Week 5 homework questions questions 1 and 2 were taken directly from

Week 5 Homework Questions Questions 1 and 2 were taken directly from the text and I am aware that the answers are available through an internet search.  I want to remind you that searching the internet for the answers and using those answers is a violation of UMUC academic integrity policies.  In addition, using any outside source without citation is plagiarism.  However, just gaining access to the answers will not satisfy the homework assignment because I have added the requirement that you explain your answers, which cannot be found on the internet and needs to be reasoned out from the material in the chapter.  In grading, I will place more emphasis you explanation than your selection of the correct alternative. 1)             The following are several multiple choice questions adapted from the CPA exam that cover the concept and application of materiality.  For each question, selected the best answer and then explain why it is better than all the alternatives.  Your explanations should address all the possible alternatives presented in the question.a)              Which one of the following statements is correct concerning the concept of materiality?i)               Materiality is determined by reference to guidelines established by the AICPA.ii)             Materiality depends only on the dollar amount of an item relative to other items in the financial statements.iii)           Materiality depends on the nature of an item rather than the dollar amount.iv)           Materiality is a matter of professional judgment.Answer:  Explanation:   b)             In considering materiality for planning purposes, an auditor believes that misstatements aggregating $10,000 will have a material effect on an entity’s income statement, but that misstatements will have to aggregate $20,000 to materially affect the balance sheet.  Ordinarily, it is appropriate to design audit procedures that are expected to detect misstatements that aggregate toi)               $10,000ii)             $15,000iii)           $20,000iv)           $30,000Answer:  Explanation:   c)              A client decides not to record an auditor’s proposed adjustments that collectively are not material and wants the auditor to issue the report based on the unadjusted numbers.  Which of the following statements is correct regarding the financial statement presentation?i)               The financial statements are free from material misstatement, and no disclosure is required in the notes to the financial statements.ii)             The financial statements do not conform with generally accepted accounting principles (GAAP).iii)           The financial statements contain unadjusted misstatements that should result in a qualified opinion.iv)           The financial statements are free from material misstatement, but disclosure of the proposed adjustment is required in the notes to the financial statements.Answer:  Explanation:   2)             The following are several multiple choice questions adapted from the CPA exam that cover audit risk.  For each question, selected the best answer and then explain why it is better than all the alternatives.  Your explanations should address all the possible alternatives presented in the question.a)              Some account balances, such as those for pensions and leases, are the result of complex calculations. The susceptibility to material misstatements in these types of accounts is defined asi)               audit risk.ii)             detection risk.iii)           inherent risk.iv)           sampling risk. Answer:  Explanation:   b)             As the acceptable level of detection risk decreases, the auditor may do one or more of the following except change thei)               nature of audit procedures to more effective procedures.ii)             timing of audit procedures, by perhaps performing them at year-end rather than an interim date.iii)           extent of audit procedures, by perhaps using larger sample sizes.iv)           assurances provided by audit procedures to a lower level. Answer:  Explanation:   c)              Inherent risk and control risk differ from planned detection risk in that theyi)               arise from the misapplication of auditing procedures.ii)             may be assessed in either quantitative or qualitative terms.iii)           exist independently of the financial statement audit.iv)           can be changed at the auditor’s discretion Answer:  Explanation:  

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