Question 1

One means of informing the client that the auditor is NOT responsible for the discovery of all acts of fraud is the:

Accepted Answer

A)  representation letter. 
B)  responsibility letter. 
C)  client letter. 
D)  engagement letter. 
A)  representation letter. 
B)  responsibility letter. 
C)  client letter. 
D)  engagement letter.

Question 2

Which one of the following is NOT a major reason why the auditor should properly plan engagements?

Accepted Answer

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

Question 3

Public accounting firms must accept every audit engagement.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

How does the auditor usually obtain knowledge of the auditee's business?

Accepted Answer

A)  from technical magazines 
B)  from textbooks 
C)  from Internet resources 
D)  all of the above 
A)  from technical magazines 
B)  from textbooks 
C)  from Internet resources 
D)  all of the above

Question 6

The purpose of requiring communication between the predecessor and successor auditor is to:

Accepted Answer

A)  help the successor audit evaluate whether to accept the engagement. 
B)  help the client by facilitating the change of auditors. 
C)  ensure that information which is provided to ASIC will be accurate. 
D)  allow the predecessor to disclose information which would otherwise be confidential. 
A)  help the successor audit evaluate whether to accept the engagement. 
B)  help the client by facilitating the change of auditors. 
C)  ensure that information which is provided to ASIC will be accurate. 
D)  allow the predecessor to disclose information which would otherwise be confidential.

Question 7

Working papers can be viewed by different audit personnel simultaneously by using:

Accepted Answer

A)  ACL. 
B)  groupshare software programs. 
C)  statistical sampling software programs. 
D)  IDEA. 
A)  ACL. 
B)  groupshare software programs. 
C)  statistical sampling software programs. 
D)  IDEA.

Question 8

What is the purpose of an engagement letter?

Accepted Answer

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

Question 9

An auditor who accepts an audit engagement must gain an understanding of the client's industry and business.This includes knowledge of the:

Accepted Answer

A)  industry and external environment. 
B)  business operations and processes. 
C)  management and governance. 
D)  all of the above 
A)  industry and external environment. 
B)  business operations and processes. 
C)  management and governance. 
D)  all of the above

Question 10

Permanent files contain all the data:

Accepted Answer

A)  about the current audit and financial statements. 
B)  of a historical or continuing nature pertinent to the current audit. 
C)  of a historical or continuing nature about the client. 
D)  about the most recent audits. 
A)  about the current audit and financial statements. 
B)  of a historical or continuing nature pertinent to the current audit. 
C)  of a historical or continuing nature about the client. 
D)  about the most recent audits.

Question 11

A thorough understanding of the client entity, its business and its environment, and knowledge of the
company's business and industry are essential for doing an adequate audit.ASA 315 provides an overview of five components to this understanding.Identify and discuss each of these five components.

Accepted Answer

1.Industry, regulation, and other extern

Question 12

What should an engagement letter include, according to ASA 210?

Accepted Answer

A)  the responsibilities of the auditor and management 
B)  the engagement's objectives 
C)  the engagement's limitations 
D)  all of the above 
A)  the responsibilities of the auditor and management 
B)  the engagement's objectives 
C)  the engagement's limitations 
D)  all of the above

Question 13

The development of the audit program is the final stage in:

Accepted Answer

A)  the client acceptance decision. 
B)  audit planning. 
C)  the engagement letter. 
D)  documenting independence. 
A)  the client acceptance decision. 
B)  audit planning. 
C)  the engagement letter. 
D)  documenting independence.

Question 14

Why is it essential to plan an audit engagement with the goal of accumulating sufficient evidence?

Accepted Answer

A)  to minimise legal liability and maintain the firm's good reputation in the business community 
B)  to help the firm remain competitive 
C)  to facilitate good client relations 
D)  all of the above 
A)  to minimise legal liability and maintain the firm's good reputation in the business community 
B)  to help the firm remain competitive 
C)  to facilitate good client relations 
D)  all of the above

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Discuss each of the five steps involved in accepting an audit engagement and initial planning.

Accepted Answer

The five steps involved in 'preplanning'

Question 17

Transactions with related parties are important to auditors because:

Accepted Answer

A)  they have high inherent risk. 
B)  of the financial statement disclosure requirements under Australian accounting standards. 
C)  there is a risk that they weren't valued at the same amount as they would have been if the transactions had been with an independent third party. 
D)  all of the above 
A)  they have high inherent risk. 
B)  of the financial statement disclosure requirements under Australian accounting standards. 
C)  there is a risk that they weren't valued at the same amount as they would have been if the transactions had been with an independent third party. 
D)  all of the above

Question 18

Two major factors that affect acceptable audit risk are inherent risk and control risk.

Accepted Answer

A) True 
 B)False

Question 19

Which is NOT a major type of supporting schedule working papers?

Accepted Answer

A)  An audit program 
B)  A test of reasonableness schedule 
C)  A reconciliation 
D)  Outside documentation 
A)  An audit program 
B)  A test of reasonableness schedule 
C)  A reconciliation 
D)  Outside documentation

Question 20

A tour of the client's facilities is helpful in obtaining a better understanding of the client's business operations because it may indicate

Accepted Answer

A)  reasons not to accept the engagement. 
B)  areas of increased audit risk. 
C)  areas of increased client business risk. 
D)  areas of increased inherent risk. 
A)  reasons not to accept the engagement. 
B)  areas of increased audit risk. 
C)  areas of increased client business risk. 
D)  areas of increased inherent risk.

One means of informing the client that the auditor is NOT responsible for the discovery of all acts of fraud is the:

Which one of the following is NOT a major reason why the auditor should properly plan engagements?

Public accounting firms must accept every audit engagement.

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:

How does the auditor usually obtain knowledge of the auditee's business?

The purpose of requiring communication between the predecessor and successor auditor is to:

Working papers can be viewed by different audit personnel simultaneously by using:

What is the purpose of an engagement letter?

An auditor who accepts an audit engagement must gain an understanding of the client's industry and business.This includes knowledge of the:

Permanent files contain all the data:

A thorough understanding of the client entity, its business and its environment, and knowledge of the company's business and industry are essential for doing an adequate audit.ASA 315 provides an overview of five components to this understanding.Identify and discuss each of these five components.

What should an engagement letter include, according to ASA 210?

The development of the audit program is the final stage in:

Why is it essential to plan an audit engagement with the goal of accumulating sufficient evidence?

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

Discuss each of the five steps involved in accepting an audit engagement and initial planning.

Transactions with related parties are important to auditors because:

Two major factors that affect acceptable audit risk are inherent risk and control risk.

Which is NOT a major type of supporting schedule working papers?

A tour of the client's facilities is helpful in obtaining a better understanding of the client's business operations because it may indicate

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

One means of informing the client that the auditor is NOT responsible for the discovery of all acts of fraud is the:

Which one of the following is NOT a major reason why the auditor should properly plan engagements?

Public accounting firms must accept every audit engagement.

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:

How does the auditor usually obtain knowledge of the auditee's business?

The purpose of requiring communication between the predecessor and successor auditor is to:

Working papers can be viewed by different audit personnel simultaneously by using:

What is the purpose of an engagement letter?

An auditor who accepts an audit engagement must gain an understanding of the client's industry and business.This includes knowledge of the:

Permanent files contain all the data:

A thorough understanding of the client entity, its business and its environment, and knowledge of the company's business and industry are essential for doing an adequate audit.ASA 315 provides an overview of five components to this understanding.Identify and discuss each of these five components.

What should an engagement letter include, according to ASA 210?

The development of the audit program is the final stage in:

Why is it essential to plan an audit engagement with the goal of accumulating sufficient evidence?

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

Discuss each of the five steps involved in accepting an audit engagement and initial planning.

Transactions with related parties are important to auditors because:

Two major factors that affect acceptable audit risk are inherent risk and control risk.

Which is NOT a major type of supporting schedule working papers?

A tour of the client's facilities is helpful in obtaining a better understanding of the client's business operations because it may indicate

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