Risks

School: Arizona Western College - Course: FIN 672 - Subject: Accounting

Given the following information for an audit, what is the detection risk?  Audit risk = 0.10  Inherent risk = 0.60  Control risk = 0.60 0.25 1.3 0.07 0.36 Solution The correct answer is: 0.36 Wrong Hide solution Question 2 Which of the following is true about engagement risk? It does not apply if the company is not publicly traded It is present whenever an auditor does not conduct an audit in accordance with auditing standards It is only mitigated with 100% accuracy in data entry It is not present in the majority of audits that an auditor accepts Solution The correct answer is It is present whenever an auditor does not conduct an audit in accordance with auditing standards Correct Hide solution Question 3 Which of the following is an example of business risk? Cash flow problems

Hi-tech manufacturing New customers No financial risk Solution The correct answer is Cash flow problems Wrong Hide solution Question 4 Which of the following describes audit risk? The risk that financial disclosures or assertions contain misstatements The risk that an audit might not be capable of detecting a material misstatement The risk that auditors incorrectly give a favorable audit report when misstatements are present The risk that auditors do not detect material errors on the financial statements Solution The correct answer is: The risk that auditors incorrectly give a favorable audit report when misstatements are present Which of the following describes audit risk? The risk that auditors do not detect material errors on the financial statements The risk that auditors incorrectly give a favorable audit report when misstatements are present The risk that an audit might not be capable of detecting a material misstatement The risk that financial disclosures or assertions contain misstatements Solution The correct answer is: The risk that auditors incorrectly give a favorable audit report when misstatements are present