Question 1

Define the term "related party" and discuss why an auditor should identify the client's related parties early in the audit.

Accepted Answer

A related party is an affiliated company

Question 2

Statements on Auditing Standards provide detailed, objective guidance on how auditors are to establish a preliminary materiality level, thus eliminating the need for subjective auditor judgment in this task.

Accepted Answer

A) True 
 B)False

Question 3

Auditors should obtain copies of the client's code of ethics and minutes of the meetings of the board of directors to aid in their understanding of the company's management and governance structure.

Accepted Answer

A) True 
 B)False

Question 4

Which is usually included in an engagement letter?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 5

If the preliminary judgment of materiality increases, the amount of audit evidence required will decrease.

Accepted Answer

A) True 
 B)False

Question 6

Auditing standards ________ that the basis used to determine the preliminary judgment about materiality be documented in the audit files.

Accepted Answer

A)  permit 
B)  do not allow 
C)  require 
D)  strongly encourage 
A)  permit 
B)  do not allow 
C)  require 
D)  strongly encourage

Question 7

Materiality is an absolute, rather than a relative, concept in auditing.

Accepted Answer

A) True 
 B)False

Question 8

A 100% audit risk is complete certainty.

Accepted Answer

A) True 
 B)False

Question 9

An engagement letter sent to a publicly held audit client usually would not include a(n)

Accepted Answer

A)  reference to the auditor's responsibility for the detection of errors or irregularities. 
B)  estimation of the time to be spent on the audit work by audit staff and management. 
C)  statement that management advisory services would be made available upon request. 
D)  reference to management's responsibility for the financial statements. 
A)  reference to the auditor's responsibility for the detection of errors or irregularities. 
B)  estimation of the time to be spent on the audit work by audit staff and management. 
C)  statement that management advisory services would be made available upon request. 
D)  reference to management's responsibility for the financial statements.

Question 10

When analyzing a client's performance measurement system,

Accepted Answer

A)  ratio analysis and benchmarking against key competitors are utilized. 
B)  only income statement numbers are used. 
C)  inherent risk of financial statement misstatements may be decreased if the performance measurement system encourages aggressive accounting. 
D)  the auditor is likely to decrease the extent of testing if the client has set unreasonable objectives. 
A)  ratio analysis and benchmarking against key competitors are utilized. 
B)  only income statement numbers are used. 
C)  inherent risk of financial statement misstatements may be decreased if the performance measurement system encourages aggressive accounting. 
D)  the auditor is likely to decrease the extent of testing if the client has set unreasonable objectives.

Question 11

Certain types of misstatements are likely to be more important than other types to users, even if the dollar amounts are the same. Which of the following demonstrates this?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 12

An auditor should examine minutes of the board of directors' meetings

Accepted Answer

A)  through the date of the financial statements. 
B)  through the date of the audit report. 
C)  only at the beginning of the audit. 
D)  on a test basis. 
A)  through the date of the financial statements. 
B)  through the date of the audit report. 
C)  only at the beginning of the audit. 
D)  on a test basis.

Define the term "related party" and discuss why an auditor should identify the client's related parties early in the audit.

Statements on Auditing Standards provide detailed, objective guidance on how auditors are to establish a preliminary materiality level, thus eliminating the need for subjective auditor judgment in this task.

Auditors should obtain copies of the client's code of ethics and minutes of the meetings of the board of directors to aid in their understanding of the company's management and governance structure.

Which is usually included in an engagement letter?

If the preliminary judgment of materiality increases, the amount of audit evidence required will decrease.

Auditing standards ________ that the basis used to determine the preliminary judgment about materiality be documented in the audit files.

Materiality is an absolute, rather than a relative, concept in auditing.

A 100% audit risk is complete certainty.

An engagement letter sent to a publicly held audit client usually would not include a(n)

When analyzing a client's performance measurement system,

Certain types of misstatements are likely to be more important than other types to users, even if the dollar amounts are the same. Which of the following demonstrates this?

An auditor should examine minutes of the board of directors' meetings

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

Filters

Exam 8: Audit Planning and Materiality

Define the term "related party" and discuss why an auditor should identify the client's related parties early in the audit.

Statements on Auditing Standards provide detailed, objective guidance on how auditors are to establish a preliminary materiality level, thus eliminating the need for subjective auditor judgment in this task.

Auditors should obtain copies of the client's code of ethics and minutes of the meetings of the board of directors to aid in their understanding of the company's management and governance structure.

Which is usually included in an engagement letter?

If the preliminary judgment of materiality increases, the amount of audit evidence required will decrease.

Auditing standards ________ that the basis used to determine the preliminary judgment about materiality be documented in the audit files.

Materiality is an absolute, rather than a relative, concept in auditing.

A 100% audit risk is complete certainty.

An engagement letter sent to a publicly held audit client usually would not include a(n)

When analyzing a client's performance measurement system,

Certain types of misstatements are likely to be more important than other types to users, even if the dollar amounts are the same. Which of the following demonstrates this?

An auditor should examine minutes of the board of directors' meetings

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

Filters