If tests of controls induce the audit team to change the assessed level of control risk for fixed assets from 0.4 to 1.0 and audit risk (0.05) and inherent risk remain constant, the acceptable level of detection risk is most likely to
a. be unchanged
b. change from 0.1 to 0.04
c. change from 0.2 to 0.3
d. change from 0.25 to 0.1
Answer: d. change from 0.25 to 0.1
Which of the following is a specific procedural response to a particular fraud risk in an account balance or class of transactions?
a. exercising more professional skepticism
b. performing procedures such as inventory observation and cash counts on a surprise or unannounced basis
c. studying management's selection and application of accounting principles more carefully
d. carefully avoiding conducting interviews with people in the fraud-rich areas
Answer: b. performing procedures such as inventory observation and cash counts on a surprise or unannounced basis
Analytical procedures are generally used to produce evidence from
a. detailed examination of external, external-internal, and internal documents
b. relationships among current financial balances and prior balances, forecasts and non-financial data
c. confirmations mailed directly to the auditors by client customers
d. physical observation of inventories
Answer: b. relationships among current financial balances and prior balances, forecasts and non-financial data
