Answered: 1)Which of the following factors most…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

1)Which of the following factors most likely would cause an auditor to decline a new audit engagement?

A.Concluding that the entity’s management probably lacks integrity.

B.An inability to perform preliminary analytical procedures before assessing control risk.

C.An inadequate understanding of the entity’s internal control.

D.The close proximity to the end of the entity’s reporting period.

2)Before accepting an engagement to audit a new client, an auditor is required to

A.Obtain a copy of the client’s financial statements.

B.Prepare amemorandum setting forth the staffing requirements and documenting the preliminary audit plan.

C.Make inquiries of the predecessor auditor after obtaining consent of the prospective client.

D.Discuss the management representation letter with the client’s audit committee.

3)Which of the following conditions most likely would pose the greater risk in accepting a new audit engagement?A.There will be a client-imposed scope limitation.

B.The client’s financial reporting system has been in place for 10 years.

C.The firm will have to hire an expert in one audit area.

D.Staff will need to be rescheduled to cover this new client.

4)Which of the following circumstances would permit an independent auditor to accept an engagement after the end of the reporting period?

A.Expectation of the operating effectiveness of controls.

B.Issuance of a disclaimer of opinion as a result of inability to conduct certain tests required by PSAs due to the timing of the acceptance of the engagement.

C.Remedy the limitations resulting from accepting the engagement after the end of the reporting period, such as those relating to the existence of physical inventory.

D.Receipt of an assertion from the predecessor auditor that the entity will be able to continue as a going concern.

5)In an audit based on Philippine Standards on Auditing, a successor auditor would normally become satisfied with opening balances by

A.Performing analytical procedures

B.Reviewing the predecessor’s working papers

C.Auditing the previous year’s working papers

D.Interviewing client personnel

6)A predecessor auditor withdrew from the engagement after discovering that a client’s financial statements are materially misstated that it would not revise. If asked by the successor auditor about the termination of the engagement, the predecessorshould

A.Suggest that the successor auditor should obtain the client’s consent to discuss the reasons.

B.Indicate that there was a misunderstanding.

C.State that the audit revealed material misstatement that the client would not revise.

D.Suggest that the successor auditor ask the client.

7)An audit conducted on the premise that management, and where appropriate, those charged with governance, have acknowledged and understood that they have responsibility that are fundamental to the conduct of an audit in accordance with PSAs. Which of the following is not one of those responsibilities?

A.The preparation of financial statements in accordance with relevant pronouncements such as PSAs.

B.The establishment and maintenance of an adequate internal control system thatis necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

C.To provide the auditor with access to all information that is relevant to the preparation of the financial statements such as records, documentation, and other matters.

D.To provide the auditor with unrestricted access to persons within the entity from which the auditor determines it necessary to obtain audit evidence.

8)The auditor shall agree the terms of the audit engagement with management or those charged with governance, as appropriate. The agreed terms shall be recorded in a/an

A.Engagement letter

B.Letter of audit inquiry

C.Management representation letter

D.Confirmation letter

9)The following matters are generally included in an auditor’s engagement letter, except

A.The factors to be considered in determining the overall materiality.

B.The fact that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that even some material misstatements may remain undiscovered.

C.The scope and purpose of the audit.

D.Management’s responsibility for the preparation of financial statements.

10)Which of the following statements would leastlikely appear in an auditor’s engagement letter?

A.Our audit will be made with the objective of our expressing an opinion on the financial statements.

B.We remind you that the responsibility for the preparation of financial statements including adequate disclosure is that of the management of the entity.

C.After performing our preliminary procedures, we will discuss with you the other procedures we consider necessary to complete engagement.

D.Our fees, which will be billed as work progresses, are based on the timerequired by the individuals assigned to the engagement plus out of pocket expenses.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Audit procedures for items of Financial Statement

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.