Audit exercises

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

• Concluding that the entity's management probably lacks integrity

• Inability to perform preliminary analytical procedures before assessing control risks

• Inadequate understanding of the entity's internal control

• The close proximity to the end of the entity's reporting period.

Which of the following conditions most likely would pose the greatest risk in accepting a new audit engagement?

• There will be a client - imposed scope limitation

• The client's financial reporting system has been in place for 10 years

• The firm have to hire an expert in one audit area

• Staff will need to be reschedules to cover this new client

A predecessor 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 predecessor should:

• Suggest that the successor auditor should obtain the client's consent to discuss the reasons.

• Indicate that there was a misunderstanding

• State that the audit revealed material misstatement that the client would not revise

• Suggest that the successor audit ask the client

Which of the following is not correct regarding the communications between successor / incoming and predecessor/ previous auditors?

• The burden of initiating the communication rests with predecessor auditor

• The burden of initiating the communication rests with the successor auditor

• The predecessor auditor may choose to provide a limited response to a successor auditor

• The predecessor auditor must receive his/ her former client's permission prior to disclosing client information to the auditor.

Which of the following engagements does not require compliance with independence requirements?

• Compilation

• Review

• Examination of prospective financial information

• Audit

The primary responsibility for the adequacy of disclosure in the financial statements rests with:

• partner assigned to the audit engagement

• management of the company

• SEC

• Auditor in charge of the field work

All the information used by the auditor is arriving at the conclusions on which the audit opinion is based is called

• Audit information

• Audit evidence

• Accounting records

• Corroborating information

The following are assertions about account balances at the period end,except

• Existence

• Rights and obligations

• valuation and allocation

• cut off