Exam 8: Audit Planning and Materiality

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Assume an audit client identified in the planning stage of the audit the risk of material misstatement for revenue recognition and accounts receivable due to complex valuation related issues; this situation warrants the auditor to accumulate additional audit evidence and to assign more experienced staff to perform the testing in this area.

(True/False)

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Question 81

A predecessor auditor who has been contacted by a successor auditor for information about the client does not have to obtain permission from the former client before providing any confidential information to the successor auditor because the confidentiality requirement does not extend to former clients.

(True/False)

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Question 82

If a prospective client has been audited in the past, the successor auditor will typically rely solely on the representations about the client by the predecessor auditor.

(True/False)

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Question 83

Which is usually included in an engagement letter?

(Multiple Choice)

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Question 84

Amounts involving fraud are not usually considered qualitative factors affecting the preliminary materiality judgment.

(True/False)

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Question 85

Because of the lack of independence between related parties, the Sarbanes-Oxley Act prohibits all related party transactions.

(True/False)

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Question 86

________ materiality is materiality for segments of the audit.

(Multiple Choice)

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Question 87

Staff assigned to an audit engagement must be knowledgeable about the client's industry.

(True/False)

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Question 88

When using financial ratios, the most important comparisons are to those of previous years for the company and to industry averages or similar companies for the same year.

(True/False)

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Question 89

Which of the following are major difficulties auditors face when allocating materiality to balance sheet accounts?

(Multiple Choice)

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Question 90

Auditors are ________ to document the known and likely misstatements in the financial statements under audit.

(Multiple Choice)

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Question 91

Which of the following is an accurate statement regarding a public company's code of ethics?

(Multiple Choice)

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Question 92

Auditors cannot learn about potential related parties for an audit client by reviewing Securities and Exchange Commission (SEC) filings.

(True/False)

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Question 93

Which of the following statements is not correct?

(Multiple Choice)

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Question 94

The purpose of the requirement in having communication between the predecessor and successor auditors is to

(Multiple Choice)

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Question 95

Because of audit risk, some CPA firms now refuse any new clients in certain high-risk industries.

(True/False)

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Question 96

Qualitative factors can affect an auditor's assessment of materiality. Which of the following statements is true? I. Misstatements that are otherwise immaterial may be material if they affect earnings trends. II. Misstatements that are otherwise minor may be material if there are possible consequences arising from contractual obligations.

(Multiple Choice)

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Question 97

Net assets are the most often used base for deciding materiality.

(True/False)

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Question 98

To calculate the estimate of the likely misstatement of a total population, the auditor makes a direct projection of the known misstatement from the sample to the population, and subtracts an estimated allowance for sampling risk.

(True/False)

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Question 99

The first phase in planning an audit and designing an audit approach is to

(Multiple Choice)

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(80)

Question 100

Showing 81 - 100 of 172

Exam 8: Audit Planning and Materiality

If a prospective client has been audited in the past, the successor auditor will typically rely solely on the representations about the client by the predecessor auditor.

Which is usually included in an engagement letter?

Amounts involving fraud are not usually considered qualitative factors affecting the preliminary materiality judgment.

Because of the lack of independence between related parties, the Sarbanes-Oxley Act prohibits all related party transactions.

________ materiality is materiality for segments of the audit.

Staff assigned to an audit engagement must be knowledgeable about the client's industry.

When using financial ratios, the most important comparisons are to those of previous years for the company and to industry averages or similar companies for the same year.

Which of the following are major difficulties auditors face when allocating materiality to balance sheet accounts?

Auditors are ________ to document the known and likely misstatements in the financial statements under audit.

Which of the following is an accurate statement regarding a public company's code of ethics?

Auditors cannot learn about potential related parties for an audit client by reviewing Securities and Exchange Commission (SEC) filings.

Which of the following statements is not correct?

The purpose of the requirement in having communication between the predecessor and successor auditors is to

Because of audit risk, some CPA firms now refuse any new clients in certain high-risk industries.

Net assets are the most often used base for deciding materiality.

To calculate the estimate of the likely misstatement of a total population, the auditor makes a direct projection of the known misstatement from the sample to the population, and subtracts an estimated allowance for sampling risk.

The first phase in planning an audit and designing an audit approach is to

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Assessing the Risk of Material Misstatement

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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