Auditing Chp 3
Generally accepted auditing standards require that auditors always prepare and use
A written audit plan
In testing the existence assertion for an asset, an auditor ordinarily works from the
Accounting records to the supporting evidence.
The company being audited has an internal auditor who is both competent and objective. The independent auditor wants to assign tasks for the internal auditor to perform. Under these circumstances, the independent auditor may
Allow the internal auditor to perform tests of internal controls
Which of the following communications is most likely to be written before the balance sheet date?
An engagement letter
Which of the following is NOT a benefit claimed for the practice of determining materiality of the initial planning stage of an audit?
Being able to decide early what type of audit opinion to issue
The revenue cycle of a company generally includes which accounts?
Cash, accounts receivable, and sales
Which of the following procedures would a CPA most likely perform in planning a financial statement audit?
Compare financial information with nonfinancial operating data
Which of the following would be considered an analytical procedure?
Comparing inventory balances to recent sales activities
Audit documentation that shows the detailed evidence and procedures regarding the balance in the accumulated depreciation account for the year under audit will be found in the
Current file audit documentation
When evaluating whether accounting estimates made by management are reasonable, the audit team would be most interested in which of the following?
Evidence of a conservative systematic bias
An auditor's permanent file audit documentation most likely will contain
Excerpts of the corporate charter and bylaws
Confirmations of accounts receivable provide evidence primarily about which two assertions?
Existence and rights and obligations
Inspection of tangible assets provides evidence for which financial statement assertion?
Existence.
When auditing the existence assertion for an asset, auditors proceed from the
General ledger back to the supporting original transaction documents
Which of the following procedures would most likely be performed during planning?
Identifying related parties
With respect to the concept of materiality, which of the following statements is correct?
Materiality is a matter of professional judgment
For which of the following judgments may an independent external auditor share responsibility with an entity's internal auditor who already has been assessed to be both competent and objective?
No Assessment of inherent risk and No Assessment if control risk
In deciding whether to use the work of internal auditors, external auditors must evaluate the internal auditors'
Objectivity and competence.
Which of the following is not done during the client acceptance and retention phase of planning?
Obtain an understanding of the internal control system.
In testing the completeness assertion for a liability, an auditor ordinarily works from the
Potentially unrecorded items to the financial statements.
Spreadsheet software would be most useful for which of the following audit activities?
Preparing a comparison of current-year expenses with those from the previous year
Which of the following is not included in the engagement letter?
Representations that the financial statements were prepared in accordance with generally accepted accounting principles.
Which of the following engagement planning procedures would most likely assist the auditor in identifying related-parties transactions before the balance-sheet date?
Scanning the minutes for significant transactions with members of the board of directors
An audit engagement letter should normally include which of the following matters of agreement between the auditor and the client?
Schedules and analyses to be prepared by the client's employees
An audit plan contains
Specifications of procedures the auditors believe appropriate for the financial statements
When auditing Vandalay Jewlery, Costanza, CPA, was not familiar with the quality and cut of the company's precious jewel inventory. To address this shortcoming, Costanza hired Benes, an expert in jewel valuation, to assist as an audit specialist for the inventory valuation. Should Costanza refer to Benes's work in the audit report?
The auditor's report should mention the use of the audit specialist only when the audit specialist's finding affect the auditors' conclusions
When planning an audit, which of the following is NOT a factor that affects auditors' decisions about the quantity, type, and content of audit documentation?
The auditors' judgment about their independence with regard to the client
In the preparation of an audit program, which of the following items is not essential?
The preparation of a detailed time budget identifying the costs of resources needed.
Which of the following is not true regarding audit planning in an electronic environment?
The procedures used are not changed.
Which of the following conditions most likely would pose the greatest risk in accepting a new audit engagement?
There will be a client-imposed scope limitation
Which of the following statements is correct concerning analytical procedures used in planning an audit engagement?
They typically use financial and nonfinancial data aggregated at a high level
Prior to accepting a new audit engagement, a public accounting firm should
a. Attempt to contact the predecessor auditors b. Evaluate the integrity of management c. Assess the firm's resources to ensure that they are sufficient to permit the firm to accept the engagement d. ALL THE ABOVE
When initiating communications with predecessor auditors, prospective auditors should expect
a. To take responsibility for obtaining the client's consent for the predecessor to give information about prior audits b. To conduct interviews with the partner and manager in charge of the predecessor public accounting firm's engagement c. To obtain copies of some or all of the predecessor auditors' audit documentation d. ALL THE ABOVE
