Audit Representation Questions

Which of the following is not correct relating to representation letters?

• They must be obtained for audits.

• They are signed by members of top management.

• Extended to include all events occurring until the date of the last subsequent event referred to.

• they often serve as a substitute for the application of other procedures.

In evaluating accounting estimates the auditor would not concentrate on key factors and assumptions that are

• within budgetary expectations.

• subjective and susceptible to misstatement and bias.

• inconsistent with current economic trends.

• sensitive to variations.

Which of the following is not a potential indicator of going concern problems for a client?

• negative trends.

• loss of key personnel.

• plan to sell nonessential assets.

• default on a loan.

The management representation letter should be signed by the

• members of the audit committee and board of directors.

• chief executive officer and the chief financial officer.

• chief financial officer and the treasurer.

• controller and the auditor.

Which one of the following is not a purpose of the management representation letter?

• It clearly documents the audit procedures that were performed by the auditors.

• It further acknowledges management's responsibility for the financial statements.

• It reduces the possibility of misunderstanding concerning the matters that are the subject of the representations.

During the course of an audit, immaterial misstatements may be detected. The auditor should

• permanently pass on these immaterial misstatements as they do not individually impact the financial statements.

• request that management footnote the immaterial misstatements in the financial statements for fair presentation.

• accumulate all of the known and projected misstatements to determine if the impact is material in the aggregate.

• roll them forward for three years when they will become material enough to adjust.

Analytical review procedures are required by GAAS for

• the planning stages of the audit.

• both the planning and review phases of the audit.

• the review phase of the audit.

• performance of tests of controls.

Which of the following is not a valid basis for omitting an audit test in forming an opinion on the clients financial statements?

• The degree of reliance on the relevant internal controls.

• The relative risk involved.

• The difficulty and expense involved in testing a particular item

• The relationship between the cost of obtaining evidence and its usefulness

When designing the audit program and the particular audit tests, the auditor should keep in mind that:

• the audit program is broken down into two parts-the risk assessment procedures and the tests of details of balances.

• the tests of controls will not vary depending on assessed control risk.

• analytical procedures performed during substantive testing are generally more focused and more extensive than those done as part of planning.

• auditing standards require that the tests contained in the audit program must be approved by the PRC-BOA.

Transaction related audit objectives would most likely be performed in which phase of the audit process?

• Plan and design audit approach.

• Perform audit tests for controls and transactions.

• Perform analytical procedures and tests of balances

• Complete the audit and issue the audit report