Audit QUIZ 2 - Lecture notes 3 PDF

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audit quiz 2 review questions...

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1. When initiating communications with predecessor auditors, prospective auditors should expect: all of the choices are correct 2. Which of the following conditions would most likely pose the greatest risk in accepting a new audit engagement? Client imposed scope limitation 3. GAAS requires that auditors always prepare and use: a written audit plan 4. Which of the following engagement planning procedures would most likely assist the auditor in identifying related party transactions before the balance-sheet data? Minutes 5. An audit plan contains: specifications believed appropriate 6. Which of the following procedures would a CPA most likely perform in planning an FS audit? Compare financial information with nonfinancial operating data 7. Which is not a benefit claimed for the practice of determining materiality in the initial planning stage of an audit? Being able to decide early 8. Confirmations of accounts receivable provide evidence primarily about which 2 assertions? Existence and rights and obligations 9. Audit documentation that shows the detailed evidence and procedures regarding the balance in the accumulated depreciation account for the year under audit will be found in the: current file audit doc 10. When planning an audit which is NOT a factor that affects auditors’ decisions about quantity, type, and content of audit doc? The auditors’ judgement about their independence with regard to the client 11. An audit engagement letter should normally include which of the following matters of agreement between the auditor and client? Schedules and analyses 12. Which of the following statements is correct concerning analytical procedures used in planning an audit engagement? They typically use fin 13. What is the primary obj of fraud brainstorming sessions? Assess the potential for material misstatement due to fraud 14. Analytical procedures are generally used to produce evidence from: relationships among current financial balances… 15. Analytical procedures can be used in which of the following ways? All of the above 16. Under the Private Securities Litigation Act, independent auditors are required to first: report to the SEC… 17. Analytical procedures used when planning an audit should concentrate on: accounts and relationships… 18. Auditors are not responsible for accounting estimates with respect to: making estimates 19. Auditors perform analytical procedures in the planning stage of an audit for the purpose of: identifying unusual conditions… 20. An auditor’s analytical procedures indicate a lower than expected ROE investment. This could most likely be caused by: an error in recording amortization of the excess of the investor’s cost over the investment’s underlying BV 21. Which increases when an auditor performs substantive analytical procedures for FS accounts at the interim date? Detection 22. The most important fundamental component of an entity’s internal control is: control environment

23. The primary purpose for obtaining an understanding of IC during the audit of a nonissuer is to: determine the nature… 24. In most audits of large entities, control risk assessment contributes to audit efficiency, which means that: auditors will be able to reduce the cost of substantive procedures by an amount LESS than the cost of tests of controls 25. When planning the audit of IC for an issuer, the audit team should: identify significant accounts, locations, and relevant assertions 26. Which report would not be appropriate for a public accounting firm to provide on financial reporting controls? Disclaimer of opinion – significant deficiencies exist 27. Once the auditor detects a control deficiency, which of the following steps must they take first? Evaluate the severity… 28. Tests of controls in a GAAS audit are required for: obtaining evidence about the operating effectiveness…. 29. When completing the audit of IC for an issuer, the severity of an IC deficiency depends on: both the magnitude… 30. When completing the audit of IC for an issuer, PCAOB requires the audit team to audit internal controls over: financial reporting 31. The purpose of separating the duties of hiring personnel and distributing payroll checks is to separate the: authorization… 32. If the auditors encounter a significant scope limitation… disclaimer of opinion 33. Matters that could affect… relevance and reliability… 34. The auditor should assess control risk for each relevant assertion by evaluating the evidence obtained from all sources, including all of above...