Exam 6: Client Acceptance,Planning,and Materiality

Why might the decisions about materiality and risks be different for the internal auditor than for the external auditor when conducting an audit of a system?

It is important that the policies,procedures,and key decisions of senior management,the board of directors,and the audit committee be considered when developing a client risk profile because

An important reason for auditors to obtain good knowledge of a client's industry is that

One of the purposes of developing a client risk profile is to assist the auditor in

During the process of deciding to accept or continue an audit engagement,what indicators may raise doubts in the auditor's mind about management's integrity?

What is specific materiality?

Since materiality is relative,it is necessary to have benchmarks for establishing whether misstatements are material.Normally,the most important base for deciding what is material,because it is regarded as a critical item of current period information for users,is

The official record of the meetings of the board of directors and shareholders is contained in the corporate

Your client,Macilbink Ltd. ,manufactures calendars,books,and magazines.The printing presses that they use are only three years old,yet new technology has been developed that would result in cuts in ink and electricity costs by over 20%,while simplifying the setup process,making smaller production runs more feasible.Macilbink Ltd.is facing lowered demand for its products and will need to change direction or innovate to stay in business.The effect of the new printing technology has resulted in which of the following risk assessment changes by Macilbink Ltd.'s auditors?

Vanovo Ltd.has purchased several companies in the retail sector.Recently,Vanovo purchased both a coffee and donut chain (that also owned bakeries)and a submarine sandwich chain.Unfortunately,the planned synergies between these two retail chains did not arise.What effect would this have on the financial statements of Vanovo Ltd. ,the parent company?

What is performance materiality?

Distinguish horizontal and vertical analysis.Give an example of each.

There are many types of analytical procedures that the auditor can conduct during the planning stage of the financial statement audit.What is the purpose of comparing prepaid expenses and related expense accounts with those of prior years?

When reading the corporate minutes,the auditor obtained information regarding loans that were authorized for borrowing.What audit step would the auditor likely conduct with this information?

The overall audit strategy typically includes

Michum Inc.has related party transactions with a company owned by the CEO's brother totalling about $500 000.There are also related party transactions with the owner (about $250)and with two of the officers ($750 and $1000)respectively.Which related parties should be identified and included in audit documentation?

Silka is in the process of performing an audit.During the audit,Silka decided to change materiality.A valid reason for this would be

The auditors have decided upon a materiality level of $100 000 for their audit of ABC Manufacturing.Which one of the following errors would be considered more important by the auditors?

Black Rock Limited is a marble and tile outlet that has a large outdoor area as well as an indoor showroom for a variety of stone,tile,and marble.It is July and your firm has just been appointed as the auditor for the September year-end audit.The previous auditing firm had conducted review engagements.The company's bank has asked for audited financial statements for the current year end. Required:A)What is the purpose of obtaining knowledge of the client's industry and business environment? Identify at least three procedures that you could undertake in this area.B)What is the purpose of obtaining knowledge of the client's business? Identify at least three procedures that you could undertake in this area.

There are many types of analytical procedures that the auditor can conduct during the planning stage of the financial statement audit.What is the purpose of calculating key ratios for the client's business and comparing them with industry averages?