Reference no: EM132687613

True False question

Question 1: For satisfaction of the attestation engagement contract, five factors must be satisfied. : three parties, reliability, evidence, criteria, and subject matter.

Question 2: Agreed upon procedure describes the proceeded procedure in the auditor's report that an auditor(or accountant) have performed in detail.

Question 3: If an auditor conclude that performing substantive test on inventory will take less time than performing test of controls, This situation mean that control risk is low, because an auditor will perform only substantive tests on inventory. by so doing, test of controls are automatically verified and control risks are naturally prevented.

Question 4: There are many products that is very small and produced with high-priced semiconductor part in the client's warehouse. This situation is generally evaluated that the detection risk is high, because auditor will have difficulty in performing substantive tests when they count semiconductor parts.

Question 5: Materiality does not apply when the auditor has direct financial relationship with the client. On the contrary, materiality applies when the auditor has indirect financial relationship with the client.

Question 6: A client's industry is expected to dramatically decline recently three years. In this situation, It is highly possible that PPE is impaired, LCM application may be required to manage inventory items, and to set up allowance for doubtful accounts may be required to manage account receivable. In this environment, It is possible that inherent risk is high and the company understate their net income.

Question 7: In case of aggregating likely misstatements, If the misstatement amounts is extracted by range, SAS Interpretation states that median value of the range which an auditor estimated is accepted.

Question 8: In audit technique, Inspection is divided into two sub-group : document inspection and tangible asset inspection. From among these, substantive test stage use the tangible asset inspection. On the contrary, risk assessment and test of control stage don't use this technique.

Question 9: In the risk assessment and test of control stage, four audit techniques are used. risk assessment is : inquiry, document inspection, observation, and analytical procedure. Test of control is : Inquiry, document inspection, observation, and recalculation.