Reference no: EM132829706

Problem 1: When an auditor increases the assessed level of control risk because certain control procedures were determined to be ineffective, the auditor would most likely

a. Increase the level of detection risk.
b. Decrease the assessment of inherent risk to offset the increase in control risk.
c. Increase the emphasis on tests of controls.
d. Decrease the emphasis on risk assessment procedures.
e. Increase the sample sizes used for substantive tests.

Problem 2: Which of the following communications between the auditor with final responsibility for an engagement (such as the engagement partner) and the audit engagement team regarding the susceptibility of a client's financial statements to material fraud is required by AICPA Professional Standards?

a. Discussing the firm's policy for allocating budgeted audit hours to detect fraud.
b. Explaining all procedures to be performed on the engagement to detect significant errors or fraudulent activity.
c. Explaining the firm's strategy for managing and controlling legal liability due to fraud.
d. Discussing the need to maintain a questioning mind and to exercise professional skepticism throughout the audit.