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WorksheetsQuiz Time
Total questions: 11
Worksheet time: 6mins
Which of the following is one of the procedures in the planning phase?
Determine materiality.
Determine need for other professionals.
Prepare client proposal.
Select staff to perform the audit.
Judgments about materiality are made in light of surrounding circumstances, and are affected by the ______________ of a misstatement, or a combination of both.
Significance or size.
Size or nature.
Significance or nature.
Size or characteristics.
The audit standards define fraud as ‘an intentional act by one or more individuals among management, those charged with governance, ___________________ , involving the use of deception to obtain an unjust or illegal advantage.’
Employees, vendors or third parties.
Employees or others.
Employees or vendors.
Employees or third parties.
Risk assessment procedures that may indicate fraud include inquiries of management regarding:
Internal control effectiveness.
If there is fraud elsewhere in their industry.
If there are any relatives of the executives employed in the entity.
Whether management knows of any fraud in the entity.
Inherent risk, control risk and detection risk are components of:
Materiality risk.
Auditor’s risk.
Business risk.
Audit risk.
When a CPA is approached to perform an audit for the first time, the CPA should make inquiries of the predecessor auditor. This is a necessary procedure because the predecessor may be able to provide the successor with information that will assist the successor in determining
Whether, in the predecessor's opinion, the financial statements are materially correct
Whether, in the predecessor's opinion, the company's internal controls have been satisfactory
Whether the predecessor's work should be utilized
Whether the engagement should be accepted
In assessing the competence of the internal audit function, an independent CPA most likely would obtain information about the
Organization's commitment to integrity and ethical values
Quality of the work of the internal audit function
Influence of management on the scope of the internal audit function duties
Organizational levels to which the internal audit function reports
An auditor is required to establish an understanding with a client regarding the responsibilities for each engagement. This understanding generally includes
Management's responsibility to guarantee that there are no material misstatements due to fraud
The auditor's responsibility to plan and perform the audit to provide reasonable, but not absolute, assurance of detecting material errors or fraud
Management's responsibility for providing the auditor with an assessment of the risk of material misstatement due to fraud
The auditor's responsibility for the fairness of the financial statements
Which of the following is not a concern as to whether a misstatement is qualitatively material?
The misstatement hides a failure to meet analysts' expectations
The misstatement increases management's compensation
The misstatement changes a small amount of profit to a small reported loss
The misstatement is less than 5% of pretax income
Which of the following relatively small misstatements most likely would have a material effect on an entity's financial statements?
A piece of obsolete office equipment that was not retired
A petty cash fund disbursement that was not properly authorized
An uncollectible account receivable that was not written-off
An illegal payment to a foreign official that was not recorded
Which of the following is the most important qualitative factor that auditors should consider when making materiality judgments?
answer choices
A misstatement exceeded five percent of net income
The auditor also provides consulting services to the audit client
The misstatement will cause the client to fail to meet an earnings forecast
The audit committee is not well-educated about the accounting principle in question.
