CA Audit & Risk Management 2

Question 1

Which type of audit risk arises from the possibility that internal controls fail to prevent or detect material misstatements?

Accepted Answer

Control risk

Answer

Control risk is the risk that a client's internal controls fail to prevent or detect material misstatements on a timely basis.

Question 2

An auditor issues a qualified opinion when:

Accepted Answer

A material but non-pervasive misstatement or scope limitation exists

Answer

A qualified opinion ('except for') is issued when misstatements or scope limitations are material but not pervasive enough to warrant an adverse or disclaimer opinion.

Question 3

Enterprise Risk Management (ERM) under the COSO framework includes which of the following components?

Accepted Answer

Governance & culture, strategy & objective-setting, performance, review & revision, and information & communication

Answer

The 2017 COSO ERM framework organizes risk management into five interrelated components: governance & culture, strategy & objective-setting, performance, review & revision, and information, communication & reporting.

Question 4

When an auditor uses stratified sampling, the primary purpose is to:

Accepted Answer

Divide the population into subgroups to improve audit efficiency and focus on higher-risk items

Answer

Stratified sampling divides the population into homogeneous subgroups so the auditor can apply more scrutiny to higher-value or higher-risk strata.

Question 5

Which procedure is classified as a substantive analytical procedure rather than a test of details?

Accepted Answer

Comparing the current year's gross margin percentage to prior years and industry averages

Answer

Substantive analytical procedures involve evaluating financial information through plausible relationships among data, such as trend and ratio analysis, rather than examining individual transactions.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Audit & Risk Management 2