21.

The risk that a misstatement that could occur in an account balance or class of transactions and that could be
material individually or in the aggregate, will not be prevented or detected and corrected on a timely basis by the
accounting and internal control systems:

A. Audit risk

B. Control risk

C. Inherent risk

D. Detection risk

22. Inherent risk and control risk differ from detection risk in that inherent risk and control risk are

A. Elements of audit risk while detection risk is not.

B. Changed at the auditor's discretion while detection risk is not.

C. Considered at the individual account-balance level while detection risk is not.

D. Functions of the client and its environment while detection risk is not.

23.The risk that an auditor's procedures will lead to the conclusion that a material error does not exist in an account
balance when in fact, such error does exist is referred to as

A. Audit risk

B. Control risk

C. Inherent risk

D. Detection risk

24. An auditor should design the written audit program so that

A. All material transactions will be selected for testing.

B. Substantive tests prior to the balance sheet date will be minimized.

C. The audit procedures selected will achieve specific audit objectives.

D. Each account balance will be tested under either tests of controls or tests of transactions.

5. The primary purpose of the auditor's consideration of internal control is to provide a basis for -

A. Determining whether procedures and records that are concerned with the safeguarding of assets are
reliable.
 B. Constructive suggestions to clients concerning deficiencies in internal control.

C. Determining the nature, timing and extent of audit tests to be applied.

D. The expression of an opinion.

6. Tests of controls are used to test whether controls are:

A. Operating effectively.

B. Placed in operation or implemented.

C. Properly incorporated in the financial statements.

D. Properly documented by the client.

27. The major reason an independent auditor gathers audit evidence is

A. To form an opinion o the financial statements.

B. To detect fraud.

C. To evaluate management.

D. To evaluate internal control.

28.Which statement is incorrect regarding the sufficiency and appropriateness of audit evidence?

A. Sufficiency and appropriateness are inter-related.

B. Sufficiency is the measure of the quantity of audit evidence.

C. Appropriateness is the measure of the quality of audit evidence.

D. Merely obtaining more audit evidence may compensate for its poor quality.

29.Which of the following descriptions refer to substantive tests?

A. Obtain an understanding of the entity and its environment, including its internal control

B. Test the operating effectiveness of controls.

C. Detect material misstatements at the assertion level.

D. None of these
30.When a company's financial statements bear an unqualified opinion, readers of the audit report can assume that:

A. The external auditor found no fraud.

B. The company is financial sound and the financial statements are accurate.

C. Internal control is effective.