Reference no: EM13343538

True/False

REQUIRED: For each of the following items, indicate whether it is (T) True or (F) False. For those marked "False," identify the error(s) and indicate the change or changes that are needed to make the statement true.

1. Material misstatement is not possible for individual accounts with balances below the auditor's preliminary judgment about materiality.
2. Many auditors make the allocation of materiality on the basis of the balance sheet account balances alone.
3. Materiality should be allocated to the various accounts in proportion to their recorded balances.
4. As more materiality is allocated to an account, the amount of audit work on that account increases.
5. Analytical procedures are defined as "evaluations of financial information made by a study of plausible relationships among financial data components."
6. The allocation of the preliminary estimate of materiality may not be revised once the fieldwork is begun.
7. In practice, the allocation of materiality is normally done without heavy reliance on the subjective judgment of the auditor.
8. In developing analytical procedures, the reliability of budget data is independent of the assumptions used in their preparation or the care used in compiling the budgeted amounts.
9. Analytical models that compare financial data with underlying nonfinancial data are usually less effective than analytical models that compare current year's financial data with last year's financial data.
10. Relationships among data may be expected to continue in the absence of known conditions to the contrary.

REQUIRED: For each of the following items, indicate whether it is (T) True or (F) False. For those marked "False," identify the error(s) and indicate the change or changes that are needed to make the statement true.

1. An auditor will normally plan to perform tests of controls only if it has been determined that effective internal controls have been placed in operation.
2. Public company auditors must test controls related to all significant financial statement assertions.
3. Assessing control risk is the process of evaluating the effectiveness of an entity's internal control in preventing or detecting material misstatement in the financial statements.
4. Internal control risk assertions are made for internal controls as a whole, not for individual assertions.
5. The auditor may base an assessment of control risk on the evidence collected while obtaining an understanding of internal controls.