Lesson: Audit Risk Practice Questions

Instructor: Nick Palazzolo

In this lesson, Nick Palazzolo walks through practice questions on audit risk, covering key aspects of audit risk types, including inherent risk, control risk, and detection risk. The lesson breaks down a complex question related to invoice testing and provides a clear explanation of how to deduce the correct answer. Subsequently, the lesson dives into the differences between inherent risk, control risk, and detection risk, examining how auditors have control over detection risk while the other two risks are independent factors. Through detailed explanations and engaging examples, this lesson demystifies audit risk types and helps to solidify understanding of this crucial topic for the CPA exam.

Updated: June 22, 2023 Create an account

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Recommended Lessons

Audit Risk Overview

Audit Risk Objectives

Introduction to Audit Risk

Audit Risk Formula

Inherent Risk, Control Risk, and Detection Risk

Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Alright everyone, so now we've got our multiple choice questions on auditors. So first question is going to say, a senior auditor conducted a dual purpose test on a client's invoice to determine whether the invoice was approved and to ascertain the amount and other terms of the invoice. Which of the following lists two tests that the auditor performed? Now if you're thinking, what the heck did he just read off? You're not alone, no worries. That was a wordy question and two approaches. Yes, it does make sense, but that is at such a higher level than you likely would need to know for the exam. So let's deduce this how I would, as someone who is dealing with four exams at once and doesn't have time to get on the level that this question is asking. Now first, let's look at the answers, right? and we're doing a dual purpose test on an invoice, right? So we're an auditor, it says you're an auditor. So we know we're doing an audit. Generally speaking, what types of tests do we do as an auditor? Now you could say, yeah, we do analytical procedures, substantive, test of details, test of controls. You could say we do all of these, right? 100%. Just a reminder that test of details are the same thing as substantive procedures. So make sure you're taking note of that. Those are the same things. So also, I would definitely, I mean, unless you think the right answer is only test of details or substantive procedures, then I would choose letter D, but this means the same thing, right? Test of details and substantive procedures are the same exact thing. So that's why I'm going to eliminate that. All right. Now other than that, our choices

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Identify Risk During Planning

Module: 5 Concepts, 62 Lessons

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Fraud & General Risk at All Levels Objectives

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