Posted: January 6th, 2017

Why do auditors establish a preliminary judgment about materiality?

uestion Question 1.1. (TCO 6) The distinction between physical examination of assets and examination of documents is dependent on the item being examined. If the object being examined has no inherent value, the evidence is called (Points : 3) documentation. physical examination. confirmation. none of the above. Question 2.2. (TCO 6) Analytical procedures are (Points : 3) diagnostic tests of financial information that may not be classified as evidential matter. calculations of financial information made by a computer. substantive tests of financial information made by a study and comparison of relationships among data. statistical tests of financial information designed to identify areas requiring intensive investigation. Question 3.3. (TCO 6) Which of the following statements regarding analytical procedures is not correct? (Points : 3) The definition of analytical tests emphasizes a comparison of client’s data to GAAP. Analytical procedures are required on all audits. Analytical procedures can be used as substantive tests. For certain accounts with small balances, analytical procedures alone may be sufficient evidence. Question 4.4. (TCO 6) Which of the following statements about confirmation is true? (Points : 3) Confirmations are expensive and so are often not used. Confirmations may inconvenience those asked to supply them, but they are widely used. Confirmations are sometimes not reliable and so auditors use them only as necessary. None of the above statements are true. Question 5.5. (TCO 7) Analytical procedures used in planning an audit should focus on identifying (Points : 3) material weaknesses of internal control. the predictability of financial data from individual transactions. the various assertions that are embodied in the financial statements. areas that may represent specific risks relevant to the audit. Question 6.6. (TCO 7) A measure of the auditor’s assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client’s internal control is (Points : 3) acceptable audit risk. control risk. inherent risk. statistical risk. Question 7.7. (TCO 7) Which of the following is not correct regarding the communications between successor and predecessor auditors? (Points : 3) The burden of initiating the communication rests with the predecessor auditor. The burden of initiating the communication rests with the successor auditor. The predecessor auditor must receive their former client’s permission prior to divulging information to the successor auditor. The predecessor auditor may choose to provide a limited response to a successor auditor. Question 8.8. (TCO 8) The preliminary judgment about materiality is the _____ amount by which the auditor believes the statements could be misstated and still not affect the decisions of reasonable users. (Points : 3) minimum maximum mean average median average Question 9.9. (TCO 8) When auditors allocate the preliminary judgment about materiality to account balances, the materiality allocated to any given account balance is referred to as (Points : 3) the materiality range. the error range. tolerable materiality. tolerable misstatement. Question 10.10. (TCO 8) Why do auditors establish a preliminary judgment about materiality? (Points : 3) To determine the appropriate level of audit experience required for the work So that the client can know what records to make available to the auditor To plan the appropriate audit evidence to accumulate and develop an overall audit strategy None of the above