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Levels of Materiality within Auditing

1. Materiality underlies the application of Generally Accepted Auditing Standards (GAAS), particularly the:

a. general and field work standards,
b.general and reporting standards,
c. field work and reporting standards,
d.reporting standards, or
e.general standards.

2.Which of the following is not a weakness of analytical procedures?

a.Fraudulent financial reporting often reports numbers that appear to be reasonable.
b.The auditor may have no basis for presuming that the data used is accurate.
c.Analytical procedures are usually very cost effective.
d.Improper specification of relationships between the variables used may undermine their effectiveness.
e.Any audit procedure runs some risk of failing to detect material misstatements.

3.The auditor makes preliminary judgments about materiality levels in planning the audit. This materiality assessment is referred to as:

a.planning materiality,
b.preliminary materiality,
c.initial materiality,
d.beginning materiality, or
e.benchmark materiality.

4.When setting the level of materiality on a particular engagement, the auditor is required to consider:

a.the unique circumstances pertaining to the entity,
b.the information needs of the users,
c.neither the unique circumstances pertaining to the entity nor the information needs of the users,
d.the information needs of the client, or
e.both the unique circumstances pertaining to the entity and the information needs of the users.

5.In a normal audit, the relationship between the level of materiality used to plan the engagement and the level of materiality used to evaluate evidence is:

a.they must be identical,
b.the former may be either higher or lower than the latter,
c.the former is normally higher than the latter,
d.the former is normally lower than the latter, or
e.they can never be the same.

Solution Preview

1. Materiality underlies the application of generally accepted auditing standards, particularly the c) field work and reporting standards. Materiality is based on the field work that an auditor completes and the subsequent auditor's report.

2.Which of the following is not a weakness of analytical procedures? The answer is c) Analytical procedures are usually very cost ...

Solution Summary

This solution provides the correct answers with complete explanations to the auditing multiple choice questions listed.

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