Question 1

Only those adjusting and reclassification entries that significantly affect the fair presentation of financial statements (i.e. material entries) should be documented or summarised in the auditor's working papers.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

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

Question 3

Discuss the purposes of audit working papers.

Accepted Answer

The answer of Discuss the purposes of audit working papers....

Question 4

There are three main reasons why the auditor should properly plan engagements. Which are the three? 1. to enable the auditor to obtain sufficient appropriate evidence
2) to help keep audit costs reasonable
3) to avoid misunderstandings with the client
4) to earn audit fees for the firm.

Accepted Answer

A)  1, 3, 4 
B)  2, 3, 4 
C)  1, 2, 3 
D)  1, 2, 4

Question 5

Adjusting and reclassification entries are normally included in the current files of the auditor's working papers.

Accepted Answer

A) True 
 B)False

Question 6

A predecessor (old) auditor who has been contacted by a successor (new) auditor for information about the client must obtain permission from the client before providing any confidential information to the successor auditor.

Accepted Answer

A) True 
 B)False

Question 7

One hundred percent acceptable audit risk means that the auditor wants complete certainty that the financial statements are not materially misstated.

Accepted Answer

A) True 
 B)False

Question 8

The auditor plans the engagement to obtain sufficient appropriate evidence. This is essential to:

Accepted Answer

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

Question 9

Identify the three primary reasons an auditor should obtain a good understanding of the client's industry and discuss specific ways an auditor can obtain this understanding.

Accepted Answer

The answer of Identify the three primary reasons an auditor...

Question 10

A clear understanding of the terms of the engagement should exist between the client and the public accounting firm as documented in the engagement letter required by:

Accepted Answer

A)  ASA 620. 
B)  ASA 220. 
C)  ASA 210. 
D)  APES 110.

Question 11

The engagement letter:

Accepted Answer

A)  can be used to alter the auditor's responsibilities under Australian auditing standards. 
B)  is useful only if it is an audit engagement, but has no effect for review or compilation services. 
C)  can affect legal responsibilities to the client. 
D)  affects the audit firm's responsibility to external users of audited financial statements.

Question 12

ASA 210 requires auditors to:

Accepted Answer

A)  communicate with the previous auditor. 
B)  obtain a knowledge of the business. 
C)  use analytical procedures in the planning stage. 
D)  document their understanding of the engagement in working papers.

Question 13

Policy and procedures governing the acceptance and continuance of client relationships are contained primarily in:

Accepted Answer

A)  ASA 210. 
B)  ASA 220. 
C)  ASA 315. 
D)  ASA 620.

Question 14

The auditor plans the engagement to keep costs reasonable. This is essential to:

Accepted Answer

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

Question 15

For prospective clients that have previously been audited by another firm, the new auditor is required to communicate with the previous auditor.

Accepted Answer

A) True 
 B)False

Question 16

Assessing acceptable audit risk and inherent risk is an important part of audit planning, because:

Accepted Answer

A)  it helps to determine the timing of audit procedures. 
B)  it helps to determine the fees to charge for the audit. 
C)  it helps to determine staff to be assigned to the engagement. 
D)  all of the above

Question 17

Knowledge of the auditee's business can be obtained in a variety of ways. Which one of the following is NOT usually one of those ways?

Accepted Answer

A)  From Internet resources 
B)  From textbooks 
C)  From technical magazines 
D)  All of the above are usual sources.

Question 18

The last step in accepting an audit engagement and initial planning is to:

Accepted Answer

A)  perform preliminary analytical procedures. 
B)  obtain background information. 
C)  develop the overall audit plan and programs 
D)  identify why the client wants an audit.

Question 19

What procedures should the auditor use to identify a related- party transaction?

Accepted Answer

The answer of What procedures should the auditor use to...

Question 20

The auditor plans the engagement to avoid misunderstandings with the client. This is essential to:

Accepted Answer

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

Exam 6: Audit Planning and Documentation

Only those adjusting and reclassification entries that significantly affect the fair presentation of financial statements (i.e. material entries) should be documented or summarised in the auditor's working papers.

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

Discuss the purposes of audit working papers.

There are three main reasons why the auditor should properly plan engagements. Which are the three? 1. to enable the auditor to obtain sufficient appropriate evidence 2) to help keep audit costs reasonable 3) to avoid misunderstandings with the client 4) to earn audit fees for the firm.

Adjusting and reclassification entries are normally included in the current files of the auditor's working papers.

A predecessor (old) auditor who has been contacted by a successor (new) auditor for information about the client must obtain permission from the client before providing any confidential information to the successor auditor.

One hundred percent acceptable audit risk means that the auditor wants complete certainty that the financial statements are not materially misstated.

The auditor plans the engagement to obtain sufficient appropriate evidence. This is essential to:

Identify the three primary reasons an auditor should obtain a good understanding of the client's industry and discuss specific ways an auditor can obtain this understanding.

A clear understanding of the terms of the engagement should exist between the client and the public accounting firm as documented in the engagement letter required by:

The engagement letter:

ASA 210 requires auditors to:

Policy and procedures governing the acceptance and continuance of client relationships are contained primarily in:

The auditor plans the engagement to keep costs reasonable. This is essential to:

For prospective clients that have previously been audited by another firm, the new auditor is required to communicate with the previous auditor.

Assessing acceptable audit risk and inherent risk is an important part of audit planning, because:

Knowledge of the auditee's business can be obtained in a variety of ways. Which one of the following is NOT usually one of those ways?

The last step in accepting an audit engagement and initial planning is to:

What procedures should the auditor use to identify a related- party transaction?

The auditor plans the engagement to avoid misunderstandings with the client. This is essential to: