WGU D251 ADVANCED AUDITING 2023/2024 PRACTICE
QUESTIONS WITH DETAILED VERIFIED ANSWERS GRADED
A+
1. Performance Materiality is also known as _____________. - (correct answer) Tolerable Error
2. Auditor uses Performance Materiality for ____________. - (correct answer) Determining significant accounts,
locations, and audit procedures.
3. Performance Materiality is what percent of Planning Materiality? - (correct answer) 75%
4. What happens is Performance Materiality is set too high? - (correct answer) Auditor might not perform
sufficient procedures to detect material misstatements.
5. What happens if Performance Materiality is set too low? - (correct answer) Auditor might perform more
substantive procedures than needed.
6. Overall Materiality is also known as _________. - (correct answer) Planning Materiality
7. Auditors use Overall Materiality to ___________. - (correct answer) Determine whether financial statements
overall are materially correct.
8. What does Posting Materiality signify? - (correct answer) The misstatements identified throughout the audit that
will be considered at the end of the audit in determining whether the financial statements are materially correct.
9. What percentage is Posting Materiality commonly set at? - (correct answer) 5% of Planning Materiality
10. What is Materiality? - (correct answer) The magnitude of an omission or misstatement of accounting
information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable
person relying on the information would have been changed or influenced by the omission or misstatement.
11. What makes a fact Material? - (correct answer) If there is a substantial likelihood that a reasonable investor
would have viewed the fact as having significantly altered the total mix of information made available.
12. What is the materiality level that an auditor uses for determining significant accounts, significant locations, and
audit procedures for those accounts and locations? - (correct answer) Performance Materiality
13. An auditor has determined performance materiality has been set too high at the beginning of the audit. Which
procedures should this auditor consider to detect misstatements? - (correct answer) The auditor should
perform additional substantive audit procedures.
14. Which risk exists at the overall financial statement level and at the assertion level and can be categorized as
involving inherent risk and control risk? - (correct answer) Risk of material misstatement
15. What represents an identified and assessed risk of material misstatement that requires special audit
consideration? - (correct answer) Significant risk
16. What is the impact on the amount of acceptable audit risk if an auditor believes the chance of financial failure of a
client is high? - (correct answer) The acceptable audit risk is reduced.
17. Which factor should lead an auditor to assess inherent risk as high? - (correct answer) The account balance
consists of a large number of complex transactions.
, 18. Which factor would lead an auditor to assess client business risk at a higher level? - (correct answer) The
client's use of information technology is incompatible across systems and processes.
19. An auditor determines overall materiality of $500,000 would be material to the income statement and $1,000,000
would be material to the balance sheet. Which amount would an auditor typically assess performance materiality
to be for this client? - (correct answer) 75% of $500,000
20. At which percentage do auditors commonly set posting materiality? - (correct answer) 5% of planning
materiality
21. What is Client Business Risk? - (correct answer) Risks affecting the business operations and potential outcomes
of an organization's activities.
22. What does the Risk of Material Misstatement represent? - (correct answer) The Inherent and Control Risks
23. Who controls the Risk of Material Misstatement? - (correct answer) The Client
24. What happens to Detection and Audit Risk when Risk of Material Misstatement is high? - (correct answer)
Detection Risk is lowered to reduce the Audit Risk to an acceptable level.
25. What is Inherent Risk? - (correct answer) The likelihood of material misstatement without considering the
effects of internal control
26. What is Control Risk? - (correct answer) The risk of a misstatement occurring or not being prevented by
internal controls
27. What is audit risk? - (correct answer) The risk that the auditor expresses an inappropriate audit opinion when
the financial statements are materially misstated.
28. What is detection risk? - (correct answer) Risk that the auditors' procedures will lead them to conclude that a
material misstatement does not exist in an assertion when in fact such misstatement does exist.
29. What is the audit risk model? - (correct answer) Audit Risk = Inherent Risk x Control Risk x Detection Risk
30. What is engagement risk? - (correct answer) Risk of potential for loss to the auditor because of being
associated with the client.
31. What is the relationship between Audit Risk and Engagement Risk? - (correct answer) Inverse
32. What percentages does Audit Risk use? - (correct answer) 1%-5%
33. What amount of evidence is needed as Detection Risk decreases? - (correct answer) More evidence is required
with a lower Detection Risk
34. What is a Significant Risk? - (correct answer) An identified and assessed risk of material misstatement that
requires special audit consideration
35. Which has a higher Inherent Risk - Cash or Large Equipment - (correct answer) Cash - Easily stolen
36. What are some factors that increase Inherent Risk? - (correct answer) Easily stolen, complex, estimations, high
volume and nonroutine
QUESTIONS WITH DETAILED VERIFIED ANSWERS GRADED
A+
1. Performance Materiality is also known as _____________. - (correct answer) Tolerable Error
2. Auditor uses Performance Materiality for ____________. - (correct answer) Determining significant accounts,
locations, and audit procedures.
3. Performance Materiality is what percent of Planning Materiality? - (correct answer) 75%
4. What happens is Performance Materiality is set too high? - (correct answer) Auditor might not perform
sufficient procedures to detect material misstatements.
5. What happens if Performance Materiality is set too low? - (correct answer) Auditor might perform more
substantive procedures than needed.
6. Overall Materiality is also known as _________. - (correct answer) Planning Materiality
7. Auditors use Overall Materiality to ___________. - (correct answer) Determine whether financial statements
overall are materially correct.
8. What does Posting Materiality signify? - (correct answer) The misstatements identified throughout the audit that
will be considered at the end of the audit in determining whether the financial statements are materially correct.
9. What percentage is Posting Materiality commonly set at? - (correct answer) 5% of Planning Materiality
10. What is Materiality? - (correct answer) The magnitude of an omission or misstatement of accounting
information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable
person relying on the information would have been changed or influenced by the omission or misstatement.
11. What makes a fact Material? - (correct answer) If there is a substantial likelihood that a reasonable investor
would have viewed the fact as having significantly altered the total mix of information made available.
12. What is the materiality level that an auditor uses for determining significant accounts, significant locations, and
audit procedures for those accounts and locations? - (correct answer) Performance Materiality
13. An auditor has determined performance materiality has been set too high at the beginning of the audit. Which
procedures should this auditor consider to detect misstatements? - (correct answer) The auditor should
perform additional substantive audit procedures.
14. Which risk exists at the overall financial statement level and at the assertion level and can be categorized as
involving inherent risk and control risk? - (correct answer) Risk of material misstatement
15. What represents an identified and assessed risk of material misstatement that requires special audit
consideration? - (correct answer) Significant risk
16. What is the impact on the amount of acceptable audit risk if an auditor believes the chance of financial failure of a
client is high? - (correct answer) The acceptable audit risk is reduced.
17. Which factor should lead an auditor to assess inherent risk as high? - (correct answer) The account balance
consists of a large number of complex transactions.
, 18. Which factor would lead an auditor to assess client business risk at a higher level? - (correct answer) The
client's use of information technology is incompatible across systems and processes.
19. An auditor determines overall materiality of $500,000 would be material to the income statement and $1,000,000
would be material to the balance sheet. Which amount would an auditor typically assess performance materiality
to be for this client? - (correct answer) 75% of $500,000
20. At which percentage do auditors commonly set posting materiality? - (correct answer) 5% of planning
materiality
21. What is Client Business Risk? - (correct answer) Risks affecting the business operations and potential outcomes
of an organization's activities.
22. What does the Risk of Material Misstatement represent? - (correct answer) The Inherent and Control Risks
23. Who controls the Risk of Material Misstatement? - (correct answer) The Client
24. What happens to Detection and Audit Risk when Risk of Material Misstatement is high? - (correct answer)
Detection Risk is lowered to reduce the Audit Risk to an acceptable level.
25. What is Inherent Risk? - (correct answer) The likelihood of material misstatement without considering the
effects of internal control
26. What is Control Risk? - (correct answer) The risk of a misstatement occurring or not being prevented by
internal controls
27. What is audit risk? - (correct answer) The risk that the auditor expresses an inappropriate audit opinion when
the financial statements are materially misstated.
28. What is detection risk? - (correct answer) Risk that the auditors' procedures will lead them to conclude that a
material misstatement does not exist in an assertion when in fact such misstatement does exist.
29. What is the audit risk model? - (correct answer) Audit Risk = Inherent Risk x Control Risk x Detection Risk
30. What is engagement risk? - (correct answer) Risk of potential for loss to the auditor because of being
associated with the client.
31. What is the relationship between Audit Risk and Engagement Risk? - (correct answer) Inverse
32. What percentages does Audit Risk use? - (correct answer) 1%-5%
33. What amount of evidence is needed as Detection Risk decreases? - (correct answer) More evidence is required
with a lower Detection Risk
34. What is a Significant Risk? - (correct answer) An identified and assessed risk of material misstatement that
requires special audit consideration
35. Which has a higher Inherent Risk - Cash or Large Equipment - (correct answer) Cash - Easily stolen
36. What are some factors that increase Inherent Risk? - (correct answer) Easily stolen, complex, estimations, high
volume and nonroutine
