Risks in auditing

7.1Define risk in auditing. Review 7­1 (book/static) Why is it important for the auditor to consider the risk of material misstatement at the overall financial statement level? A. It is important for the auditor to consider risks at the overall financial statement level given those risks may increase the likelihood of risks of material misstatement across a number of accounts and assertions for those accounts. Your answer is correct. B. It is important for the auditor to consider risks at the overall financial statement level given those risks may decrease the likelihood of risks of material misstatement across a number of accounts and assertions for those accounts. C. It is important for the auditor to consider risks at the overall financial statement level because each of the aspects considered must be explained in the audit report. D. It is important for the auditor to consider risks at the overall financial statement level given those risks may eliminate the need to perform analytical procedures. Review 7­2 (book/static) Provide two examples of factors that might increase the risk of material misstatement at the overall financial statement level. A. declining economic conditions Your answer is correct. B. a lower cash balance than the prior year C. significant changes in the industry Your answer is correct. D. a high level of asset purchases in the current year Review 7­3 (book/static) Assume that you are concerned that your client has recorded revenues that did not occur. What assertion would you assess as having a high risk of material misstatement? A. Occurrence Your answer is correct. B. Classification C. Timing D. Accuracy E. Completeness Moranda and Sills, LLP, has served for over 10 years as the auditor of the financial statements of Highland Credit Union. The firm is conducting its audit planning for the current fiscal year and is in the process of performing risk assessment procedures. LOADING... (Click the icon to view additional information.) Required a. Describe any risks of material misstatement at the financial statement level. b. Describe any risks of material misstatement at the assertion level. c. Which, if any, risks would be considered a significant risk? Requirement a. Describe any risks of material misstatement at the financial statement level. Select any risks of material misstatement at the financial statement level from the list below. (If a box is not used in the table, leave the box empty; do not select a label.) LOADING... (Click the icon to view the list of risks.)