Audit and Independence Challenges: Evaluating Risk, Ethics, and Strategies in Client Engagement

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Audit and Independence Challenges:Evaluating Risk, Ethics, and Strategies inClient EngagementAssignment 1—Session 3 (spring)(This assignment is based on Modules 1 and 2)If this is your first time using the OnlineLearning Environment, check out the CourseOrientation and the quick tutorials in the Support Centre.General assignment FAQs can be found in your Assignment Submission/Group Workarea.Prepare your answers to these assignment questions in Word and save them as one Worddocument on your hard drive. For the recommended format and filename, see the AssignmentSubmission/Group Work/FAQ area. If this assignment Word file requires you to pasteExcel.xlssections, or other files, you are strongly advised to refer to the pages How To/UseSoftware/Excel, Word, or both, to ensure you successfully submit your complete assignment.When your file is complete and you are ready to submit it for marking, select your AssignmentSubmission/Group Workarea. For help, refer to the quick tutorial, “Submit assignments”.Question 1 (15 marks)(Multiple choice) (1½ marks each)Note: For multiple-choice questions, select the best answer. Answer each item by giving thenumber of your choice. Incorrect answers will be marked as zero. Multiple-choice questionsmust be completed in your Assignment Submission section. This portion of theassignment willbe automatically graded. Donotinclude your answers in your Word document as they will notbe graded.a.Which of the following has historically represented the key driver in the demand foraudits?1.Regulators’ requirements2.Lenders’preferences3.Clients’ demand4.Investors’ information risk

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b.An auditor found $5,000 in errors from a representative sample of $50,000 in accountsreceivable balances. The population of the total accounts receivable is $200,000. Theclient corrected $3,000 of the errors. What would be the projectedmisstatement?1.$2,0002.$5,0003.$17,000($5000*4–$3000)4.$20,000c.Which of the following elements of the audit risk model is most likely to incorporate thelowest numerical value?1.Audit risk2.Inherent risk3.Control risk4.Detection riskd.Which of the following isnota likely consequence of audit team members under-recording hours worked on audit engagements?1.The audit firm will likely quote a lower fee for the following year’s audit.2.The audit team for the following year’s audit will have trouble meeting the timebudget.3.Audit members will increase their respect for the integrity of their employer.4.Audit team members will benefit in their performance evaluation for that auditengagement.e.In general, there are two dimensions to audit evidence: sufficiency (quantity) andcompetency (quality and reliability). When considering the best approach to gatherevidence, which of the following factors would most likelynotdirectly affect financialdata reliability?1.Client economic risk2.Management integrity3.Persuasiveness of alternative forms of evidence4.Client’s control structure

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f.Katy, a CGA, is in the process of reassessing control risk. Which of the following is mostlikely to cause Katy to lower the level of control risk?1.Inherent risk is higher than expected.2.Tests of control show high sample error rates.3.A substantive approach is used.4.Tests of control show low sample error rates.g.Meetings are an important component of the audit process. Meetings may be held prior tothe commencement of field work, during the audit, and at the conclusion of the audit withmanagement or the audit committee. Which of the following items would most likely beon the agenda of a meeting that is held during the audit?1.Schedules to be prepared by the client2.Arrangements for using computer-assisted audit techniques (CAATs) on the audit3.Other services that might be provided by your firm (such as tax services)4.Arrangements for plant toursh.Which of the following best describes financial statement risk?1.The risk that the auditor will form the wrong opinion on the financial statements2.The risk that the auditor will not detect a material misstatement3.The business risk faced by the auditor4.The risk of materialmisstatementi.Bruno, a CGA, is auditing the financial statements of a small business client. Which typeof risk is Bruno most likely to encounter when applying the audit risk model?1.High engagement risk2.High control risk3.High detection risk4.High risk ofmaterial misstatementj.To assist the auditor in evaluating the effect of misstatements accumulated during theaudit, auditing standards require the auditor to distinguish between factual misstatements,judgmental misstatements, and projected misstatements. Which of the followingstatements would most likely be associated with projected misstatements?1.The auditor requests management to record an adjustment for such misstatements.

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