Question 1

List and briefly explain four factors that increase the auditor's risk from accepting an audit engagement.

Accepted Answer

Factors that make an audit engagement ri

Question 2

An auditor should assess a client's business risks ________.

Accepted Answer

A) during the planning stage of the engagement 
B) at the end of the engagement after all evidence has been assembled 
C) as part of the year-end evidence gathering 
D) only if the client requests the auditor to do so in the engagement letter 
A) during the planning stage of the engagement 
B) at the end of the engagement after all evidence has been assembled 
C) as part of the year-end evidence gathering 
D) only if the client requests the auditor to do so in the engagement letter

Question 3

The CASs provide the overall objective of a financial statement auditor and set out the requirements that must be met to meet that objective.

Accepted Answer

A) True 
 B)False

Question 4

An "accountable party" can be all of the following at the same time except ________.

Accepted Answer

A) an auditor 
B) an entity 
C) a client 
D) an auditee 
A) an auditor 
B) an entity 
C) a client 
D) an auditee

Question 5

If an auditor were to use 5% of income before taxes as a basis for materiality,it would be an example of judgment based on ________.

Accepted Answer

A) absolute size 
B) relative size 
C) nature of the item 
D) cumulative effects 
A) absolute size 
B) relative size 
C) nature of the item 
D) cumulative effects

Question 6

Analytical procedures are required at the beginning,during the testing phase and the end of an audit.

Accepted Answer

A) True 
 B)False

Question 7

Overall materiality is used to identify and assess risks,to design audit procedures to be done in response to the assessed risks,and to evaluate the results of sampling procedure

Accepted Answer

A) True 
 B)False

Question 8

When there is a change in auditors,the Rules of Professional Conduct do not permit the predecessor auditor to give information to the successor auditor without explicit approval by the client.

Accepted Answer

A) True 
 B)False

Question 9

CAS and CSQC standards require all of the following factors be addressed as part of the audit engagement acceptance and continuance decision,except for:

Accepted Answer

A) An assessment of the auditor's level of independence. 
B) An assessment of the client's integrity 
C) An assessment of the auditor's competence and capabilities to perform the audit. 
D) An assessment of what additional services can be provided to the current or potential client. 
A) An assessment of the auditor's level of independence. 
B) An assessment of the client's integrity 
C) An assessment of the auditor's competence and capabilities to perform the audit. 
D) An assessment of what additional services can be provided to the current or potential client.

Question 10

The overall audit strategy typically includes ________.

Accepted Answer

A) the detailed audit plan 
B) specific procedures for determining inherent and control risk 
C) decisions about unusual client accounting principles 
D) audit evidence gathering procedures 
A) the detailed audit plan 
B) specific procedures for determining inherent and control risk 
C) decisions about unusual client accounting principles 
D) audit evidence gathering procedures

Question 11

In researching a potential new audit client,you determine that the business operates in a highly competitive industry,with low barriers to entry and very short product life cycles.What audit planning factors will this information help you to assess?

Accepted Answer

A) Audit risk 
B) Auditor's risk from taking the engagement. 
C) Client business risk 
D) An acceptable level of Information risk. 
A) Audit risk 
B) Auditor's risk from taking the engagement. 
C) Client business risk 
D) An acceptable level of Information risk.

Question 12

An intentional misstatement for an amount lower than both overall and performance materiality is still likely to be considered material.

Accepted Answer

A) True 
 B)False

Question 13

The probability that something will adversely affect the entity's ability to achieve its objectives and execute its strategies is called ________.

Accepted Answer

A) Audit Risk 
B) Business Risk 
C) The Risk of Material Misstatement 
D) Information Risk 
A) Audit Risk 
B) Business Risk 
C) The Risk of Material Misstatement 
D) Information Risk

Question 14

Materiality levels determined at the planning stage are used to decide how much work to do on each financial statement account.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is likely to be found in the minutes of the board of directors' meetings?

Accepted Answer

A) Approval of customer credit limits. 
B) Approval of a new computer for the controller. 
C) Authorization of employee salaries. 
D) Authorization of executive salaries. 
A) Approval of customer credit limits. 
B) Approval of a new computer for the controller. 
C) Authorization of employee salaries. 
D) Authorization of executive salaries.

Question 16

Materiality is primarily a quantitative calculation.

Accepted Answer

A) True 
 B)False

Question 17

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

Accepted Answer

A) True 
 B)False

Question 18

What are the benefits of scheduling interim audit work as part of your audit time budget?

Accepted Answer

Performing interim audit work provides t

Question 19

What is meant by materiality in the context of the audit plan?

Accepted Answer

In general,materiality refers to the lev

Question 20

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

Accepted Answer

Horizontal analysis refers to changes in

Exam 5: Preliminary Audit Planning: Understanding the Auditees Business

List and briefly explain four factors that increase the auditor's risk from accepting an audit engagement.

An auditor should assess a client's business risks ________.

The CASs provide the overall objective of a financial statement auditor and set out the requirements that must be met to meet that objective.

An "accountable party" can be all of the following at the same time except ________.

If an auditor were to use 5% of income before taxes as a basis for materiality,it would be an example of judgment based on ________.

Analytical procedures are required at the beginning,during the testing phase and the end of an audit.

Overall materiality is used to identify and assess risks,to design audit procedures to be done in response to the assessed risks,and to evaluate the results of sampling procedure

When there is a change in auditors,the Rules of Professional Conduct do not permit the predecessor auditor to give information to the successor auditor without explicit approval by the client.

CAS and CSQC standards require all of the following factors be addressed as part of the audit engagement acceptance and continuance decision,except for:

The overall audit strategy typically includes ________.

In researching a potential new audit client,you determine that the business operates in a highly competitive industry,with low barriers to entry and very short product life cycles.What audit planning factors will this information help you to assess?

An intentional misstatement for an amount lower than both overall and performance materiality is still likely to be considered material.

The probability that something will adversely affect the entity's ability to achieve its objectives and execute its strategies is called ________.

Materiality levels determined at the planning stage are used to decide how much work to do on each financial statement account.

Which of the following is likely to be found in the minutes of the board of directors' meetings?

Materiality is primarily a quantitative calculation.

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

What are the benefits of scheduling interim audit work as part of your audit time budget?

What is meant by materiality in the context of the audit plan?

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

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, receivables, and Receipts Process and Cash Account Balance

The Purchases, payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

Filters