Auditing: Chapter 6

Which of the following element underlies the application of generally accepted auditing standards, particularly the standards of fieldwork and reporting? a. Materiality and audit risk. b. Client acceptance. c. Adequate disclosure. d. Quality control.

a. Materiality and audit risk.

Three conditions generally are present when fraud occurs. Select the one below that is not one of those conditions. a. Supervisory position. b. Opportunity. c. Incentive or pressure. d. Rationalization.

a. Supervisory position.

An auditor must document the reasoning behind their materiality decision. a. True b. False

a. True

Which of the following should the auditors obtain from the predecessor auditors before accepting an audit engagement? a. All matters of continuing accounting significance. b. Facts that might bear on the integrity of management. c. Analysis of balance sheet acounts. d. Analysis of income statements accounts.

b. Facts that might bear on the integrity of management.

Vouching is a valid test for completeness. a. True b. False

b. False

The risk that the auditors will conclude, based on substantive procedures, that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as a. Business risk. b. Engagement risk. c. Detection risk. d. Control risk.

c. Detection risk.

Which portion of an audit is least likely to be completed before the balance sheet date? a. Tests of controls. b. Issuance of an engagement letter. c. Substantive procedures. d. Assessment of control risk.

c. Substantive procedures.

Which of the following should not normally be included in the engagement letter for an audit? a. A description of the responsibilities of client personnel to provide assistance. b. An indication of the amount of the audit fee. c. A description of the limitations of an audit. d. A listing of the client's branch offices selected for testing.

d. A listing of the client's branch offices selected for testing.

The primary objective of tests of details of transactions performed as substantive procedures is to: a. Evaluate whether management's policies and procedures are operating effectively. b. Attain assurance about the reliability of the accounting system. c. Comply with generally accepted auditing standards. d. Detect material misstatements in the financial statements.

d. Detect material misstatements in the financial statements.