QUIZ CHAPTER 5

1. What is the main objective of audit planning? (to determine the scope of
the audit procedures to be performed.)
2. _______ requires that the auditor should obtain an ________ of the entitys
selection and application of accounting policies and consider whether they are
appropriate for its business and consistent with the applicable financial
reporting framework and accounting policies used in the __________ industry.
(PSA 315; understanding; relevant)
3. The element of the audit planning process most likely to be agreed upon with
the client before implementation of the audit strategy is the determination of
schedules & analyses to be prepared by the auditors. True or False? Modify.
(False/clients staff)
4. Some account balances, such as those retirement benefits and finance leases,
are the results of complex calculations. The suspectibility to material
misstatements in these types of accounts is referred to as ________. (inherent
risk)
5. There is a/an __________ relationship between control risk and detection risk,
that is, the ______ the assessed level of control risk, the ______ the acceptable
level of detection risk. (inverse; higher; lower
6.

Mathematically, the auditing standards state the relationship between audit

risk and its component as: ______ (Audit risk= Inherent risk x Control risk x
Detection risk)

7. If inherent risk and control risk are assumed to be 60% each, detection risk has
to be set at _______ in order to prevent the overall audit risk from exceeding
10%. (27.8%)
8. It Involve analysis of significance ratio and trends, including the resulting
investigation of fluctuations and relationships that are inconsistent with other
relevant information or deviated from predicted amounts. (Analytical
procedure)
9. Analytical procedures may be used as a planning tool, substantive test and
overall review. True or False? (True.)
10.The final step in the planning process is the __________________ by preparing an
overall audit plan, audit program, and time budget. (Documentation of the
audit planning process)