Exam 6: Client Acceptance,Planning,and Materiality

White Top Telephones is the largest telephone distributor in the province,distributing wired and cordless phones as well as cell phones.Management always seems to be in a rush and is difficult to approach.Unfortunately,this attitude has permeated down to all of the staff.Everyone seems to be hurrying about,doing what needs to be done.Sometimes it seems as if they don't even have time for their customers.Yet,everything seems to get done.The company's website has a lengthy privacy policy statement indicating that customers are number one and that all data is kept secure. Required: Explain the importance of the control environment and corporate governance structure.During what phases of the risk assessment and planning process would the control environment and corporate governance structure be documented and assessed?

An important reason for adequately planning the audit engagement is to

What are the preliminary engagement activities performed by the auditor before planning the audit?

The Canadian Auditing Standards state that the auditor must develop an audit plan.List and explain the components that must be included in the auditor's plan.

In addition to direct impacts on the financial statements,the auditor also needs to consider indirect effects.An assessment of client objectives and strategies can reveal issues that could lower income or cause contingent liabilities.Which of the following could cause lost sales,increases in warranty expenses,and product liability claims?

Frontenac Construction,your audit client,is a construction company.In the initial planning phase of the audit,you identified that it has many contracts with severe non-performance clauses if any of the current constructions are not completed on the dates set in the contracts over the next three years.As the auditor,you would set the inherent risk for sales and penalties as

What is the purpose of developing a client risk profile? List the steps involved in developing a client risk profile.

What are the three main factors that influence the organizational structure of all public accounting firms?

The audit plan includes the nature,timing,and extent of audit procedures for the purposes of risk assessment,including those that are linked to the individual audit assertions,as well as any other audit procedures that are considered necessary.At what point in the audit process is the audit plan finalized?

If the client has set unreasonable objectives or if the performance measurement system encourages aggressive accounting,the auditor will

It is important for the auditor to obtain a good understanding of the client's industry to develop a client risk profile.If the auditor is looking at a client in the fashion clothing industry,a risk specific to the industry would be

A code of ethics is an important document for organizational conduct.In response to the Sarbanes-Oxley Act in the United States,the SEC requires which of the following actions for organizations that have not adopted a code of ethics?

What is the best description of the engagement letter?

An effective audit is one that

If it is probable that the judgment of a reasonable person would have been changed or influenced by the omission or misstatement of information,then that information is considered to be

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 the gross margin with prior years and looking for large fluctuations?

What are the factors considered by an auditor while setting performance materiality?

Mario,the owner of Clayton's ice cream,is giving Steve,the manager of the audit,a private tour of the production facilities.By doing the tour,Steve will

Brandon is working on the audit of Michum Inc.In accordance with CAS 550 (related parties),Brandon had obtained a management confirmation of all related-party transactions.When auditing the purchasing cycle of Michum,Brandon found that the company had purchased over $500 000 of merchandise from Elite Crust Inc. ,a company that is owned by the CEO's brother.The $500 000 purchase is a material amount and it was not included in the confirmation provided by Michum.Brandon should

External auditor Mary Smith may not rely on the work of internal auditor Ray Jones unless