The auditors assessed risk of material misstatement at 0.50 and said they wanted to achieve a 0.05 risk of failing to express a correct opinion on financial statements that were materially misstated. What detection risk do the auditors plan to use for planning the remainder of the audit work?
a. 0.10
b. 0.00
c. 0.20
d. 0.75
Answer: a. 0.10
When a company that sells its products for a (gross) profit increases its sales by 15 percent and its cost of goods sold by 7 percent, the cost of goods ratio will
a. decrease
b. increase
c. remain unchanged
d. not be able to be determined with the information provided
Answer: a. decrease
Analytical procedures can be used in which of the following ways?
a. as "attention-directing" methods when planning an audit at the beginning
b. as a means of overall review at the end of the audit
c. as substantive audit procedures to obtain evidence during an audit
d. all of the answers are correct
Answer: d. all of the answers are correct
