Question 1

The purpose of an engagement letter is to:

Accepted Answer

A)  satisfy the Trade Practices Act which requires that contracts for professional services must be in writing to be enforceable. 
B)  record the terms of the engagement in writing in order to minimise misunderstandings. 
C)  notify the audit staff of an upcoming engagement so that personnel scheduling can be facilitated. 
D)  reduce the audit firm's responsibility to external users of the audited financial statements. 
A)  satisfy the Trade Practices Act which requires that contracts for professional services must be in writing to be enforceable. 
B)  record the terms of the engagement in writing in order to minimise misunderstandings. 
C)  notify the audit staff of an upcoming engagement so that personnel scheduling can be facilitated. 
D)  reduce the audit firm's responsibility to external users of the audited financial statements. B

Question 2

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 called:

Accepted Answer

A)  statistical risk. 
B)  inherent risk. 
C)  acceptable audit risk. 
D)  financial risk. 
A)  statistical risk. 
B)  inherent risk. 
C)  acceptable audit risk. 
D)  financial risk. C

Question 3

Which of the following is NOT one of the three main reasons why the auditor should properly plan engagements?

Accepted Answer

A)  To enable proper on- the- job training of employees 
B)  To avoid misunderstandings with the client 
C)  To help keep audit costs reasonable 
D)  To enable the auditor to obtain sufficient competent evidence 
A)  To enable proper on- the- job training of employees 
B)  To avoid misunderstandings with the client 
C)  To help keep audit costs reasonable 
D)  To enable the auditor to obtain sufficient competent evidence A

Question 4

The minutes of meetings of the board of directors and/or shareholders include:

Accepted Answer

A)  declaration of dividends. 
B)  appointment and retirement of directors. 
C)  allotment and issue of shares. 
D)  all of the above 
A)  declaration of dividends. 
B)  appointment and retirement of directors. 
C)  allotment and issue of shares. 
D)  all of the above

Question 5

Which of the following characteristics of the client's management affects the risk of material misstatements in the financial report?

Accepted Answer

A)  Ability to respond to risk 
B)  Philosophy and operating style 
C)  Ability to identify risk 
D)  All three of the above 
A)  Ability to respond to risk 
B)  Philosophy and operating style 
C)  Ability to identify risk 
D)  All three of the above

Question 6

Much of the early planning of audits deals with obtaining information to help auditors assess two risks:

Accepted Answer

A)  acceptable audit risk and business risk. 
B)  business risk and inherent risk. 
C)  acceptable audit risk and inherent risk. 
D)  none of the above 
A)  acceptable audit risk and business risk. 
B)  business risk and inherent risk. 
C)  acceptable audit risk and inherent risk. 
D)  none of the above

Question 7

The audit program is normally contained in the current file of the auditor's working papers.

Accepted Answer

A) True 
 B)False

Question 8

There are three main reasons why an auditor should properly plan audit engagements. Please discuss each of these reasons.

Accepted Answer

Three reasons why an auditor should prop

Question 9

The current file of the auditor's working papers generally should include:

Accepted Answer

A)  a flowchart of the internal controls. 
B)  organisation charts. 
C)  a copy of the financial statements. 
D)  copies of bond and note indentures. 
A)  a flowchart of the internal controls. 
B)  organisation charts. 
C)  a copy of the financial statements. 
D)  copies of bond and note indentures.

Question 10

Which of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarising similar or related items?

Accepted Answer

A)  Supporting schedules 
B)  Control accounts 
C)  Lead schedules 
D)  Account analyses 
A)  Supporting schedules 
B)  Control accounts 
C)  Lead schedules 
D)  Account analyses

Question 11

When a successor (new) auditor contacts a company's previous auditor, the predecessor auditor is required to respond to the request for information.

Accepted Answer

A) True 
 B)False

Question 12

A related party transaction is:

Accepted Answer

A)  non arm's- length transaction. 
B)  transaction with the auditor. 
C)  transaction at an undervalue. 
D)  all of the above 
A)  non arm's- length transaction. 
B)  transaction with the auditor. 
C)  transaction at an undervalue. 
D)  all of the above

Question 13

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:

Accepted Answer

A)  the client is dissatisfied with predecessor's work. 
B)  the predecessor believes the client lacks integrity. 
C)  there are legal problems between the client and predecessor. 
D)  the predecessor auditor has poor relations with successor auditor. 
A)  the client is dissatisfied with predecessor's work. 
B)  the predecessor believes the client lacks integrity. 
C)  there are legal problems between the client and predecessor. 
D)  the predecessor auditor has poor relations with successor auditor.

Question 14

When an auditor decides on a higher acceptable audit risk, one effect is that the auditor wants to be more certain the accounts are not materially misstated.

Accepted Answer

A) True 
 B)False

Question 15

An example of a reclassification entry would be an entry:

Accepted Answer

A)  to reduce inventory when client failed to write down its obsolete raw materials. 
B)  to increase the income tax liability account when it was discovered that the tax rate would be higher than originally estimated. 
C)  to change material credit balances in accounts receivable accounts to accounts payable accounts. 
D)  to increase the allowance for doubtful accounts when it was discovered that a customer had filed for bankruptcy. 
A)  to reduce inventory when client failed to write down its obsolete raw materials. 
B)  to increase the income tax liability account when it was discovered that the tax rate would be higher than originally estimated. 
C)  to change material credit balances in accounts receivable accounts to accounts payable accounts. 
D)  to increase the allowance for doubtful accounts when it was discovered that a customer had filed for bankruptcy.

Question 16

When a company changes auditors, the Code of Ethics for Professional Accountants requires communication between the predecessor and successor auditors. The burden of initiating the communication rests with the:

Accepted Answer

A)  client. 
B)  predecessor. 
C)  successor. 
D)  ASIC. 
A)  client. 
B)  predecessor. 
C)  successor. 
D)  ASIC.

Question 17

Discuss the purpose of an audit engagement letter.

Accepted Answer

The purpose of an audit engage

Question 18

An extensive understanding of the client's business and industry and knowledge about the company's operations are essential because:

Accepted Answer

A)  there is a risk the business may impact the environment. 
B)  the increased importance of intangible assets has increased accounting complexity. 
C)  the increased importance of human resources has increased accounting complexity. 
D)  all of the above 
A)  there is a risk the business may impact the environment. 
B)  the increased importance of intangible assets has increased accounting complexity. 
C)  the increased importance of human resources has increased accounting complexity. 
D)  all of the above

Question 19

Discuss the factors an auditor should consider before accepting a company as an audit client.

Accepted Answer

The auditor should investigate and consi

Question 20

The largest portion of the auditor's working papers is the:

Accepted Answer

A)  supporting schedules. 
B)  adjusting and reclassification entries. 
C)  working trial balance. 
D)  lead schedules. 
A)  supporting schedules. 
B)  adjusting and reclassification entries. 
C)  working trial balance. 
D)  lead schedules.

The purpose of an engagement letter is to:

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 called:

Which of the following is NOT one of the three main reasons why the auditor should properly plan engagements?

The minutes of meetings of the board of directors and/or shareholders include:

Which of the following characteristics of the client's management affects the risk of material misstatements in the financial report?

Much of the early planning of audits deals with obtaining information to help auditors assess two risks:

The audit program is normally contained in the current file of the auditor's working papers.

There are three main reasons why an auditor should properly plan audit engagements. Please discuss each of these reasons.

The current file of the auditor's working papers generally should include:

Which of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarising similar or related items?

When a successor (new) auditor contacts a company's previous auditor, the predecessor auditor is required to respond to the request for information.

A related party transaction is:

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:

When an auditor decides on a higher acceptable audit risk, one effect is that the auditor wants to be more certain the accounts are not materially misstated.

An example of a reclassification entry would be an entry:

When a company changes auditors, the Code of Ethics for Professional Accountants requires communication between the predecessor and successor auditors. The burden of initiating the communication rests with the:

Discuss the purpose of an audit engagement letter.

An extensive understanding of the client's business and industry and knowledge about the company's operations are essential because:

Discuss the factors an auditor should consider before accepting a company as an audit client.

The largest portion of the auditor's working papers is the:

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Quality and Ethics

Audit Responsibilities and Objectives

Audit Evidence

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Audit of Transaction Cycles and Financial Statement Balances II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters

Exam 6: Audit Planning and Documentation

The purpose of an engagement letter is to:

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 called:

Which of the following is NOT one of the three main reasons why the auditor should properly plan engagements?

The minutes of meetings of the board of directors and/or shareholders include:

Which of the following characteristics of the client's management affects the risk of material misstatements in the financial report?

Much of the early planning of audits deals with obtaining information to help auditors assess two risks:

The audit program is normally contained in the current file of the auditor's working papers.

There are three main reasons why an auditor should properly plan audit engagements. Please discuss each of these reasons.

The current file of the auditor's working papers generally should include:

Which of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarising similar or related items?

When a successor (new) auditor contacts a company's previous auditor, the predecessor auditor is required to respond to the request for information.

A related party transaction is:

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:

When an auditor decides on a higher acceptable audit risk, one effect is that the auditor wants to be more certain the accounts are not materially misstated.

An example of a reclassification entry would be an entry:

When a company changes auditors, the Code of Ethics for Professional Accountants requires communication between the predecessor and successor auditors. The burden of initiating the communication rests with the:

Discuss the purpose of an audit engagement letter.

An extensive understanding of the client's business and industry and knowledge about the company's operations are essential because:

Discuss the factors an auditor should consider before accepting a company as an audit client.

The largest portion of the auditor's working papers is the:

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Quality and Ethics

Audit Responsibilities and Objectives

Audit Evidence

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Audit of Transaction Cycles and Financial Statement Balances II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters