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5. In class, we discussed the notion of an audit philosophy of tests of accounts for overstatement and understatement to gain audit efficiencies. Consider the following statemen ts: I. Wh en the inventory purchases account is tested directly for OVERstatement, then conceptually, is being tested also indirectiy for UNDERstatement When the sales revenue account' is tested directly for ONDERstatement, then conceptually, accounts receivable is being tested also indirectly for UNDERstatement. accounts payable a. I is true; II is true. b. I is true: II is false. c. I is false; II is true. d. I is false; II is false. Answer 6. Assume that the achieved audit risk is .05, the inherent risk is .60, and the control risk is .30. The calculation of detection risk would round to: b. .05 d. .28 f. none of the above . The answer is Answer .01 . 18 . 90 . 7. Consider the following statements: I. A basic sense of materiality would be "something is material if it would affect a decision maker's decision. II. When considering a preliminary judgment of materiality, if the auditor sets a LOWER dollar amount for materiality, rather than a HIGHER dollar amount evidence (i.e. substantive testing) is required. , MORE a. I is true; II is true b. I is true; II is false. c. I is false; II is true. d. I is false; II is false

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