Auditing__Assurance_Services_Timothy_Louwers_7th_Edition__Test_Bank LATEST UPDATE A+

Auditing & Assurance Services Timothy Louwers 7th Edition – Test Bank Description Auditing & Assurance Services Timothy Louwers 7th Edition – Test Bank Sample Questions Instant Download With Answers Chapter 3 Engagement Planning 1) Which of the following auditor concerns most likely could be so serious that the auditor would conclude that a financial statement audit cannot be conducted? 1. A) The entity has no formal written code of conduct. 2. B) The integrity of entity’s management is suspect. 3. C) Procedures requiring separation of duties are subject to management override. 4. D) Management fails to modify prescribed controls for changes in conditions. Difficulty: 2 Medium Topic: Pre-Engagement Activities (AU-C 300, AS 2101) 2) Before accepting an engagement to audit a new client, an auditor is required to: 1. A) make inquiries of the predecessor auditor after obtaining the consent of the prospective client. 2. B) obtain the prospective client’s signature to the engagement letter. 3. C) prepare a memorandum setting forth the staffing requirements and documenting the preliminary audit plan. 4. D) discuss the management representation letter with the prospective client’s audit committee. 3) Which of the following statements is most accurate regarding sufficient and appropriate documentation? 1. A) Accounting estimates are not considered sufficient and appropriate documentation. 2. B) Sufficient and appropriate documentation should include evidence that the audit working papers have been reviewed. 3. C) If additional evidence is required to document significant findings or issues, the original evidence is not considered sufficient and appropriate and therefore should be deleted from the working papers. 4. D) Audit documentation is the property of the client, and sufficient and appropriate copies should be retained by the auditor for at least five years. 4) When applying analytical procedures during an audit, which of the following is the best approach for developing expectations? 1. A) Considering unaudited account balances and ratios to calculate what adjusted balances should be. 2. B) Identifying reasonable explanations for unexpected differences before talking to client management. 3. C) Considering the pattern of several unusual changes without trying to explain what caused them. 4. D) Comparing client data with client-determined expected results to reduce detailed tests of account balances. 5) Which of the following explanations best describes why an auditor may decide to reduce tests of details for a particular audit objective? 1. A) The audit is being performed soon after the balance sheet date. 2. B) Audit staff are experienced in performing the planned procedures. 3. C) Analytical procedures have revealed no unusual or unexpected results. 4. D) There were many transactions posted to the account during the period. 6) Which of the following steps should an auditor perform first to determine the existence of related parties? 1. A) Examine invoices, contracts, and purchasing orders. 2. B) Request a list of related parties from management. 3. C) Review the company’s business structure. 4. D) Review proxy and other materials filed with the SEC. 7) Which of the following is a correct statement regarding the nature and timing of communications between an accounting firm performing an initial audit of an issuer and the issuer’s audit committee? 1. A) Prior to accepting the engagement, the firm must orally affirm its independence to the audit committee with all members present. 2. B) The firm must address all independence impairment issues on the date of the audit opinion. 3. C) Communications related to independence may occur in any form prior to issuance of the financial statements. 4. D) Prior to accepting the engagement, the firm should describe in writing all relationships that, as of the date of the communication, may reasonably be thought to bear on independence. 8) Before accepting an engagement to audit a new client, a CPA is required to obtain: 1. A) an assessment of fraud risk factors likely to cause material misstatements. 2. B) an understanding of the prospective client’s industry and business. 3. C) the prospective client’s signature to a written engagement letter. 4. D) the prospective client’s consent to make inquiries of the predecessor, if any. 9) During a financial statement audit an internal auditor may provide direct assistance to the independent CPA in performing. Tests of controls Substa A. Yes Yes B. Yes No C. No Yes D. No No 10) When assessing internal auditors’ objectivity, an independent auditor should: 1. A) consider the policies that prohibit the internal auditors from auditing areas where they were recently assigned. 2. B) review the internal auditors’ reports to determine that their conclusions are consistent with the work performed. 3. C) verify that the internal auditors’ assessment of control risk is comparable to the independent auditor’s assessment. 4. D) evaluate the quality of the internal auditors’ working paper documentation and their recent audit recommendations. ...............................................continued...............................................