Reference no: EM132809506

Question

1. Review the chapter overviews. Look at the Concept Check questions and the suggested questions. Review quizzes and assignments as well as questions looked at in class.

a) At what two levels does the auditor assess risk of material misstatement? (C7-1)

b) Define misappropriation of assets and give two examples. (C7-3)

c) Using the audit risk model, holding all factors equal, what happens to detection risk if control risk goes down? Why? (7-5)

d) Why should the auditor consider client business risk when determining acceptable audit risk? (C7-6)

e) What is meant by acceptable audit risk? What is its relevance to evidence accumulation? (RQ7-20)

f) Describe which two factors of the audit risk model relate to the risk of material misstatement at the assertion level. (RQ 7-13)

g) List and briefly explain the three factors that need to be present for fraud (these factors are known as the fraud triangle). What does the auditor need to do if they find evidence of fraud?

h) What are the five components of internal control in the COSO internal control framework? Provide an example of a control for each component. (RQ 8-5)

i) What are control activities? Explain their role in the financial reporting process. (C8-3)

j) What are general controls? Explain how they are similar to entity-level controls. (C8-4)

k) How is management's risk assessment relevant to the audit? (C8-6)

l) What is the key internal control risk at a small business, and how can a small business owner deal with it? (C8-8)

m) Describe the four broad objectives management has when designing effective internal control. (RQ8-1)

n) What is meant by the "control environment"? (RQ 8-7)

o) Describe the activities that the auditor performs to obtain an understanding of internal control and assessing control risk. (C9-1)

p) Explain why the auditor tests controls. (C9-4)

q) What is the auditor's responsibility for obtaining an understanding of internal control? (C 9-1)

r) Explain what is meant by "significant deficiencies" as they relate to internal control. What should the auditor do when he or she has discovered significant deficiencies in internal control? (C 9-6)

s) Distinguish between a substantive approach and a combined approach in auditing a financial statement assertion. (C 9-8)

t) If the auditor assesses control risk as high for a transaction-related audit objective, what does that imply for detection risk and the level of substantive testing? (C 9-12)