Questions:

1.

Risks that financial statements are likely to be misstated materially without

regard to the effectiveness of internal control. Inherent risk
2. Analytical procedures are used in an audit because it is assumed of financial
statements that: ? Plausible relationships among data may reasonably be
expected to exist and continue
3. What analysis best considers the economic relationships among account
balances. Ratio analysis
4. Which is not critical component of risks relevant in conducting an audit:
business, audit, engagement, or decentralize risk? Decentralize Risks
5. An auditor compares year-to-year account balances in order to perform
analytical procedures, which ratio: ratio analysis, trend analysis, internal
control analysis, or vertical analysis. Trend analysis
6. Which is a component of audit risk model: inherent, statistical, detection, or
control risk? statistical
7. A financial statement auditor concludes that internal controls over cash are
not functioning as designed. She believes that material misstatement to the
cash accounts are possible because of the deficiencies. What is the course of
action the auditor will take? Develop specific tests for cash balances to determine
the extent of misstatement
8. Which is the most likely to be considered intentional misapplication of
accounting principles or financial statements?
a. A capital lease is presented as periodic rent expense rather than
interest depreciation
b. A deferred tax asset is reduced to zero with a valuation allowance
c. Insurance amortized
d. Revenues for up front fees are deferred rather than recognized.
9. Which represents the primary difference between an audit and forensic
accounting? 1. Auditing looks for acts of omission; forensic looks for acts of
commission.
2. Auditing looks for overstated assets and understated liabilities; forensic looks for
understated assets and overstated liabilities
10.Risk that financial statements are likely to be misstated materially without
regard to the effectiveness of internal control is: inherent risk, audit risk,
client risk, or control risk? Inherent risk