Bcom Bachelor of Commerce Auditing 2

Question 1

What is the 'audit risk model'?

Accepted Answer

Audit Risk = Inherent Risk × Control Risk × Detection Risk

Answer

The audit risk model states that overall audit risk is the product of inherent risk (susceptibility to misstatement), control risk (controls failing to catch it), and detection risk (auditor failing to detect it).

Question 2

Which section of the Sarbanes-Oxley Act requires management to assess internal controls over financial reporting?

Accepted Answer

Section 404

Answer

SOX Section 404 requires management to assess and report on the effectiveness of internal controls over financial reporting, with the auditor attesting to that assessment.

Question 3

What is an 'audit program'?

Accepted Answer

A detailed plan listing the specific audit procedures to be performed

Answer

An audit program documents the specific procedures, timing, and extent of testing an auditor will perform to gather sufficient evidence.

Question 4

What is 'independence' in auditing?

Accepted Answer

The auditor's freedom from conflicts of interest that could compromise objectivity

Answer

Independence requires that auditors are free from financial, personal, or other relationships that could impair their objectivity or create the appearance of bias.

Question 5

What is 'sampling risk' in auditing?

Accepted Answer

The risk that the auditor's conclusion from a sample differs from the conclusion if the entire population were tested

Answer

Sampling risk arises because auditors test only a portion of transactions; the sample may not perfectly reflect the full population's characteristics.

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Auditing 2