REVIEW QUESTIONS-THEORITICAL

Which of the following is an incorrect phrase regarding auditing?

• Auditing is a systematic process

• Auditing subjectively obtains and evaluates evidence

• Auditing evaluates evidence regarding assertions

• Auditing communicates results to interested users

Set the following phases in proper order

I. Pre-Engagement
II. Internal Controls

IIL Evidence-Gathering
IV. Completing the Audit

V. Planning
VI. Post-Audit Responsibilities
VII. Reporting

• I, II, III, IV, V, VI, VII

• I, IV, III, II, VII, V, VI

• I,V, II, III, IV, VII, VI

• I, IV, II, III, V, VI, VII

Which of the following procedures is not required to be performed by the auditor?

• Risk assessment procedures

• Substantive procedures

• Tests of control

• Analytical procedures

Which of the following procedures should be performed by the auditor prior to starting an initial audit?

I. Perform procedures regarding the acceptance of the client relationship
and the specific audit engagement.

II. Communicate with the previous auditor, where there has been a change of auditors, in compliance with relevant ethical requirements.

• I only

• II only

• Both I and II

• Neither I nor II

Confirmation of receivable or bank balance is performed during what phase?

• Studying and evaluating internal controls phase

• Substantive testing phase

• Pre-engagement phase

• Completing the audit phase

Which of the following would not be a consideration of a CPA firm in deciding whether to accept a new client?

• The client's financial ability.

• The client's relations with its previous CPA firm.

• The client's standing in the business community.

• The client's probability of achieving an unqualified opinion.
  

Management's integrity affects all of the following risks except:

• Business risk

• Audit risk

• Financial reporting risk

• 
  All of these risks are affected

Prior to the acceptance of an audit engagement with a client who has terminated the services of the predecessor auditor, the CPA should

• Contact the predecessor auditor without advising the prospective client and request a complete report of the circumstances leading to the termination of the engagement with an understanding that all information disclosed will be kept confidential

• Accept the engagement without contacting the predecessor auditor since the CPA can include audit procedures to verify the reason given by the client for the termination.

• Not communicate with the predecessor auditor because this would in effect be asking the auditor to violate the confidential relationship between an auditor and the client.
  

• Advise the client of the intention to contact the predecessor auditor and request a permission for the contact.

When an independent auditor is approached ached to perform an audit for the first time, he or she should make inquiries of the predecessor auditor. Inquiries are necessary because the predecessor may be able to provide the successor with information that will assist the successor in determining whether

• The company rotates auditors

• The engagement should be accepted

• The predecessor's work should be used
  

• In the predecessor's opinion, control risk is less than high

Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding:

• The predecessor's evaluation of matters of continuing accounting significance

• Disagreement which the predecessor had with the client concerning auditing procedures and accounting principles

• The degree of cooperation the predecessor received concerning the inquiry of the client's legal counsel

• The predecessor's assessment of inherent risk and judgments about materiality