Question 1

Discuss the four primary purposes of analytical procedures performed during the planning phase of an audit.

Accepted Answer

The four primary purposes of preliminary

Question 2

Which of the following best describes the corporate minutes of an entity?

Accepted Answer

A)  Official record of the meetings of the board of directors and the stockholders 
B)  Unofficial record of the meeting of the board of directors 
C)  Official record of management meeting with investors and creditors of the company 
D)  Unofficial record of the board of directors meetings 
A)  Official record of the meetings of the board of directors and the stockholders 
B)  Unofficial record of the meeting of the board of directors 
C)  Official record of management meeting with investors and creditors of the company 
D)  Unofficial record of the board of directors meetings

Question 3

One of the purposes of an engagement letter is to avoid misunderstandings with the client.This is important for:

Accepted Answer

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

Question 4

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 5

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.

Question 6

Which is usually included in an engagement letter?

Accepted Answer

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

Question 7

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 8

Analytical procedures:

Accepted Answer

A)  are not a type of audit evidence. 
B)  are not required during the completion phase of the audit. 
C)  performed during the planning phase of the audit are used as a substantive test in support of account balances. 
D)  performed in the completion phase serve as a final review for material misstatements or financial problems. 
A)  are not a type of audit evidence. 
B)  are not required during the completion phase of the audit. 
C)  performed during the planning phase of the audit are used as a substantive test in support of account balances. 
D)  performed in the completion phase serve as a final review for material misstatements or financial problems.

Question 9

Sarbanes-Oxley encourages management to certify that it has informed the auditor and audit committee of any significant deficiencies in internal control.

Accepted Answer

A) True 
 B)False

Question 10

An official record of meetings of the board of directors and stockholders is included in the corporate:

Accepted Answer

A)  bylaws. 
B)  charter. 
C)  minutes. 
D)  license. 
A)  bylaws. 
B)  charter. 
C)  minutes. 
D)  license.

Question 11

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

Accepted Answer

A)  allow the predecessor to disclose information which would otherwise be confidential. 
B)  help the successor auditor to evaluate whether to accept the engagement. 
C)  help the client by facilitating the change of auditors. 
D)  ensure the predecessor collects all unpaid fees prior to a change in auditor. 
A)  allow the predecessor to disclose information which would otherwise be confidential. 
B)  help the successor auditor to evaluate whether to accept the engagement. 
C)  help the client by facilitating the change of auditors. 
D)  ensure the predecessor collects all unpaid fees prior to a change in auditor.

Question 12

A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the:

Accepted Answer

A)  inherent risk. 
B)  acceptable audit risk. 
C)  statistical risk. 
D)  financial risk. 
A)  inherent risk. 
B)  acceptable audit risk. 
C)  statistical risk. 
D)  financial risk.

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

There are three primary reasons for obtaining a thorough understanding of the client's industry and external environment.What are these reasons?

Accepted Answer

The three reasons are:
•Risks associated

Question 15

Which of the following statements is true regarding communications between predecessor and successor auditors?

Accepted Answer

A)  The burden of initiating the communication rests with the predecessor. 
B)  The predecessor's response can be limited to stating that no information will be provided. 
C)  The predecessor should communicate with the successor only if the client is public. 
D)  The predecessor auditor of a public company does not need permission from the client before communicating with the successor auditor. 
A)  The burden of initiating the communication rests with the predecessor. 
B)  The predecessor's response can be limited to stating that no information will be provided. 
C)  The predecessor should communicate with the successor only if the client is public. 
D)  The predecessor auditor of a public company does not need permission from the client before communicating with the successor auditor.

Question 16

Written communication that the auditor will provide reasonable assurance for the detection of fraud is found in:

Accepted Answer

A)  engagement letter. 
B)  representation letter. 
C)  responsibility letter. 
D)  client letter. 
A)  engagement letter. 
B)  representation letter. 
C)  responsibility letter. 
D)  client letter.

Question 17

Which is usually included in an engagement letter?

Accepted Answer

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

Question 18

Which of the following would not be classified as an analytical procedure?

Accepted Answer

A)  Benchmarking the company's profitability ratios against others in the industry 
B)  Variance analysis of actual versus budgeted amounts for production 
C)  Reperforming the client's depreciation expense using the client's accounting policies for capital expenditures made during the year 
D)  Reconciling fixed asset dispositions with the fixed asset ledger 
A)  Benchmarking the company's profitability ratios against others in the industry 
B)  Variance analysis of actual versus budgeted amounts for production 
C)  Reperforming the client's depreciation expense using the client's accounting policies for capital expenditures made during the year 
D)  Reconciling fixed asset dispositions with the fixed asset ledger

Question 19

Which of the following would most likely not be classified as a related-party transaction?

Accepted Answer

A)  An advance of one week's salary to an employee 
B)  Sales of merchandise between affiliated companies 
C)  Loans or credit sales to the principal owner of the client company 
D)  Exchanges of equipment between two companies owned by the same person 
A)  An advance of one week's salary to an employee 
B)  Sales of merchandise between affiliated companies 
C)  Loans or credit sales to the principal owner of the client company 
D)  Exchanges of equipment between two companies owned by the same person

Question 20

Discuss the required communications between predecessor and successor auditors.

Accepted Answer

Auditing standards require a successor a

Exam 8: Audit Planning

Discuss the four primary purposes of analytical procedures performed during the planning phase of an audit.

Which of the following best describes the corporate minutes of an entity?

One of the purposes of an engagement letter is to avoid misunderstandings with the client.This is important for:

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.

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

Which is usually included in an engagement letter?

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

Analytical procedures:

Sarbanes-Oxley encourages management to certify that it has informed the auditor and audit committee of any significant deficiencies in internal control.

An official record of meetings of the board of directors and stockholders is included in the corporate:

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

A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the:

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.

There are three primary reasons for obtaining a thorough understanding of the client's industry and external environment.What are these reasons?

Which of the following statements is true regarding communications between predecessor and successor auditors?

Written communication that the auditor will provide reasonable assurance for the detection of fraud is found in:

Which is usually included in an engagement letter?

Which of the following would not be classified as an analytical procedure?

Which of the following would most likely not be classified as a related-party transaction?

Discuss the required communications between predecessor and successor auditors.

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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 Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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