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Following Are a Number of Items That May Have an Impact

Question 44

Matching

Following are a number of items that may have an impact on one of the components of audit risk, indicate the risk component that is directly affected. More than one selection may be correct. Use the following code:

Premises:

Responses:

Fixed assets consist primarily of capitalized leasehold items.

Inherent Risk

Policies and procedures in the cash collection area appear ineffective.

Control Risk

Evidence from external sources will be obtained in testing the sales cycle.

Analytical Procedures Risk

The CPA firm has a sound system of quality controls.

Tests of Details Risk

In the prior year, numerous errors were detected in the account in question.

Limited procedures to obtain an understanding are planned.

The auditor has decided to consult a specialist.

An internal audit function exists and answers directly to the president.

Physical security over blank documents and accounting records is weak.

Extensive tests of details of balances are planned.

The client is in the savings and loan industry.

Working capital levels have declined over the past year.

A highly experienced audit staff has been assigned to the engagement.

The auditor is planning extensive compliance testing.

Management turnovers have been considerable this year.

Premises:

Fixed assets consist primarily of capitalized leasehold items.

Policies and procedures in the cash collection area appear ineffective.

Evidence from external sources will be obtained in testing the sales cycle.

The CPA firm has a sound system of quality controls.

In the prior year, numerous errors were detected in the account in question.

Limited procedures to obtain an understanding are planned.

The auditor has decided to consult a specialist.

An internal audit function exists and answers directly to the president.

Physical security over blank documents and accounting records is weak.

Extensive tests of details of balances are planned.

The client is in the savings and loan industry.

Working capital levels have declined over the past year.

A highly experienced audit staff has been assigned to the engagement.

The auditor is planning extensive compliance testing.

Management turnovers have been considerable this year.

Responses:

Inherent Risk

Control Risk

Analytical Procedures Risk

Tests of Details Risk

Correct Answer:

Premises:

Responses:

Fixed assets consist primarily of capitalized leasehold items.

Policies and procedures in the cash collection area appear ineffective.

Evidence from external sources will be obtained in testing the sales cycle.

The CPA firm has a sound system of quality controls.

In the prior year, numerous errors were detected in the account in question.

Limited procedures to obtain an understanding are planned.

The auditor has decided to consult a specialist.

An internal audit function exists and answers directly to the president.

Physical security over blank documents and accounting records is weak.

Extensive tests of details of balances are planned.

The client is in the savings and loan industry.

Working capital levels have declined over the past year.

A highly experienced audit staff has been assigned to the engagement.

The auditor is planning extensive compliance testing.

Management turnovers have been considerable this year.