Risk Assessment Procedures Are Performed by the Auditor to Assess

question 62

Multiple Choice

Risk assessment procedures are performed by the auditor to assess the risk of material misstatement in the financial statements. Below are four types of further audit procedures the auditor should perform that provide the basis for the auditor's opinion. Which of these are compliance procedures?
1) Tests of controls
2) Tests of details of balances
3) Substantive tests of transactions
4) Substantive analytical procedures

• A) 1, 2, and 3
• B) 2, 3, and 4
• C) 1 only
• D) 1 and 2

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Definitions:

Reserve Bank

A central banking institution responsible for overseeing the monetary policy, issuing currency, and regulating the banking system of a country.

Required Reserve Ratio

The fraction of deposits that a bank is required by regulation to hold in reserve and not lend out, aiming to ensure bank liquidity and stability.

Money Supply

The total amount of monetary assets available in an economy at any specific time, including cash, coins, and balances held in checking and savings accounts.

Required Reserve Ratio

is the fraction of deposits that banks are required to keep on hand as reserves, rather than loaning them out.