Question

Which of the following is false regarding materiality?

		Because we use materiality, benchmarks are not necessary.
		Materiality is a relative rather than absolute concept.
		Performance materiality is materiality for segments of the audit.
		Auditors often change their preliminary judgment about materiality.

Which of the following is false regarding assessing risk?

		If a client has questionable integrity, the auditor is likely to assess a higher acceptable audit risk.
		Engagement risk is the risk that the auditor or audit firm will suffer harm after the audit is finished, even though the audit report was correct.
		It is difficult for an auditor to predict financial failure before it occurs.
		Several factors are good indicators of the degree to which statements are relied on by external users.

Which of the following is false regarding internal control objectives and responsibilities?

		Management designs systems of internal control to accomplish the objectives.
		COSO is a comprehensive list of audit objectives.
		Management typically has three broad objectives in designing an effective internal control system.
		Responsibilities for internal controls differ between management and the auditor.

Which of the following is false regarding COSO?

		The board of directors is essential for effective corporate governance.
		The control environment consists of the actions, policies, and procedures that reflect the overall attitudes of top management.
		The auditor can perceive how controls are implemented from the organizational chart.
		Most privately held companies do not create an audit committee since they are not required.

Answer 1

Which of the following is false regarding materiality?

Because we use materiality, benchmarks are not necessary.

As materiality is more relative than absolute, it is necessary to have benchmarks for establishing whether the misstatements are material.

Which of the following is false regarding assessing risk?

If a client has questionable integrity, the auditor is likely to assess a higher acceptable audit risk.

If a client has questionable integrity, the auditor is likely to assess acceptable audit risk lower.

Which of the following is false regarding internal control objectives and responsibilities?

COSO is a comprehensive list of audit objectives.

Which of the following is false regarding COSO?

Most privately held companies do not create an audit committee since they are not required.