Reference no: EM132829728

Problem 1: Tolerable misstatement is best described by which of the following statements?

a. The amount of misstatement that management is willing to tolerate in the financial statements.
b. Materiality used to establish a scope for the audit procedures for the individual account balance or relevant disclosures.
c. Materiality for the balance sheet as a whole.
d. The quantitative characteristics that would determine materiality at the financial statement level.
e. The qualitative characteristic s that would determine materiality at the financial statement level.

Problem 2: Which of the following statements concerning illegal acts by clients is most accurate?

a. An audit in accordance with AICPA Professional Standards includes a requirement to perform procedures designed to detect illegal acts having an indirect but material effect on the entity's financial statements.
b. An auditor has no responsibility to detect illegal acts by clients that have an indirect effect on the financial statements.
c. An auditor is responsible for determining that the entity is in compliance with all applicable laws and regulations that could affect the entity's financial statements.
d. An auditor considers illegal acts from the perspective of the reliability of management's representations rather than their relation to audit objectives derived from financial statement assertions.
e. An auditor's responsibility to detect illegal acts that have a direct and material effect on an entity's financial statements is the same as that for errors and fraud.