Question

Question 3  

PCAOB gives 3 examples of matters that might lead to higher risk of material misstatement in the financial statements. Which of the following is not one of those examples?

I.	Lack of sufficient capital to continue operations.
II.	Absence of an internal audit function.
III.	Ineffective control environment
IV.	Declining conditions affecting the company’s industry.

Question 4  

PCAOB states the nature and extent of planning activities necessary depend on three conditions. Which one of the following is not those considerations?

I.	Amount of the audit fee approved by the audit committee.
II.	Changes in circumstances that occur during the audit.
III.	Auditor’s prior experience with the company.
IV.	Size and complexity of the company.

Answer 1

Question 3  

Answer is option d) Declining conditions affecting the company’s industry.

Condition effecting Company's industry has no effect on risk of material misstatement in the financial statement.

All other 3 situation will increase the risk of material misstatement

Question

Answer is option a) Amount of the audit fee approved by the audit committee.

Audit planning will not consider the audit fee approved by the audit committee.

All other 3 conditions to be considered by the auditor when making audit plan