Appendix 7: Answers to Reinforcement Quizzes
Answers to Reinforcement Quiz ñ Section V, Chapter 2
1. Audit risk includes which of the following? (Select two correct answers.)
a. inherent risk
b. liability risk
c. control risk
d. material risk
Answer: (a) and (c). Audit risk includes inherent risk (the chance that
something can go wrong), control risk (the chance that an entityís
controls will not prevent or detect something going wrong) and
detection risk (the chance that the auditor will not find a problem that
the entityís control system also missed).
2. Which steps might an auditor include in the audit planning process?
a. accumulating current knowledge
b. conducting analytical tests
c. assessing audit risk
d. developing an audit program
e. all of the above
Answer: (e). All of the steps listed are part of the audit planning
process.
3. The risk associated with an organization that handles a lot of cash is:
a. inherent risk.
b. financial risk.
c. control risk.
d. detection risk.
Answer: (a). Cash is inherently risky because people will try to steal it.
Accordingly, we consider risks associated with handling a lot of cash to
be an inherent risk.
4. Covering a specific fiscal year in an audit is an example of:
a. audit objective.
b. audit scope.
c. audit risk.
d. audit performance.
Answer: (b). The scope is how we limit the audit coverage. Almost all
audits have some limitations on the time period covered.
Online version, for personal use only AGA Study Guide 3, 2016 Edition

Appendix 7: Answers to Reinforcement Quizzes
5. What are four phases of an audit?
Answer: The audit phases include audit planning, including the
entrance conference; audit fieldwork; exit conference and draft report;
and final audit report.
Online version, for personal use only AGA Study Guide 3, 2016 Edition

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AGA CGFM Study Guide 3: Governmental Financial Management and Control