A properly planned and performed audit may fail to detect a material misstatement resulting from fraud because: A. an audit is planned and performed to provide reasonable assurance of detecting material misstatements caused by errors but not by fraud B. the auditor did not consider factors influencing audit risk for account balances that have effects pervasive to the financial report taken as a whole. C. the factors considered in assessing control risk indicated an increased risk of error but only a low risk of fraud in the financial report. D. audit procedures that are effective for detecting an error may be ineffective for fraud that is concealed through collusion

According to PSA 400 - Risk Assessments and Internal Control, audit risk meansSelect one:a.The risk that an auditor's substantive procedures will not detect a misstatement that exists in an account balance or class of transactions that could be material, individually or when aggregated with misstatements in other balances or classes.b.The risk that the auditor gives an inappropriate audit opinion when the financial statements are materially misstated.c.The risk that a misstatement, that could occur in an account balance or class of transactions and that could be material, individually or when aggregated with misstatements in other balances or classes, will not be prevented or detected and corrected on a timely basis by the accounting and internal control systems.d.The susceptibility of an account balance or class of transactions to misstatement that could be material, individually or when aggregated with misstatements in other balances or classes, assuming that there were no related internal controls.Clear my choice

An auditor must understand audit risk and its components when planning a financial report audit. The firm of Thomas & Fine evaluates the risk of material misstatement by disaggregating it into its three components: inherent risk, control risk and detection risk.RequiredFor each situation in the table below, select the component of audit risk that is most directly illustrated. The components of audit risk may be used once, more than once, or not at all. SITUATIONCOMPONENT OF AUDIT RISK(a) Segregation of duties is inadequate. (b) Confirmation of receivables by an auditor fails to detect a material misstatement. (c) Cash payments have occurred without proper approval. (d) A client, Expo Ltd, has a large cash balance. (e) A necessary substantive audit procedure has been omitted. (f) Technological innovations within the industry have caused a major product to become obsolete. (g) A client, Rocket Ltd, has insufficient working capital to continue its operations.

This risk may be reduced to an acceptable level through the risk-based approach to auditing:identifying and assessing risks of material misstatement at the financial statement and assertion levels (ISA 315);designing and performing audit procedures to obtain sufficient appropriate audit evidence to draw reasonable conclusions on which to base the audit opinion (ISA 330).

Which is not true of the following statements?Group of answer choicesDiscovery of fraudulent transactions depends on the preparation and skill of the auditorsThe risk of the auditor not detecting a material misstatement resulting from management fraud is greater than for employee fraud,The discovery of a material misstatement of the financial statements resulting from fraud does not, in itself, indicate a failure tocomply with PSAsThe risk of not detecting a material misstatement resulting from fraud is higher than the risk of not detecting a material misstatementresulting from error

An audit requires an understanding of all the control activities related to each significant class of transactions, account balance, and disclosure in the financial statements or to every assertion relevant to them.Select one:TrueFalse