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WorksheetsARF C2: Process of assurance: obtaining an engagement
Total questions: 25
Worksheet time: 13mins
The engagement letter
Affects the CA firm's responsibility to external users of audited financial statements.
Is useful only if it is an audit engagement, but has no effect for review or compilation services.
Can be used to alter the auditor's responsibilities under generally accepted auditing standards.
Can affect legal responsibilities to the client.
Which of the following activities would be most helpful to the auditor in deciding whether to accept a new audit client?
Evaluating the auditor's ability to properly service the client.
Before accepting an engagement to audit a new client, the auditor is required to obtain:
This audit process is to make a decision of whether to accept or reject an audit engagement.
Accepting an Engagement
Issuing a report
Performing Substantive test
Completing the audit
One of the primary considerations before accepting an audit engagement is to determine whether the auditor has the necessary skills and __________ to handle the engagement.
Independence
Integrity
Ability
Competence
This term can also be used for the new auditor
Successor
Predecessor
The initial phase of a financial statement audit involves the acceptance decision for the client in question. Which of the following is not a consideration during this phase of the audit?
In accepting an engagement, an auditor takes on professional responsibilities to:
Before accepting an engagement, the auditor should identify special circumstances and unusual risks. Which of these conditions is not directly part of a review of such a circumstance or risk?
In assessing independence, an audit firm may do which of the following?
Which of these is not an ethical consideration for the auditor in deciding whether to accept an audit engagement?
A common fee structure for audit engagements is:
The following are usually included in an auditor's engagement letter, except
One of the purposes of an engagement letter is to avoid misunderstandings with the client. This is important for:
Good client relations: Yes
Facilitating high-quality work at a reasonable cost: Yes
Good client relations: Yes
Facilitating high-quality work at a reasonable cost: No
Good client relations: No
Facilitating high-quality work at a reasonable cost: Yes
Good client relations: No
Facilitating high-quality work at a reasonable cost: No
Rodgers CPA has requested permission to communicate with predecessor auditor in order to review certain workpapers for high risk accounts for a new audit client. The new audit clients refusal to allow this communication to occur would impact Rodgers decision concerning:
Inventory turnover
Possible scope exception due to lack of access
Integrity of management concerning possible accounting misstatements
Document the terms of the engagement
A successor auditor may perform which of the following for a new audit client?
Speak to local attorneys, banks and other businesses regarding the company's reputation: Yes
Speak to the predecessor auditors about disagreements they had with management: Yes
Speak to local attorneys, banks and other businesses regarding the company's reputation: Yes
Speak to the predecessor auditors about disagreements they had with management: No
Speak to local attorneys, banks and other businesses regarding the company's reputation: No
Speak to the predecessor auditors about disagreements they had with management: Yes
Speak to local attorneys, banks and other businesses regarding the company's reputation: No
Speak to the predecessor auditors about disagreements they had with management: No
Written communication that the auditor will provide reasonable assurance for the detection of fraud is found in:
Inherent risk
Representation letter
Letter of audit inquiry
Engagement letter
Which of the following normally signs the engagement letter for an audit of a private company?
Management
Employees
Board of Directors
Auditor
Early appointment of the independent auditor will enable:
a more thorough examination to be performed
inherent risk
a more efficient examination to be planned.
a proper study and evaluation of internal control to be performed
What is the primary purpose of conducting a risk assessment before accepting an audit engagement?
To establish the timeline for the audit
To determine the audit fee
To identify potential areas of material misstatement
To evaluate the client's internal control system
Which of the following is a key consideration for an auditor when evaluating a prospective client's financial stability?
Client's employee turnover rate
Client's historical profitability
Client's advertising budget
Client's market share
