Exam 14: Activities Required in Completing a Quality Audit

The partner performing an engagement quality review will review the working papers and financial statements but will not perform which of the following?

When a subsequent event provides evidence about conditions that did not exist at the balance sheet date,what is the best course of action for the auditor to follow?

If a lawyer refuses to furnish the requested information about the client's contingencies to the auditor,the auditor should issue an unqualified audit opinion.

Which of the following procedures is the least useful analytical procedure to indicate that further audit work needs to be performed before rendering the audit opinion?

Which of the following is not a required communication with the audit committee?

A culture that encourages auditors to seek consultation with other members of the audit firm will be more likely to result in auditors who will acquiesce to inappropriate or aggressive client preferences.

An additional partner review of the audit and its findings is typically performed by an experienced member of the firm.Which of the following individuals is most qualified to perform this concurring partner review?

Auditors are responsible for obtaining reasonable assurance that the financial statements are free from material misstatements,including material misstatements related to noncompliance with laws and regulations.

Assume a situation in which an attorney who provided significant litigation counsel to a client to refuses to furnish information requested in an audit.Which of the following descriptions best describes this situation from the auditor's perspective?

Litigation,claims,and assessments Discuss the information management should provide related to litigation,claims and assessments.Also describe the purpose of the letter of audit inquiry,who writes it,who it is addressed to,and the important inquiries that are made of the client's lawyer in the letter of audit inquiry.

Analytical procedures may indicate that new controls need to be designed before completing the audit.

Management's refusal to sign the management representation letter is considered a scope limitation sufficient to preclude the issuance of an unqualified opinion.

The auditor compares the total likely misstatements to each significant segment of the financial statements,such as total current assets,total noncurrent assets,total current liabilities,total noncurrent liabilities,owners' equity,and pretax income,to determine if they are,in aggregate,material to the financial statements.

Management representation letters Barrett Jennings,CPA,has prepared a letter of representation for the president and controller to sign.The following items are contained in it: (a)Inventory is fairly stated at the lower of cost or market and includes no obsolete items. (b)All actual and contingent liabilities are properly included in the financial statements. (c)All subsequent events,relevant to the financial statements,have been disclosed. Required: (1)Why is it desirable to have a letter of management representation letter from the client concerning these matters when the evidence accumulated during the course of the audit is meant to verify the same information? (2)How is the letter of management representation useful as audit evidence? (3)What are several other types of information commonly included in the management representation letter?

What should an auditor do when becoming aware of violations of the FCPA?

The auditor generally reports things that management could do better in a management letteras a constructive part of the audit.

Type I subsequent events indicate conditions that did not exist at the balance sheet date,but that may require disclosure.

Ratio analysis,common-size analysis,and analysis of the dollar and percentage changes in each income statement item over the previous year are useful for this purpose.

If the auditor concludes that there may be a going-concern problem with the client,which of the following is the best course of action for the auditor to follow?

In the letter of audit inquiry concerning a description and evaluation of litigation,claims and assessment provided by management to the auditor,which of the following is the client's lawyer not requested to provide?