25.Which of the following is most likely to occur at the beginning of an initial audit engagement?mediuma.Prepare a rough draft of the financial statements and of the auditor’s report.cb.Study and evaluate the system of internal administrative control.c.Determine the client’s reason for an audit.d.Consult with and review the work of the predecessor auditor prior to discussing theengagement with the client management.To download more slides, ebook, solutions and test bank, visit Show
26.An auditor should examine minutes of the board of directors’ meetings: 27.mediumThe first standard of field work, which states that the work is to be adequately planned and thatassistants, if any, are to be properly supervised, recognizes that: 28.mediumThe corporate minutes are the official record of the meetings of the board of directors andstockholders.The minutes typically include authorizations related to: 29.An engagement letter sent to an audit client usually would not include a(n):mediuma.reference to the auditor’s responsibility for the detection of errors or irregularities.cb.estimation of the time to be spent on the audit work by audit staff and management.c.statement that management advisory services would be made available upon request.d.reference to management’s responsibility for the financial statements. 30.Which of the following is correct with respect to a company’s corporate charter? • Advances in information technology have increased connectivity among companies and customers and vendors. Auditors must understand the risks associated with this • Companies have expanded operations to have global reaches, often through joint ventures and strategic alliances. • Information technology affects internal control processes, improving the quality and timeliness of accounting information. • The increased importance of human capital and other intangible assets has increased accounting complexity and the importance of management judgments and estimates. • Auditors need a better understanding of the client's business and industry to provide additional value-added services. The auditor can obtain a sound understanding of the client's business and industry through several means, including discussions with previous auditors and by reviewing the permanent files for the client; conferences with the client's personnel; studying AICPA industry audit guides, textbooks, technical magazines, and specialized journals; and by participating in industry associations and training programs. Upgrade to remove ads Only ₩37,125/year
Terms in this set (56)Which of the following is not one of the three main reasons why the auditor should properly plan engagements? To enable proper on-the-job training of employees Avoiding misunderstandings with the client is important for: Good Client Relations and Facilitating high quality wok at a reasonable cost Yes and Yes A measure of how willing the auditor is to accept that the financial statements may be materially misstated
after the audit is completed and an unqualified opinion has been issued is the: Acceptable audit risk A measure of the auditor's assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client's internal control is called: Inherent Risk When inherent risk is high, there will need to be: a lower assessment of audit risk and more evidence accumulated by the auditor. No and Yes The auditor is likely to accumulate more evidence when the audit is for a company: Which has large amount of debt and which is to be sold in the near future Yes and Yes Which of the following is not typically included in initial audit planning? Perform analytical procedures as substantive tests. Initial audit planning involves four matters. Which of the following is not one of these? Request that bank balances be confirmed. Most
auditors assess inherent risk as high for related parties and related-party transactions because: of the lack of independence between the parties. Which of the following is not correct regarding the communications between successor and predecessor auditors? The burden of initiating the communication rests with the predecessor auditor. A successor auditor may perform which of the following for a new audit client? Yes and Yes Which of the following is not a potential effect of an auditor's decision that a lower acceptable audit risk is appropriate? Less evidence is accumulated. It is easier and more common to implement increased evidence accumulation for inherent risk than for acceptable audit risk because:
inherent risk can usually be isolated to specific accounts. If an auditor is requested to perform non-audit services for a public company audit client, who is responsible for agreeing to those services with the audit firm? The client's audit committee. Which of the following statements is true regarding communications between predecessor and successor auditors? The predecessor's response can be limited to stating that no information will be provided. Investigating new clients with a focus on assessing the auditor's potential relationship with that new client is a critical element in determining: acceptable audit risk. The purpose of an engagement letter is to: document the terms of the engagement in writing to minimize misunderstandings. One means of informing the client that the auditor is not responsible for the discovery of all acts of fraud is the: engagement letter. Which
of the following normally signs the engagement letter for an audit of a public company? Audit committee. Which of the following normally signs the engagement letter for an audit of a private company? Management. An understanding of a client's business and industry and knowledge about operations are essential for performing an adequate audit. For a new client, most of this information is obtained: at the client's premises. The least effective method of identifying related parties for a public company would be a(n): distribution of the engagement letter to all stockholders. An official record of meetings of the board of directors and stockholders is included in the corporate: minutes. Which of the following is not likely to be a related party? A warehouse employee. Which of the following is most likely to occur at the beginning of an initial audit engagement? Determine the client's reason for an audit. An auditor should examine minutes of the board of directors' meetings: through the date of the audit report.
The first standard of field work, which states that the work is to be adequately planned and that assistants, if any, are to be properly supervised, recognizes that: early appointment of the auditor is advantageous to the auditor and the client. The corporate minutes are the official record of the meetings of the board of directors and stockholders. The minutes typically include authorizations related to: The CPA's use of outside specialists and Management compensation No and Yes An engagement letter sent to an audit client usually would not include a(n): statement that management advisory services would be made available upon request. Which of the following is correct with respect to a company's corporate charter? The corporate charter includes the exact name of the corporation, the date of incorporation, and the types of business the corporation is authorized to conduct. Corporate bylaws include: The types and amounts of capital stock the corporation is authorized to issue and The rules and procedures used to operate the corporation No and Yes In what order should the following steps occur? B, A, D, C. Which of the following statements is not correct with respect to analytical procedures? Analytical procedures must be performed throughout the audit. The most widely used profitability ratio is the: earnings per share The purpose of the requirement in SAS No.
84 of having communication between the predecessor and successor auditor is to: help the successor auditor to evaluate whether to accept the engagement. The predecessor auditor is required to respond to the request of the successor auditor for information, but the response can be limited to stating that no information will be provided when: there are actual or potential legal problems between the client and the predecessor. Which of the following is correct with respect to the use of analytical procedures? Analytical procedures are performed by studying plausible relationships between financial and non-financial data. Which of the following ratios is best used to assess a company's ability to meet its long-term debt obligations? Debt to equity Which of the following statements is not correct? Analytical procedures used in the completion phase are primarily aimed at assessing going concern and secondarily aimed at directing the auditor's attention to areas that may contain possible misstatements. Which of the following
would not likely be classified as a related-party transaction? An advance of one week's salary to an employee. Which of the following would not be found
in the corporate charter? The rules and procedures adopted by the stockholders. Which of the following would not usually be included in the minutes of the board of directors? The duties and powers of the corporate officers. When are auditors likely to encounter judgment problems in the use of analytical procedures? The auditor is likely to encounter judgment problems in each of the above instances. The major concern when using nonfinancial data in analytical procedures is the: accuracy of the nonfinancial data. An auditor searching for related party transactions should
obtain an understanding of each subsidiary's relationship to the total entity because: this may reveal whether transactions would have taken place if the parties had been unrelated. The first standard of fieldwork requires, in part, that audit work be properly planned. Proper planning as intended by the first standard of fieldwork would occur when the auditor: physically observes the movement of securities already counted to guard against the substitution of such securities for others that are not actually on hand Early appointment of the independent auditor will enable: a more efficient examination to be planned. Whenever an auditor compares client data to client-prepared budgets, there are two special concerns. Indicate if the two items below are concerns. Assessing whether the budgets were realistic plans and Client data may have been altered to conform to the budget Both concerns An auditor who accepts an audit engagement
and does not possess the industry expertise of the business entity should: obtain a knowledge of matters that relate to the nature of the entity's business. Which is a liquidity activity ratio? Inventory turnover Which is usually included in an engagement letter? Estimate of hours required to complete audit and Dollar estimate of fees to be billed to the client No and Yes Which is usually included in an engagement letter? A reference to GAAP and A reference to GAAS Yes and Yes Which is usually included in an engagement letter? The financial statements are the responsibility of the company's management and Ratios to be used by the auditor in the planning phase Yes and No When may the auditor refer to a specialist in the audit report? Only if the specialist's report results in a modification of the audit opinion and Only if the specialist assisted in the audit of an account material to the financial statements Yes and No Which is usually included in the engagement letter? The projected type of opinion on the financials statement to be audited and Name(s) of the client personnel responsible for supplying the auditor with information No and No Which is usually included in the engagement letter? List of audit procedures to be used in inventory observation and The auditors' assessment of Audit Risk No and No Students also viewedChapter 8 Audit Planning194 terms DRikuCPA Auditing Problem FA 2: Audit Planning44 terms FantasticJumbie Chapter 7 Overview of the Financial Audit Process156 terms DRikuCPA ACTG 307 - Auditing - Audit Planning & Analytical…152 terms fantastichula Sets found in the same folderChapter 10 Auditing45 terms becca_ward3 Auditing Chapter 13 Questions152 terms meagan_steers Audit Exam Ch2133 terms juliana303011 AUDITING THEORY148 terms Crystal_Red Other sets by this creatorAIS Chapter 1242 terms becca_ward3 ch 1552 terms becca_ward3 Auditing Chapter 958 terms becca_ward3 Auditing Exam 2 Study guide3 terms becca_ward3 Verified questions
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Which is the first step in the audit engagement?Step 1: Define Audit Objectives
Prior to the audit, AMAS conducts a preliminary planning and information gathering phase. The assigned auditor defines the audit objectives and likely scope of the audit. The auditor starts to develop the audit program to define the audit testing procedures.
Which of the following is the most likely step an auditor would perform at the beginning of an initial audit engagement?Which of the following is the most likely first step the auditors would perform at the beginning of an initial audit engagement? Prepare a rough draft of the financial statements and of the auditors' report.
Which of the following procedures would an auditor most likely include in the initial?Which of the following procedures would an auditor most likely include in the initial planning of a financial statement audit? Determining the extent of involvement of the client's internal audit function.
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