Audit Planning
3 years ago
vpaz01
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  • Question 1
    30 seconds
    Q. An auditor has withdrawn from an audit engagement of a publicly held company after finding fraud that may materially affect the financial statements. The auditor should set forth the reasons and findings in correspondence with the 
    answer choices
    SEC
    Client's legal counsel
    Stock exchanges where the company's stock is traded
    Audit committee of the board of directors
  • Question 2
    30 seconds
    Q. When a CPA is approached to perform an audit for the first time, the CPA should make inquiries of the predecessor auditor. This is a necessary procedure because the predecessor may be able to provide the successor with information that will assist the successor in determining 
    answer choices
    Whether the predecessor's work should be utilized.
    Whether, in the predecessor's opinion, the financial statements are materially correct
    Whether, in the predecessor's opinion, the company's internal controls have been satisfactory
    Whether the engagement should be accepted
  • Question 3
    30 seconds
    Q. Which of the following should an auditor obtain from the predecessor auditor prior to accepting an audit engagement? 
    answer choices
    Analysis of balance sheet accounts
    Analysis of income statement accounts
    All matters of continuing accounting significance
    Facts that might bear on management integrity
  • Question 4
    30 seconds
    Q. A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor's 
    answer choices
    Engagement letter
    Audit working papers
    Engagement letter and audit working papers
    It would not be typical to allow a review of either the engagement letter or the audit working papers.
  • Question 5
    30 seconds
    Q. An auditor is required to establish an understanding with a client regarding the responsibilities for each engagement. This understanding generally includes 
    answer choices
    Management's responsibility to guarantee that there are no material misstatements due to fraud
    The auditor's responsibility to plan and perform the audit to provide reasonable, but not absolute, assurance of detecting material errors or fraud.
    Management's responsibility for providing the auditor with an assessment of the risk of material misstatement due to fraud.
    The auditor's responsibility for the fairness of the financial statements
  • Question 6
    30 seconds
    Q. Which of the following is not a concern as to whether a misstatement is qualitatively material? 
    answer choices
    The misstatement hides a failure to meet analysts' expectations
    The misstatement is less than 5% of pretax income
    The misstatement increases management's compensation
    The misstatement changes a small amount of profit to a small reported loss
  • Question 7
    30 seconds
    Q. In assessing the competence of the internal audit function, an independent CPA most likely would obtain information about the 
    answer choices
    Quality of the work of the internal audit function
    Organization's commitment to integrity and ethical values
    Influence of management on the scope of the internal audit function duties
    Organizational levels to which the internal audit function reports
  • Question 8
    30 seconds
    Q. Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit? 
    answer choices
    Perform detailed testing of the individual balance sheet accounts
    Examining documents to detect illegal acts having a material effect on the financial statements.
    Considering whether the client's accounting estimates are reasonable in the circumstances
    Determining the extent of involvement of the client's internal audit function
  • Question 9
    30 seconds
    Q. The in-charge auditor most likely would have a supervisory responsibility to explain to the staff assistants 
    answer choices
    That immaterial fraud is not to be reported to the client's audit committee
    How the results of various auditing procedures performed by the assistants should be evaluated.
    How the overall audit strategy will allow the firm to reach a sufficiently low level of audit risk
    How overall materiality was selected.
  • Question 10
    30 seconds
    Q. Which of the following audit procedures would be least likely to disclose the existence of related party transactions of a client during the period under audit? 
    answer choices
    Reading "conflict-of-interest" statements obtained by the client from its management
    Scanning accounting records for large transactions at or just prior to the end of the period under audit.
    Reading minutes of the Board of Directors meetings for authorization or discussion of material transactions.
    Confirming purchases and sales transactions with the vendors and/or customers involved.
  • Question 11
    30 seconds
    Q. Under the Sarbanes-Oxley Act, the audit committee of a public company has the following requirement(s): 
    answer choices
    Each member of the committee must be a board member and shall be independent
    The audit committee must preapprove all audit and nonaudit services
    The audit committee must establish and maintain procedures to handle all issues that relate to accounting, internal control, and auditing.
    All of these
  • Question 12
    30 seconds
    Q. Which of the following relatively small misstatements most likely would have a material effect on an entity's financial statements? 
    answer choices
    An illegal payment to a foreign official that was not recorded
    A piece of obsolete office equipment that was not retired
    A petty cash fund disbursement that was not properly authorized
    An uncollectible account receivable that was not written-off
  • Question 13
    30 seconds
    Q. Which of the following is the most important qualitative factor that auditors should consider when making materiality judgments? 
    answer choices
    A misstatement exceeded five percent of net income
    The auditor also provides consulting services to the audit client
    The misstatement will cause the client to fail to meet an earnings forecast
      D.  The audit committee is not well-educated about the accounting principle in question.
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