3.4 Understanding the Entity and Its Environment

56. The objective of performing analytical procedures as risk assessment procedures in an audit is to identify

A. Unusual transactions and events.

54. The components of internal control include

B. A process of managing ricks relevant to preparing financial statements.

52. A CPA wishes to determine how various issuers have complied with the disclosure requirements of a new financial accounting standard. Which of the following information sources would the CPA most likely consult for this information?

B. AICPA Accounting Trends and Techniques.

47. Which of the following statement is true concerning analytical procedures used as risk assessment procedures?

B. Analytical procedures uses as risk assessment procedures ordinarily use data aggregated at a high level.

51. To obtain an understanding of a continuing client in planning an audit, an auditor most likely will

B. Review prior year audit documentation for the client.

49. Analytical procedures used as risk assessment procedures should

C. Address the risk of material misstatement of revenue due to fraudulent financial reporting.

57. When an auditor obtains an understanding of the entity and its environment, including its internal control, which of the following is the most likely order of performing the steps A through C below? A = Tests of controls B = Preparation of a flowchart documenting the udnerstanding of the client's internal control C= Substantive procedures

C. BAC

48. Which of the following procedures is the auditor most likely to perform after accepting an initial audit engagement?

C. Tour the client's facilities.

53. An auditor obtains an understanding of the entity and its environment to

D. Identify areas of audit emphasis

50. Prior to beginning a new audit engagement in which a CPA does not have experience in the client's industry, the CPA should

D. Obtain knowledge of industry, regulatory, and other external factors.

55. An auditor is planning an audit engagement for a new client in a business unfamiliar to the auditor. Which is the least useful source of information for the auditor when the auditor is trying to obtain an understanding of the entity and its environment, including its internal control?

D. Results of performing further audit procedures.