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12) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the A) statistical risk. B) acceptable audit risk.

C) financial risk. D) inherent risk.

13) Why do auditors establish a preliminary judgment about materiality?

A) to determine the appropriate level of staff to assign to the audit

B) to finalize the control risk assessment

C) to help plan the appropriate evidence to accumulate

D) so the client can know what records to make available to the auditor

14) The risk that audit evidence for an audit objective will fail to detect misstatements exceeding performance materiality levels is A) inherent risk. B) planned detection risk.

C) audit risk. D) control risk.

15) If the auditor decides to reduce acceptable audit risk, planned detection risk

A) stay the same. B) decreases.

C) increases. D) cannot be determined.

16) When the auditor is attempting to determine the extent to which external users rely on a client's financial statements, they may consider several factors except for A) assessment of detection risk. B) concentration of ownership.

C) nature and amounts of liabilities. D) client size.

17) Risk assessment procedures include

A) assessing acceptable audit risk.

B) determination of the type of audit opinion to issue.

C) a required discussion among the staff members of the audit and the client regarding material misstatements in the financial statement.

D) observation of the entity's operations.

18) Which of the following is not a primary consideration when assessing inherent risk?

A) susceptibility to misappropriation of assets

B) nature of client's business

C) existence of related parties

D) effectiveness of internal controls

19) Which of the following questions is the auditor not required to ask company management when assessing fraud risk? A) What is the nature of the fraud risks identified by management?

B) Is management using all assets effectively?

C) What internal controls have been implemented to address the fraud risks?

D) Does management have knowledge of any fraud or suspected fraud within the company?

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