Exam (elaborations)
Unit 4 Part 2 Questions with 100% correct answers
- Module
- TESTS PREP 2024
- Institution
- TESTS PREP 2024
Unit 4 Part 2 Questions with 100% correct answers
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Unit 4 Part 2What should the CAE do if the scope of the internal audit plan is insufficient to permit
expression of an opinion about risk management and control?
A.The CAE should inform senior management and the board about gaps in audit
coverage.
B.Hire more internal auditors to increase the scope of the engagement.
C.Design more procedures to ensure the audit plan becomes sufficient.
D.Make the decision to outsource the internal audit function so the scope of the audit
plan can be sufficient. - ANS-The CAE should inform senior management and the board
about gaps in audit coverage.
In the event that the audit plan is insufficient, the CAE should inform senior
management and the board about gaps in audit coverage.
The chief audit executive (CAE) performs a risk assessment before developing the
annual audit plan. Which of the following is most likely to increase the assessment of an
identified risk?
A.An unexpected, significant increase in receivables not related to an increase in sales.
B.A critical activity had not been subject to a compliance audit during the past year.
C.An immaterial, anticipated drop in cash flow after plant closings.
D.A request from senior management to review the strategic plan. - ANS-An
unexpected, significant increase in receivables not related to an increase in sales.
Unexpected, unexplained, and significant changes in amounts, such as receivables,
increase the assessed risk for that balance
A chief audit executive (CAE) uses a risk assessment model to establish the annual
audit plan. Which of the following would be an appropriate action by the CAE?
1.Maintain ongoing dialogue with management and the audit committee
2.Ensure that the schedule of audit priorities remains unchanged
3.Employ only quantitative methods to determine risk weightings
4.Revise the risk assessment and audit priorities as warranted
A.1 and 4 only.
B.1 and 2 only.
C.3 only.
, D.3 and 4 only. - ANS-1 and 4 only.
It is a best practice for risk assessment to be a dynamic process, changing over time
and as new information, business strategies, and risks are identified. Ongoing
consultation with members of management and the board is a way for the internal audit
activity to obtain such information and stay attuned to organizational developments that
may affect existing audit priorities. To accommodate such emerging priorities, the work
schedule may need to be altered.
Which of the following factors is least likely to be considered in determining the audit
work schedule?
A.Engagement work programs.
B.Issues relating to organizational governance.
C.Workload requirements.
D.The effectiveness of risk management and control processes. - ANS-Engagement
work programs.
Development of work programs occurs during the planning phase of an individual
engagement.
An auditor assesses control risk because it
A.Is relevant to the auditor's understanding of the control environment.
B.Provides assurance that the auditor's materiality levels are appropriate.
C.Affects the level of detection risk that the auditor may accept.
D.Indicates to the auditor where inherent risk may be the greatest. - ANS-Affects the
level of detection risk that the auditor may accept.
Audit risk consists of the risks of material misstatement (inherent risk combined with
control risk) and detection risk. Detection risk is the risk that the procedures performed
by the auditor to reduce audit risk to an acceptably low level will not detect a material
misstatement. It is a function of the effectiveness of an audit procedure and its
application by the auditor. Detection risk is the only component of audit risk that can be
changed at the auditor's discretion. (Inherent risk and control risk exist independently of
the audit and cannot be changed by the auditor.) The acceptable level of detection risk
for a given audit risk is inversely related to the assessed RMMs at the assertion level.
In the audit risk model, the risk that an auditor will express an inappropriate audit
opinion when the financial statements are materially misstated is
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