face when management is rewarded on the basis of financial performance is O inadequate closing procedures, overstatement of income, and understatement of expenses. O inadequate closing procedures and smoothing of income. poor internal controls and inadequate closing procedures. management override and inadequate closing procedures. Save for Later Attempts: 0 of 1 used Submit AnswerView Policies Current Attempt in Progress The most significant risks auditors face when management is rewarded on the basis of financial performance is O inadequate closing procedures, overstatement of income, and understatement of expenses. O inadequate closing procedures and smoothing of income. poor internal controls and inadequate closing procedures. O management override and inadequate closing procedures. Save for Later Attempts: 0 of 1 used Submit AnswerDuring the risk assessment phase, the auditor makes ajudgement O on the industry in which the client operates. O on fraudulent activities at the client. 0 on fraudulent activities and errors in the nancial statements. 0 on staff required to audit the client. Save for Later Attempts: 0' of 1 used The auditor may detect related party transactions by O inspecting bank conrmations, unusual sale and purchase invoices, and minutes of board of director and shareholder meetings. 0 asking the audit team to identify all related parties. 0 reviewing the processes the audit team has in place to identify related party transactions. 0 discussing potential material misstatements in the nancial statements with the management team. Save for Later Attempts: U of 1 used Decreased revenues and increased expenses are indicative of 0 material misstatements. 0 fraud. 0 error. 0 going concern risk. Save for Later Attempts: U of 1 used The auditor gains an understanding of their client by O making enquiries of the board of directors, performing substantive procedures, and obtaining corroborative evidence. O making enquiries of management, performing analytical procedures, and obtaining corroborative evidence. O making enquiries of management, performing substantive procedures, and obtaining corroborative evidence. O making enquiries of the board of directors, performing analytical procedures, and obtaining corroborative evidence.The auditor's opinion indicates that the financial statements are O true and fair. O fairly stated. O true and correct. O correct.Audit team members reviewing closing procedures should be aware of the risks of O misstated income and expenses. 0 misstated income, expenses, assets, and liabilities. O understated income and overstated expenses. 0 overstated income and expenses. When past estimates have been relatively accurate, this indicates 0 management is lacking the appropriate expertise. 0 management processes are reliable. 0 weak controls exist over estimate calculations. 0 a high degree of estimation uncertainty. Save for Later Attempts: 0 Of 1 used The extensive use of IT systems by a client 0 increases audit risk and the amount of evidence required. 0 reduces audit work. 0 reduces audit risk. 0 increases audit risk. Save for Later Attempts: D of 1 used Which of the following best describes financial reporting fraud? O minor omissions in the financial statements O deliberate misstatements in the financial statements O red flags in the financial statements O errors in the financial statementsInternal controls are designed to O eliminate risk and support the going concern of a company. O reduce risk and support the going concern of a company. O eliminate risk and guarantee the going concern of the operations of a company. O reduce risk and guarantee the going concern of the operations of a company.Which of the fol lowing factors indicate a lower estimation uncertainty? 0 estimate requires numerous assumptions. 0 amount is very subjective. O objective data is available to support estimate. 0 complex valuation model used to develop the estimate. Save for Later Attempts: 0 of 1 used Which of the following is an example of an estimate on the financial statements? O accounts payable. O warranty liability. O salaries payable. O prepaid expenses. Save for Later Attempts: 0 of 1 used Submit AnswerThe auditor evaluates the IT risks when 0 the auditor is aware offraud and error. 0 the client has an established IT system. 0 it is required by CA5 351. O the auditor is formulating an opinion. Save for Later Attempts: D of 1 used An adverse audit opinion is most likely to be issued when 0 accounts receivable are outstanding for longer than 30 days. 0 liabilities are not completely recorded in the nancial statements. 0 assets are unable to be used in the production of goods. 0 the client has unpaid accounts payable due over 30 days. Save for Later Attempts: 0' of 1 used Related party transactions would assist the client's financial statements to reflect O increased expenses. O decreased liquidity. O increased profitability. O increased or decreased profitability. Save for Later Attempts: 0 of 1 used Submit AnswerRelated partytransactions that require disclosure include 0 related party purchase and sale transactions, rent paid to landlord, loans, and loan guarantees. 0 related party purchase and sale transactions, related party rent paid, loans, and loan guarantees. 0 purchase and sale transactions, related party rent paid, related party loans, and loan guarantees. 0 related party purchase and sale transactions, related party rent paid, related party loans, and shareholder loan guarantees. Inadequate closing procedures result in financial statements not being reviewed by those charged with governance. O the auditor performing more detailed testing at year end. O financial statements not being produced. O transactions being recorded in the appropriate accounting period. Save for Later Attempts: 0 of 1 used Submit AnswerThe auditor should gather evidence about closing procedures to O discuss with the audit team. 0 make ajudgement of reliance on closing procedures and issue an audit report. 0 evaluate effectiveness and make a judgement on the potential of material misstatement of the nancial statements. 0 discuss with those charged with governance. Save for Later Attempts: 0 of 1 used CA5 550 Related Parties requires the auditor to perform which of the following procedures? 0 Discuss with those charged with governance previous client history of modied opinions. 0 Discuss with the engagement team the risk of material misstatement due to related partytransactions. 0 Request the engagement team to design procedures to identify and account for related party transactions. 0 Request the engagement team to identify all related parties and provide explanations of the transactions. Save for Later Attempts: 0 of 1 used