1.

Inherent risk and control risk collectively are known as the

A. dependent variables of risk C. risk of information dissemination
B. dual risk team D. risk of material misstatement

2. Inherent risk and control risk differ from detection risk in that inherent risk and control risk are
A elements of audit risk white detection risk is not.
B. changed at the auditor's discretion while detection risk is not.
C. functions of the client and its environment while detection risk is not.
D. considered at the individual account-balance level while detection risk is not.

3. What are the different levels of risk assessment?

A. "High" and "Low". C. "High" and "Less than High".
B. "Higher" and "Lower". D. ''Maximum" and "Minimum".

4. The acceptable level of detection risk (ADR) and the combined level of inherent risk (IR) and control risk (CR)
are ________ related.
A. directly C. not
B. inversely D. proportionately

5. Inherent risk is reduced when the likelihood of defalcations is low. This would be true for an account such as
A. Accounts receivable. C. Held for trading securities.
B. Cash. D. Property, plant and equipment.

6. When setting a preliminary judgment about materiality

A. there is no relationship between it and the peso amount of evidence needed.
B. the same amount of evidence is required for either low or high peso amounts.
C. less evidence is required for a low peso amount than for a high peso amount.
D. more evidence is required for a low peso amount than for a high peso amount.

7. When the auditors allocate the preliminary judgment about materiality to account balances, the materiality
allocated to any given account balance is referred to as
A. The error range. C. Tolerable materiality.
B. The materiality range. D. Tolerable misstatement.

8. In considering materiality for planning purposes, an auditor believes that misstatements aggregating P 10,000
would have a material effect on an entity's profit, but that misstatements would have to aggregate P 20,000 to
materially affect the statement of financial position. Ordinarily, it would be appropriate to design auditing
procedures that would be expected to detect misstatements that aggregate
A. P 10.000 C. P 20,000
B. P 15,000 D. P 30,000

9. Regardless of how the allocation of the preliminary judgment about materiality was done, when the audit is
complete the auditor must be confident that the combined errors in all accounts are
A. Equal to the preliminary judgment.
B. Less than the preliminary judgment.
C. More than the preliminary judgment.
D. Less than or equal to the preliminary judgment.

10. After beginning an audit of a new client, Syd, CPA, discovers that the professional competence necessary for
theengagement is lacking. Sydney informs management of the situation and recommends another CPA, and
managementengages the other CPA. Under these circumstances
A. Syd's lack of competence should be considered to be a violation of generally accepted auditingstandards.
B. Syd may request compensation from the client for any professional services rendered to it inconnection
with the audit.
C. Syd's request for a commission from the other CPA is permitted because a more competent audit cannow
be performed.
D. Syd may be indebted to the other CPA since the other CPA can collect from the client only the amountthe
client originally agreed to pay Syd.