which one is correct?

1. When management has an adequate level of integrity for the auditor to accept the engagement but cannot be regarded as completely honest in all dealings, auditors normally:

a.Increase inherent risk and control risk.

b.Increase acceptable audit risk and reduce inherent risk.

c.Reduce inherent risk and control risk.

d.Reduce acceptable audit risk and increase inherent risk.

2. What is the best way for an auditor to obtain evidence about the controls in relation to 'segregation of duties'?

a.Discuss the performance of duties within the company with the internal auditor

b. Observe personnel performing their duties.

c. Re-perform the task.

d. Inspect documents and records to ensure an independent check has been performed.

3.According to ASA 320, at what point should materiality be considered?

a.When determining the nature, timing, and extent of audit procedures

b.When evaluating the effect of uncorrected misstatements, if any, on the financial report and in forming the opinion in the auditor's report

c.At all stages of audit planning

d.Both A and B

4.What condition requires departure from an unmodified report?

a.A materially misstated financial report b.Inability to obtain sufficient appropriate audit evidence c.Both A and B

d.None of the above

5.If the predominantly substantive approach preliminary audit strategy is used, Detection risk will be:

a.Low or very low. b.High or very high c.Moderate or high. d.At the higher level.

6.A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

a.Greater detection risk.

b.Smaller expected frequency of misstatements.

c.Smaller measure of tolerable misstatement.

d.Greater reliance on analytical procedures.

7.Which assertion is defined as: 'transactions and events that have been recorded or disclosed, have occurred and such transactions and events pertain to the entity'?

a.Accuracy b.Cut-off

c.Occurrence d.Completeness

8.The process which requires the calculation of an interval and then selects the items based on the size of the interval is:

a.Systematic sample selection b.Computerised sample selection

c.Statistical sampling d.Random sample selection

9. When discussing acceptable audit risk and the audit risk model, which one of the following statements is TRUE?

a.When the auditor decides on lower acceptable audit risk, it means the auditor wants to be certain that the financial statements are not materially misstated.

b.Audit risk is objectively determined by the auditor.

c.Audit risk is the risk that the auditor is willing to take that the financial statements are fairly stated after the audit is completed and an unqualified opinion has been reached.

d.The terms audit assurance, overall assurance. and level of assurance are synonyms for audit risk.

10.ASA 520 states that analytical procedures can be used as:

a.Compliance tests.

b.Tests of controls

c.Substantive tests.

d.Helpful procedures not possessing the validity of other tests available to the auditor.

11. Which of the following identifies the five components of internal control?

a.Control environment, legal environment, risk assessment, control activities, monitoring of controls

b.Control environment, legal environment, information system, control activities, monitoring of controls.

c.Control environment, legal environment, risk assessment, information system, control activities.

d.control environment, risk assessment, information system, control activities, monitoring of controls.

12.Sampling risk:

a.can be eliminated by taking a random sample.

b.applies only to samples for substantive testing.

c.is the problem that the results of the test will be misinterpreted by the auditor

d.is the risk that the sample chosen by the auditor is not representative of the population of transactions.

13. Which of the following wouldNOTbe considered a method of audit sampling?

a.Random selection.

b.Systematic selection.

c.Haphazard selection

d.Block selection.

14.Adopting an audit strategy that does NOT rely heavily on substantive testing:

a.Means that the auditor will conduct extensive year-end account balance testing.

b.Is appropriate when internal controls are minimal.

c.Requires the auditor to conduct extensive control testing.

d.Means that the auditor will gain the minimum necessary knowledge of the client's system of internal controls.

15.For an audit, the auditor can control:

a.Detection risk.

b.Control risk.

c.Inherent risk.

d.Financial risk.

16.The term tolerable error relates most closely to:

a.The concept of materiality at the overall financial statement level.

b.The concept of materiality at the account balance level.

c.The level of materiality set by management.

d.The amount is determined by applying a variable percentage to either total assets or total revenues.

17.An adverse opinion is issued when the auditor believes:

a.The misstatements are material and pervasive to the financial report. b.The financial report will be found to be misleading or misstated if an adequate investigation is performed c. Some parts of the financial report are materially misstated or misleading. d.The audit firm is not independent.

18.Which of the following best describes business risk:

a.The risk of an auditor getting her opinion wrong.

b.The risk that the financial statements contain material errors.

c.The risk that the company will not achieve its objectives.

d.Economic factors that may cause cash outflows from an entity.