Auditing Ch 3

Vouching does not provide evidence regarding the ______ assertion. Multiple choice question. allocation existence valuation completeness

completeness

To simplify the audit plan, auditors typically group the accounts into ________ which are sets of logically grouped accounts.

cycles

The substantive audit plan depends almost exclusively upon the ______. Multiple choice question. size of the audit team size of the client risk assessment of the client industry the client is in

risk assessment of the client

The basis to determine the nature, timing, and extent of internal control tests and substantive tests of account balances and disclosures is the ______. Multiple choice question. risk assessment process nature of the client's business prior year's audit number of management assertions

risk assessment process

Verifying if all transactions were recorded in the proper period address the ASB assertion of

cutoff

The audit planning process ______. is prepared after procedures to assess the risk of material misstatement at the financial statement and assertion level have been completed includes the establishment of overall strategy details the nature, timing and extent of control and substantive tests designed to mitigate risk

includes the establishment of overall strategy details the nature, timing and extent of control and substantive tests designed to mitigate risk

The auditor begins the search for evidence by focusing on transactions that have already been recorded in the financial statements and following them back to the source when engaged in ______. Multiple choice question. vouching tracing inquiry confirmation

vouching

True or false: The first step in the engagement planning process includes obtaining an understanding of the client's accounting information system.

True

The collection of verbal evidence from independent parties and management is the audit procedure known as ________.

inquiry

The permanent files are also called __________ _________files

continuing audit

Perceptions of others in regards to an auditor being unbiased is referred to as ______ in_______.

independence in appearance

Inspection of tangible assets does not necessarily provide any evidence of ______. Multiple choice question. existence valuation rights

rights

The basis to determine the nature, timing, and extent of internal control tests and substantive tests of account balances and disclosures is the ______ _______process.

risk assessment

Procedures performed weeks or months before the financial statement date are referred to as ___________ __________work.

interim audit

When the audit team recomputes computations previously performed by client personnel, the audit procedure is called ______________.

recalculation

PCAOB regulations require that all documentation be finalized within ______ days of the audit report's release date. Multiple choice question. 90 30 45 60

45

True or false: Given today's complex computing requirements, audits of large companies will require IT auditors as part of the engagement team.

True

True or false: If the auditor is not independent, the financial statements are considered unaudited for all practical purposes.

True

The first step in the engagement planning process is ______. Multiple choice question. a detailed understanding of the client's business, industry and strategy evaluating the client and agreeing to accept the engagement assigning the engagement partner in charge assessing audit risk

a detailed understanding of the client's business, industry and strategy

Auditors spend a considerable amount of time on risk assessment at ______. Multiple choice question. the financial statement level only both the financial statement and management assertion level neither the financial statement nor management assertion level the management assertion level only

both the financial statement and management assertion level

The starting point for amounts on the lead schedules is ______. Multiple choice question. prior-year numbers current general ledger amounts the audited financial statements amounts

prior-year numbers

Reperformance ______. Multiple select question. is commonly used when completing internal control system walkthroughs is similar to recalculation but more narrow in approach can be completed for any client control procedure must be done manually

is commonly used when completing internal control system walkthroughs can be completed for any client control procedure

Prior to relying on the work of internal auditors, external auditors should consider their ______and______.

objectivity and competence

The probability that the firm could issue a clean, unmodified opinion when in fact a modified opinion should have been issued is referred to as___

risk.

Confirmation can provide evidence regarding ______. Multiple select question. rights and obligations existence completeness valuation cutoff

rights and obligations existence valuation cutoff

According to professional standards, ______. Multiple choice question. the auditor must determine if particular accounts require a higher materiality amount than that established for the overall financial statements once the auditor has set an overall materiality level, it is to be applied uniformly to all accounts the auditor must determine if particular accounts require a lower materiality amount than that established for the overall financial statements

the auditor must determine if particular accounts require a lower materiality amount than that established for the overall financial statements

True or false: Public accounting firms devote substantial time to make sure their audit clients are not likely to become the focus of an accounting scandal.

True

Obtaining evidence about their education, experience, and certifications, along with a review of department policies and procedures enables external auditors to investigate internal auditors'

competence

Obtaining evidence about their education, experience, and certifications, along with a review of department policies and procedures enables external auditors to investigate internal auditors' ______. Multiple choice question. competence objectivity independence

competence

Whether or not information is material is based on the ______ point of view. Multiple choice question. external auditors' financial statement users' company managements'

financial statement users'

To plan the nature, timing, and extent of further audit procedures to be performed, an auditor "should establish a(n)________ level for the financial statements as a whole that is appropriate in light of the company's earnings and other relevant factors."

materiality

Client retention reviews are typically ______. Multiple choice question. only done at the request of the client only done if the auditor is considering withdrawing from the engagement only done when a major event occurs done annually

done annually

When a document is initially prepared by a third party and returned to the client who gives it to the auditor, it is considered ________________ - _________documentary evidence.

external-internal

Analytical procedures are required during ______. Multiple select question. final evaluation substantive testing planning

final evaluation planning

Reported net income under GAAP is not one "true" figure but a possible range of measure influenced by the choice of ______. Multiple select question. estimating uncollectible accounts receivable or using direct write off of accounts fixed asset lives classification of marketable securities depreciation methods

fixed asset lives classification of marketable securities depreciation methods

The most reliable form of documentary evidence is a document ______. Multiple choice question. received directly from an independent outside party prepared and processed by the client prepared by an outside external third party and given to the auditor by the client who received it prepared and processed by the audit team

received directly from an independent outside party

Engagement letters ______. are only required for new clients reduce the risk of misunderstandings set forth audit objectives define management and auditor responsibilities should not mention fees

reduce the risk of misunderstandings set forth audit objectives define management and auditor responsibilities

Which of the followings statements is correct? Multiple choice question. The cost of finding and correcting all misstatements is worth the benefit derived from the corrections. All inaccuracies in financial statements affect user decisions. If time is taken to find all inaccuracies, the issuing of financial statements will be delayed.

If time is taken to find all inaccuracies, the issuing of financial statements will be delayed.

True or false: The engagement letter is designed to act as a contract for the audit.

True

True or false: The first step in the engagement planning process includes obtaining an understanding of the client's accounting information system.

True. This is done as well as part of obtaining a detailed understanding of the client's business, industry and strategy.

Confirmations ______. Multiple select question. should be given to client personnel for mailing are typically printed on the client's letterhead are signed by the audit engagement partner should be returned directly to the audit firm request information the recipient can supply

are typically printed on the client's letterhead should be returned directly to the audit firm request information the recipient can supply

Select all that apply Firms often engage private investigators to conduct searches for additional information when prospective clients ______. Multiple select question. terminated the predecessor auditor have never been audited before are under some type of investigation have shown recent losses are financial institutions

are under some type of investigation have shown recent losses are financial institutions

Professional standards now require that the materiality level of the financial statement as a whole needs to be expressed ______. Multiple choice question. for each major classification on the financial statements as a specified amount as a percentage of reported net income

as a specified amount

External evidence is considered reliable ______. Multiple choice question. as long as it is received directly from an independent outside party only when it contains seals, engraving or other distinctive attributes

as long as it is received directly from an independent outside party

Documents prepared and processed by the client ______. Multiple select question. are referred to as internal-external evidence become more reliable when mailed to third parties are more reliable when the client's internal control system is strong include copies of sales invoices and receiving reports

become more reliable when mailed to third parties are more reliable when the client's internal control system is strong include copies of sales invoices and receiving reports

Risk management activities are undertaken ______. Multiple choice question. at the conclusion of the audit engagement before issuing the audit report only during the audit fieldwork before beginning any audit engagement

before beginning any audit engagement

The planning process begins with a calculation of a preliminary materiality amount that is based on a relevant _______________and a rule of thumb percentage applied to it.

benchmark

When setting a preliminary materiality amount, what is most important for financial statement users and the industry in which the client operates is the basis of the appropriate ___________ used.

benchmark

During the substantive testing of balances analytical procedures ______. Multiple choice question. can be very effective should not be used

can be very effective

A widely used auditing procedure is ___________ by direct correspondence with independent parties.

confirmation

Select all that apply Client acceptance and continuation policies and procedures generally include ______. Multiple select question. considering the need for individuals with special skills or knowledge considering if any unusual risk is involved in the engagement criminal background checks for all senior and mid-level managers inquiries of persons who do business with the entity searching for lawsuits and court cases involving the entity

considering the need for individuals with special skills or knowledge considering if any unusual risk is involved in the engagement inquiries of persons who do business with the entity searching for lawsuits and court cases involving the entity

Reported net income under GAAP is not one "true" figure but a possible range of measure influenced by the choice of ______. Multiple select question. estimating uncollectible accounts receivable or using direct write off of accounts depreciation methods classification of marketable securities fixed asset lives

depreciation methods classification of marketable securities fixed asset lives

The goals of audit planning are to ______. Multiple select question. ensure proper staffing determine materiality outline specific audit procedures determine the feasibility of the audit

ensure proper staffing determine materiality outline specific audit procedures

As indicated in the SEC stance on materiality, auditors should ______. Multiple choice question. examine both quantitative and qualitative factors rely mainly on certain quantitative benchmarks in the assessment not consider engagement circumstances when setting the amount

examine both quantitative and qualitative factors

Physical inspection of tangible assets provides strong evidence regarding the assertion of __________ and may provide some evidence related to the assertion of ______.

existence, valuation

Auditors use audit procedures to ______. Multiple select question. produce evidence about the assertions made by the client's audit committee gain an understanding of the client and client risks to test the operating effectiveness of client internal control activities

gain an understanding of the client and client risks to test the operating effectiveness of client internal control activities

The term predecessor auditor refers to the public accounting firm that ______. Multiple choice question. has been terminated or voluntarily withdrawn from an audit engagement was considered but did not accept the audit engagement is being considered for an audit engagement

has been terminated or voluntarily withdrawn from an audit engagement

The audit engagement partner ______. Multiple select question. generally also serves as the audit manager has final responsibility for the audit reviews the audit team's work in critical audit areas is usually an industry specialist

has final responsibility for the audit is usually an industry specialist

Select all that apply Firms often engage private investigators to conduct searches for additional information when prospective clients ______. have never been audited before have shown recent losses are under some type of investigation terminated the predecessor auditor are financial institutions

have shown recent losses are under some type of investigation are financial institutions

Time budgets ______. Multiple select question. identify problem areas early in the engagement are often based on prior years audits are usually only prepared for year-end work may be based on a predecessor auditor's experience

identify problem areas early in the engagement are often based on prior years audits may be based on a predecessor auditor's experience

A planning memorandum ______. Multiple select question. includes specific directions related to the audit summarizes all important planning information documents the audit team is following generally accepted accounting standards can be used as an engagement letter

includes specific directions related to the audit summarizes all important planning information

Client acceptance and continuation policies and procedures generally include ______. Multiple select question. criminal background checks for all senior and mid-level managers inquiries of persons who do business with the entity searching for lawsuits and court cases involving the entity considering if any unusual risk is involved in the engagement considering the need for individuals with special skills or knowledge

inquiries of persons who do business with the entity searching for lawsuits and court cases involving the entity considering if any unusual risk is involved in the engagement considering the need for individuals with special skills or knowledge

The specific procedures needed to obtain an understanding of the client's internal control system and test that understanding for those controls that relate to the relevant financial statement assertions are contained in a(n) ______ audit plan. Multiple choice question. internal control control test assertion substantive

internal control

An audit plan ______. Multiple choice question. is a comprehensive list of specific procedures needed to gather sufficient appropriate evidence details the terms of the engagement, including auditor and management responsibilities is a contract between the client and the auditor that details the time line and fees for the audit

is a comprehensive list of specific procedures needed to gather sufficient appropriate evidence

The descriptive nature of an item or issue ______ when setting performance materiality. Multiple choice question. is an important qualitative factor has no effect is an important quantitative factor

is an important qualitative factor

Inquiry ______. Multiple select question. procedures are generally used in to final stages of the audit relates to evidence from independent parties only is never enough on its own to reach an audit conclusion generally involves the collection of verbal evidence

is never enough on its own to reach an audit conclusion generally involves the collection of verbal evidence

A summary of the accounts or components in an account group is called a(n) _________ __________.

lead schedule

The professional standards require the auditor to evaluate the facts and circumstances of each engagement carefully to determine whether there are particular accounts or discounts where amounts ______ than established materiality might influence the judgment of a reasonable financial statement user. Multiple choice question. higher or lower higher lower

lower

Relevant considerations when determining materiality include ______. Multiple select question. matters surrounded by uncertainty of future outcomes amounts that turn a net profit into a net loss the likelihood of being selected for PCAOB inspection amounts that allow the company to meet earnings expectations

matters surrounded by uncertainty of future outcomes the likelihood of being selected for PCAOB inspection amounts that allow the company to meet earnings expectations

An auditor set overall materiality at $60,000. During the audit, no individual material misstatements were discovered. However, four misstatements that are individually immaterial were found. As a result of these misstatements, net income increased by $70,000. The auditor ______. Multiple choice question. should conclude that the overall materiality threshold has been met, since all misstatements found were individually immaterial must factor in the probability that the aggregate of uncorrected and undetected misstatements could exceed overall materiality

must factor in the probability that the aggregate of uncorrected and undetected misstatements could exceed overall materiality

With respect to a predecessor auditor, a perspective auditor ______. Multiple choice question. is prohibited by auditing standards from initiating any contact should not inform the perspective client if the auditor decides to initiate contact must initiate contact and attempt to obtain certain basic information may not accept the engagement if information from the predecessor cannot be obtained

must initiate contact and attempt to obtain certain basic information

External auditors ______. Multiple select question. may delegate supervision of internal auditors to the manager of internal audit must review, evaluate and perform independent testing of the internal audit work cannot delegate tasks that require professional judgment may rely on some work completed by the internal audit department

must review, evaluate and perform independent testing of the internal audit work cannot delegate tasks that require professional judgment may rely on some work completed by the internal audit department

Public accounting firms are ______. Multiple choice question. only obligated to provide services for clients the firm has audited in the past obligated to provide services for any public company that files reports with the SEC not obligated to provide services for any new or existing client

not obligated to provide services for any new or existing client

The SEC recommends auditors ______. Multiple choice question. not put too much reliance on quantitative benchmarks when assessing materiality recognize that misstatements should be considered immaterial when they fall beneath a numerical threshold set materiality levels based on the "rule of thumb" for the industry

not put too much reliance on quantitative benchmarks when assessing materiality

Viewing a client's physical facilities and participating in a surprise payroll distributions are examples of the audit procedure known as ____________.

observation

An auditor set overall materiality at $60,000. During the audit, no individual material misstatements were discovered. However, four misstatements that are individually immaterial were found. The auditor ______. Multiple choice question. only has to consider the cumulative effects of the misstatements if together they increase net income by more than $60,000 never has to consider the cumulative effect since the individual misstatements were immaterial always has to consider the cumulative effect since more than one immaterial misstatement was found

only has to consider the cumulative effects of the misstatements if together they increase net income by more than $60,000

To ensure that the aggregate of uncorrected and undetected immaterial misstatements does not exceed materiality for the financial statements as a whole, auditors use ______ materiality. Multiple choice question. selective judgmental performance tolerable

performance

Information to familiarize new audit team members with a client, company history, continuing schedules and prior years financial statements and audit reports may all be found in the ________files.

permanent

All important overall planning information and documentation that the audit team is following generally accepted auditing standards is often summarized in a(n) ___________ ____________.

planning memorandum

A public accounting firm that has been terminated or has voluntarily withdrawn from an audit engagement is known as the _______ ________

predecessor auditor

Materiality is based on ______ Multiple choice question. industry benchmarks professional judgment definitive, quantitative guidelines

professional judgment

IT auditors ______. Multiple select question. provide specialized skills related to programming languages are not part of the audit engagement team may be needed to evaluate computerized processes assist with understanding software packages

provide specialized skills related to programming languages may be needed to evaluate computerized processes assist with understanding software packages

Recalculation ______. Multiple select question. provides evidence of valuation when used with other procedures produces compelling evidence serves the objectives of rights and obligations can use computer-assisted audit techniques

provides evidence of valuation when used with other procedures produces compelling evidence can use computer-assisted audit techniques

In addition to the audit engagement partner, audit teams typically include a(n) _______________ __________________ partner who reviews the audit team's work in critical audit areas.

quality assurance

According to the professional standards, if as assertion has "a reasonable possibility of containing a misstatement that could cause the financial statements to be materially misstated," it must be categorized as __________.

relevant

An audit procedure that is similar to recalculation but much broader in approach is called ___________.

reperformance

Cycles recognized by most audit firms are ______. Multiple select question. revenue and collection production acquisition and expenditure finance and investment purchasing and payment

revenue and collection production acquisition and expenditure finance and investment

Auditors use audit procedures for ___________ assessment, tests of ___________ , and to produce evidence about management's assertions.

risk, control

An "eyes-open" approach of looking for anything unusual that can raise questions related to evidence that needs to be obtained is called _____.

scanning

Debits to revenue accounts and credits to expense accounts are generally found using ______. Multiple choice question. scanning observation vouching tracing

scanning

AS 1215 requires that audit documentation be retained for ______ years following the conclusion of the engagement. Multiple choice question. three seven five ten

seven

Audit documentation ______. Multiple select question. should contain support for the audit decision provides the auditors' record of compliance with standards is legally owned by the client that was audited may be in either electronic or hard copy form

should contain support for the audit decision provides the auditors' record of compliance with standards may be in either electronic or hard copy form

According to the professional standards, if there is a chance an account could contain a material misstatement, it should be identified as ________________.

significant

Client continuance decisions are generally ______ client acceptance decisions. Multiple choice question. different than similar to

similar to

The nature and extent of work completed during engagement planning depends on the ______. Multiple select question. size of the company being audited prior experience with the company being audited company's industry and complexity number of auditors assigned to the audit

size of the company being audited prior experience with the company being audited company's industry and complexity

A list of audit procedures for gathering evidence related to the relevant assertions identified for an audit client's financial statement accounts and disclosures is a(n) _________ __________ plan.

substantive audit

Favorable conclusions about the competence and objectivity of internal auditors allow external auditors to rely on the work of internal auditors related to ______. Multiple select question. substantive testing of balances on the audit testing the internal control system assessing the reasonableness of the allowance for doubtful accounts forming the audit decision

substantive testing of balances on the audit testing the internal control system

When an auditor/client relationship ends a(n) _____letter should be prepared that details the subject of future services and circumstances that caused the conflict.

termination

The most important facet of the current audit evidence documentation files is the requirement that they show ______. Multiple choice question. audited management assertions how exceptions were resolved or treated resolution of differences among audit term members work was adequately planned and supervised the auditors' conclusions

the auditors' conclusions

When an audit specialist is engaged during an audit ______. Multiple select question. the specialist's findings are normally included in the audit report the external auditors must know about his or her qualifications, experience and reputation auditors may rely on the findings of the specialist without performing additional testing on the data the auditor must gain a detailed understanding of the methods and assumptions used by the specialist

the external auditors must know about his or her qualifications, experience and reputation the auditor must gain a detailed understanding of the methods and assumptions used by the specialist

The objectivity of internal auditors is questionable when ______. Multiple select question. they report to a line manager they report directly to the audit committee they report directly to the board of directors divisional managers set their pay they are scheduled for promotion to areas under internal audit review

they report to a line manager divisional managers set their pay they are scheduled for promotion to areas under internal audit review

Auditor's shorthand for abbreviating comments about work performed are called audit or _________ ________.

tick marks

To ensure the audit is completed on schedule, a(n) _______ __________is prepared to assist in identifying problem areas early in the engagement.

time budget

When auditors use sampling, performance materiality is referred to as _______ ____________.

tolerable misstatement

Commonly used benchmarks for setting materiality include ______. Multiple select question. total net assets for asset based entities profit after tax for profit based companies gross revenue or total contributions for nonprofits total revenue for high tech start-up companies

total net assets for asset based entities gross revenue or total contributions for nonprofits total revenue for high tech start-up companies

When an audit specialist is engaged during an audit, it is best to hire someone who is ______ to the company under audit. Multiple choice question. unrelated related

unrelated

Assertions that can be tested by vouching include ______. Multiple select question. completeness valuation occurrence allocation

valuation occurrence allocation

Audit evidence documentation must show ______. Multiple select question. work was adequately planned and supervised an understanding of internal controls was obtained management assertions that were audited sufficient evidence was obtained as a basis for the opinion there were no exceptions or findings contradictory to the final conclusions

work was adequately planned and supervised an understanding of internal controls was obtained management assertions that were audited sufficient evidence was obtained as a basis for the opinion

Procedures performed shortly before and after the financial statement date are referred to as ______ audit work. Multiple choice question. year-end seasonal standard interim

year-end

When significant events, such as a change in auditor occurs, public companies must file a Form ______with the SEC.

8-K

True or false: Auditors should resist using analytical procedures during the substantive testing of balances

False

Which of the following statements are correct? Multiple select question. The nature or an item or issue impacts materiality considerations. Any type of management fraud is considered material regardless of the amount. An illegal payment may or may not be considered material, depending on the amount. Potential errors in fixed assets are deferred charges are considered more important than potential errors in other accounts.

The nature or an item or issue impacts materiality considerations. Any type of management fraud is considered material regardless of the amount.

Some inaccuracy is allowed in financial statements because ______. Multiple select question. unimportant inaccuracies are immaterial some public companies choose not to follow GAAP or IFRS issuing financial statements could be delayed the cost of finding small misstatements is high

unimportant inaccuracies are immaterial issuing financial statements could be delayed the cost of finding small misstatements is high

Information is considered important or _________ if it is likely to influence financial statement users' decisions.

material

Testing the completeness assertion by following a sample of shipping documents forward to sales invoices, the sales journal and revenue earned is called ______

tracing

Observation is commonly used as a test of ______. Multiple choice question. details ownership control substantive audit procedures

control

A prospective auditor should attempt to obtain basic information directly from the predecessor auditor regarding issues that reflect directly on the ______. Multiple choice question. team the predecessor auditor used for the engagement reasons why the predecessor auditor is no longer on the engagement basis for the predecessor's last audit opinion integrity of management

integrity of management

External auditors should consider the objectivity and competence of ____________ _____________before relying on their work.

internal auditors

As a general rule, analytical procedures are ______ detailed, document-oriented procedures. Multiple choice question. less costly than about the same cost as more costly than

less costly than

Select all that apply When an auditor/client relationship ends a termination letter ______. Multiple select question. should address access to audit documentation by successor auditors may address the auditors' understanding of the termination circumstances is required by audit standards should not discuss fee arrangements for future services

should address access to audit documentation by successor auditors may address the auditors' understanding of the termination circumstances

The audit planning process is required to be led by the ______. Multiple choice question. senior auditor in charge board of directors assigned engagement partner audit team assigned to the entity

assigned engagement partner

The use of electronic confirmations by auditors has led to improvements in ______ of the confirmation process. Multiple choice question. both effectiveness and efficiency effectiveness but not efficiency efficiency but not effectiveness

both effectiveness and efficiency

A lack of auditor independence ______. can lead to investor and client lawsuits requires an adverse opinion can result in disciplinary actions

can lead to investor and client lawsuits can result in disciplinary actions

Internal auditors ______. Multiple choice question. can never be considered independent in the same sense that external auditors are considered independent can only be considered independent if they are found to be objective and report directly to the audit committee are always considered independent when they are found to be objective

can never be considered independent in the same sense that external auditors are considered independent

The three goals of audit planning are to make sure the firm has the requisite staff needed, to outline specific audit procedures needed and to determine _______

materiality

The written record of the basis for the auditor's conclusions that provide the support for the auditor's representations is the PCAOB definition of ____________ _________________.

audit documentation

A comprehensive list of the specific procedures that need to be performed to gather sufficient appropriate evidence to base an opinion on the financial statements is called a(n) _______ ________.

audit plan

Persons skilled in areas outside of accounting are sometimes used to acquire information. Such individuals are called__________ _________ and may include actuaries, attorneys and environmental engineers.

audit specialist

When the external auditor is gaining an understanding of the business, information may be needed from individuals skilled in areas other than accounting and auditing who are not members of the audit team. Such individuals are referred to as ______. Multiple choice question. outside experts IT auditors audit specialists internal auditors

audit specialists

Giving each document a title including the name of the company, balance sheet date, and a descriptive title is called ______. Multiple choice question. heading cross-referencing indexing

heading

Relevant considerations when determining materiality include ______. Multiple select question. how widely the financial statements will be used political events in foreign countries the auditors' legal liability whether or not the audit firm has chosen to provide the audit for PCAOB inspection

how widely the financial statements will be used political events in foreign countries the auditors' legal liability

An auditor's unbiased "state of mind" towards the financial statements and other information audited is referred to as the auditor possessing ______ in_______ .

independence in fact

True or false: Auditors may use the work of internal auditors, but not company specialists as audit evidence.

False

True or false: One objective of a financial statement audit is to determine if, in all material respects, the entity being audited is reporting the one true net income.

False. A range of potential net income figures is allowable under both GAAP and IFRS.

Inspecting records or documents (tracing) prepared by the client is a representative audit procedures of the PCAOB assertion of

Completeness

Which of the following statements regarding company specialists are true? Multiple select question. External auditors must consider their objectively and competence. Their work may be used as audit evidence. Their work is evaluated differently than the work of auditor-engaged specialists.

External auditors must consider their objectively and competence. Their work may be used as audit evidence.

The first step in the engagement planning process is ______. Multiple choice question. evaluating the client and agreeing to accept the engagement a detailed understanding of the client's business, industry and strategy assigning the engagement partner in charge assessing audit risk

a detailed understanding of the client's business, industry and strategy

External-internal documentary evidence means the documents were originally prepared by ______. Multiple choice question. the client and sent for verification to a third party who returned the document to the auditor an external third party, received by the auditor and passed on to the client for verification the auditor who sent it to a third party to be verified and returned directly to the auditor an external third party, received by the client and passed on to the auditor

an external third party, received by the client and passed on to the auditor

When a public company changes auditors ______. Multiple select question. the former auditor must file Form 8-K explaining whether or not they agree with the change Reason: The auditor must submit a letter but the company must file Form 8-K. any pertinent disagreements with the former auditor must be disclosed documents filed regarding the change are available to the public the board of directors must approve the change

any pertinent disagreements with the former auditor must be disclosed documents filed regarding the change are available to the public the board of directors must approve the change

Documents prepared and processed by the client ______. Multiple select question. are referred to as internal evidence include copies of insurance policies require additional audit testing to be considered reliable are less reliable when prepared by the client and mailed to third parties

are referred to as internal evidence require additional audit testing to be considered reliable