Performance Materiality is also known as _____________. - answer-Tolerable Error
Auditor uses Performance Materiality for ____________. - answer-Determining significant accounts, locations, and audit procedures.
Performance Materiality is what percent of Planning Materiality? - answer-75%
...
WGU - D251 Advanced Auditing
Performance Materiality is also known as _____________. - answer-Tolerable
Error
Auditor uses Performance Materiality for ____________. - answer-Determining
significant accounts, locations, and audit procedures.
Performance Materiality is what percent of Planning Materiality? - answer-
75%
What happens is Performance Materiality is set too high? - answer-Auditor
might not perform sufficient procedures to detect material misstatements.
What happens if Performance Materiality is set too low? - answer-Auditor
might perform more substantive procedures than needed.
Overall Materiality is also known as _________. - answer-Planning Materiality
Auditors use Overall Materiality to ___________. - answer-Determine whether
financial statements overall are materially correct.
What does Posting Materiality signify? - answer-The misstatements identified
throughout the audit that will be considered at the end of the audit in
determining whether the financial statements are materially correct.
What percentage is Posting Materiality commonly set at? - answer-5% of
Planning Materiality
What is Materiality? - answer-The magnitude of an omission or misstatement
of accounting information that, in light of surrounding circumstances, makes
it probable that the judgment of a reasonable person relying on the
information would have been changed or influenced by the omission or
misstatement.
What makes a fact Material? - answer-If there is a substantial likelihood that
a reasonable investor would have viewed the fact as having significantly
altered the total mix of information made available.
What is the materiality level that an auditor uses for determining significant
accounts, significant locations, and audit procedures for those accounts and
locations? - answer-Performance Materiality
An auditor has determined performance materiality has been set too high at
the beginning of the audit. Which procedures should this auditor consider to
Which risk exists at the overall financial statement level and at the assertion
level and can be categorized as involving inherent risk and control risk? -
answer-Risk of material misstatement
What represents an identified and assessed risk of material misstatement
that requires special audit consideration? - answer-Significant risk
What is the impact on the amount of acceptable audit risk if an auditor
believes the chance of financial failure of a client is high? - answer-The
acceptable audit risk is reduced.
Which factor should lead an auditor to assess inherent risk as high? - answer-
The account balance consists of a large number of complex transactions.
Which factor would lead an auditor to assess client business risk at a higher
level? - answer-The client's use of information technology is incompatible
across systems and processes.
An auditor determines overall materiality of $500,000 would be material to
the income statement and $1,000,000 would be material to the balance
sheet. Which amount would an auditor typically assess performance
materiality to be for this client? - answer-75% of $500,000
At which percentage do auditors commonly set posting materiality? - answer-
5% of planning materiality
What is Client Business Risk? - answer-Risks affecting the business
operations and potential outcomes of an organization's activities.
What does the Risk of Material Misstatement represent? - answer-The
Inherent and Control Risks
Who controls the Risk of Material Misstatement? - answer-The Client
What happens to Detection and Audit Risk when Risk of Material
Misstatement is high? - answer-Detection Risk is lowered to reduce the Audit
Risk to an acceptable level.
What is Inherent Risk? - answer-The likelihood of material misstatement
without considering the effects of internal control
What is Control Risk? - answer-The risk of a misstatement occurring or not
being prevented by internal controls
, What is audit risk? - answer-The risk that the auditor expresses an
inappropriate audit opinion when the financial statements are materially
misstated.
What is detection risk? - answer-Risk that the auditors' procedures will lead
them to conclude that a material misstatement does not exist in an assertion
when in fact such misstatement does exist.
What is the audit risk model? - answer-Audit Risk = Inherent Risk x Control
Risk x Detection Risk
What is engagement risk? - answer-Risk of potential for loss to the auditor
because of being associated with the client.
What is the relationship between Audit Risk and Engagement Risk? - answer-
Inverse
What percentages does Audit Risk use? - answer-1%-5%
What amount of evidence is needed as Detection Risk decreases? - answer-
More evidence is required with a lower Detection Risk
What is a Significant Risk? - answer-An identified and assessed risk of
material misstatement that requires special audit consideration
Which has a higher Inherent Risk - Cash or Large Equipment - answer-Cash -
Easily stolen
What are some factors that increase Inherent Risk? - answer-Easily stolen,
complex, estimations, high volume and nonroutine
What are the 5 Transaction Assertions? - answer-Occurrence, Completeness,
Accuracy, Cutoff and Classification
What is the Occurrence Assertion? - answer-Transactions and events that
have been recorded actually occurred and pertain to the entity.
What is the Completeness Transaction Assertion? - answer-All transactions
and events that should have been recorded have been recorded.
What is the Accuracy Transaction Assertion? - answer-Amounts and other
data relating to recorded transactions and events have been recorded
appropriately.
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