Exam 3: Audit Planning, Types of Audit Tests, and Materiality

Cart and Blanche, a regional accounting firm is determining whether it wants to accept a new client, Ivy Photos. Ivy Photos is currently a privately held photography studio operating 24 studios in several states, but the company's management is planning an Initial Public Offering in the near future. This is the company's first audit. What steps should Cart and Blanche take in evaluating this new client?

When a CPA is approached to perform an audit for the first time, the CPA should make inquiries of the predecessor auditor. This is a necessary procedure because the predecessor may be able to provide the successor with information that will assist the successor in determining

The audit client's board of directors and audit committee refused to take any action with respect to an immaterial illegal act which was brought to their attention by the auditor. Because of their failure to act, the auditor withdrew from the engagement. The auditor's decision to withdraw was primarily due to doubts concerning

Name the three types of analytical procedures and provide a definition and example for each.

The first phase of audit planning is risk assessment.

Which of the following is not an audit procedure that is commonly used in performing tests of controls?

Under the Sarbanes-Oxley Act, the audit committee of a public company has the following requirement(s):

All of the following refer to the competence of the internal audit function except:

Often in an audit, total combined tolerable misstatement is greater than overall materiality. Why is this the case?

Engagement letters include all of the following except:

In assessing whether to accept a client for an audit engagement, a CPA should consider

Which of the following would an auditor most likely use in determining the auditor's overall materiality?

An independent auditor might consider the procedures performed by the internal audit function because

Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers. The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the

An entity's financial statements were misstated over a period of years due to large amounts of revenue being recorded in journal entries that involved debits and credits to an illogical combination of accounts. The auditor could most likely have been alerted to this fraud by

The existence of a related party transaction may be indicated when another entity

Which of the following is not a concern as to whether a misstatement is qualitatively material?

An independent auditor finds that Holdaway Corporation occupies office space, at no charge, in an office building owned by a shareholder. This finding likely indicates the existence of

Which of the following situations would most likely require special audit planning?

Which element(s) is/are pervasive to the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting?