Exam 6: Client Acceptance and Planning the Audit

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?

Free

(Multiple Choice)

4.9/5

(37)

Question 1

Correct Answer:

Verified

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?

Free

(Multiple Choice)

4.7/5

(38)

Question 2

Correct Answer:

Verified

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

Free

(Essay)

4.8/5

(32)

Question 3

Correct Answer:

Verified

The client risk profile allows the auditor to assess the client's business risk and provides the information needed to effectively plan the audit.
The steps involved in developing the client risk profile are:
•obtain knowledge of industry and external business environment
•obtain knowledge of the client's business operations and processes
•assess the control environment, management's philosophies, and corporate governance processes
•understand client objectives and strategies
•understand the client's performance measurement system
•assess client business risk
•address any carry forward issues from the previous year

Fraud risk factors are examples of factors that increase the risk of fraud. Which of the following is an example of a management "incentives or pressures" risk factor?

(Multiple Choice)

4.8/5

(41)

Question 4

An important reason for adequately planning the audit engagement is to

(Multiple Choice)

4.8/5

(37)

Question 5

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?

(Multiple Choice)

4.9/5

(31)

Question 6

Risks associated with specific industries may affect the auditor's assessment of client business risk and acceptable audit risk, and even influence client acceptance decisions. Which of the following businesses would be the most risky for the auditor to accept as a new client?

(Multiple Choice)

4.9/5

(43)

Question 7

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

(Multiple Choice)

4.9/5

(38)

Question 8

Fraud risk factors are examples of factors that increase the risk of fraud. Which of the following is an example of a management "opportunities" risk factor?

(Multiple Choice)

4.7/5

(48)

Question 9

During discussion and inquiry with management, the auditor determined that the company has started a new line of business that requires a substantial investment in manufacturing equipment. The company has also implemented wireless scanning for its warehouse and inventory. Which of the following techniques will the auditor likely use to corroborate these statements?

(Multiple Choice)

4.9/5

(34)

Question 10

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

(Multiple Choice)

4.9/5

(38)

Question 11

How is lack of understanding of a client's knowledge and industry linked to the auditor's business risk?

(Multiple Choice)

4.9/5

(39)

Question 12

Organizations with a good control environment are able to document their positive "tone at the top" with a clear code of ethics. How would the auditor include the presence of such a code of ethics in the risk assessment process?

(Multiple Choice)

4.9/5

(34)

Question 13

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.

(Essay)

4.8/5

(32)

Question 14

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

(Multiple Choice)

4.7/5

(33)

Question 15

If management and salespeople are compensated on the basis of achieving high sales targets, there is increased incentive to record sales before they have been earned. In such a situation, the auditor will increase the extent of testing for which of the following transaction-related audit objectives for sales?

(Multiple Choice)

4.9/5

(38)

Question 16

The auditor will obtain a copy of the client's articles of incorporation (if applicable) and retain a copy in the permanent file. Important information in the articles of incorporation includes

(Multiple Choice)

4.9/5

(35)

Question 17

A thorough understanding of the client's business and industry and knowledge about the company's operations are essential for doing an adequate audit. Why do auditors need greater knowledge about major customers and suppliers and related risks?

(Multiple Choice)

4.8/5

(31)

Question 18

A) One step in the planning phase of an audit is to obtain information about the client's legal obligations. Identify the types of legal documents and records that auditors examine to obtain this information. B) Discuss the audit-relevant information contained in each of these three types of documents that an auditor should be aware of early in the audit.

(Essay)

4.8/5

(46)

Question 19

An effective audit is one that

(Multiple Choice)

4.8/5

(42)

Question 20

Showing 1 - 20 of 60

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?

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?

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

Fraud risk factors are examples of factors that increase the risk of fraud. Which of the following is an example of a management "incentives or pressures" risk factor?

An important reason for adequately planning the audit engagement is to

Risks associated with specific industries may affect the auditor's assessment of client business risk and acceptable audit risk, and even influence client acceptance decisions. Which of the following businesses would be the most risky for the auditor to accept as a new client?

Fraud risk factors are examples of factors that increase the risk of fraud. Which of the following is an example of a management "opportunities" risk factor?

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

How is lack of understanding of a client's knowledge and industry linked to the auditor's business risk?

Organizations with a good control environment are able to document their positive "tone at the top" with a clear code of ethics. How would the auditor include the presence of such a code of ethics in the risk assessment process?

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.

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

The auditor will obtain a copy of the client's articles of incorporation (if applicable) and retain a copy in the permanent file. Important information in the articles of incorporation includes

A thorough understanding of the client's business and industry and knowledge about the company's operations are essential for doing an adequate audit. Why do auditors need greater knowledge about major customers and suppliers and related risks?

An effective audit is one that

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters