The Importance of Understanding the Entity and its Environment

1)TrueDocumentation of the understanding of the entity and its environment is a matter of professional judgment 2)TruePlanning means developing a general audit plan and detailed audit strategy for the expected nature, timing and extent of the audit. 3)TrueThe auditor's understanding of the entity and its environment assists in the identification of events, transactions and practices which may have a material effect on the financial statements 4)FalseMateriality is considered at both the overall financial statement level and the individual account balance, class of transactions and disclosures level 5)TrueThe higher the materiality level, the higher the audit risk 6)FalseThe main difference between fraud and error lies in the effect on the financial statements. 7)FalseThe auditor is not, and cannot be held responsible for preventing fraud, error and noncompliance 8)Which of the following is not an assurance service?Compilation of financial information 9)The primary responsibility for the adequacy of disclosure in the financial statements rests with the 10)management of the company 11)The auditor is required to maintain professional skepticism throughout the audit. Which of the following statements concerning professional skepticism is false? 12)A belief that management and those charged with governance are honest and have integrity relieves the auditor of the need to maintain professional skepticism 13)The auditor is not liable to his client forerrors in application of judgement 14)The primary orientation of operational auditing istowards past protection provided by existing internal control 15)In compliance with the element of human resources, the firm should address issues relating toassignment of engagement teams 16)Which of the following standards are to be applied, as appropriate, in the audit of historical information?PSAs 17)Which of the following elements does not relate to audit quality?audit fees 18)Which is not one of the three phases in an operational audit?evidence accumulation and evaluation 19)Which of the following is considered a primary reason for creating an internal audit department? 20)to ensure the accuracy, reliability, and timeliness of financial and operating data used in management 's decision-making 21)The implementation of quality control procedures that are applicable to the individual audit engagement is the responsibility of theengagement team 22)A practitioner should accept an assurance engagement only ifthe practitioner's conclusion is to be contained in a written report 23)Professional judgementcan be used as the justification for the decisions made by the auditor that are not supported by the facts and circumstances of the engagement 24)The implementation of quality control procedures that are applicable to the individual audit engagement is the responsibility of theengagement team 25)TrueDocumentation of the understanding of the entity and its environment is a matter of professional judgment 26)Which of the following is not one of the limitations of the audit?limitations imposed by the client