AUD 3

Question 1

An outside reviewer who is not already associated with a registered public accounting firm would become associated with the firm issuing the report if he or she

Answer 1

1. ) receives compensation from the firm issuing the report for performing the review or
2. )performs the review as agent for the firm issuing the report.

Question 2

significant engagement deficiency

Answer 2

1. ) the engagement team failed to obtain sufficient appropriate evidence
2. )the engagement team reached an inappropriate overall conclusion
3. )the engagement report is not appropriate
4. )the firm is not independent of its client

Question 3

After field work audit procedures are completed, a partner of the CPA firm who has not been involved in the audit performs a second or wrap-up working paper review, which is a focus on

Answer 3

The fair presentation of the financial statements in conformity with GAAP

Question 4

The auditor’s standard report on financial statements should refer to generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP):

Answer 4

Explicitly to both

Question 5

A successor auditor most likely would make specific inquiries of the predecessor auditor regarding

Answer 5

communications to management and those charged with governance regarding significant deficiencies in internal control

Question 6

usually included in the engagement letter

Answer 6

• Arrangements regarding fees and billing

- Management’s acknowledgment of its responsibility for maintaining effective internal control.

Question 7

Supporting records that should be readily available are frequently not produced when requested would cause

Answer 7

an auditor to consider whether material misstatements exist

Question 8

In planning stage of an audit, auditors would

Answer 8

make a preliminary judgement about materiality

Question 9

The acceptable level of detection risk is inversely related to the

Answer 9

Assurance provided by substantive tests.

Question 10

Assessing control risk at below the maximum level most likely would involve

Answer 10

identifying specific internal control structure policies and procedures relevant to specific assertions.

Question 11

An auditor would most likely be concerned with internal control structure policies and procedures that provide reasonable assurance about the

Answer 11

Entity’s ability to process and summarize financial data.

Question 12

An auditor may decide to assess control risk at the maximum level for certain assertions because the auditor believes

Answer 12

Control policies and procedures are unlikely to pertain to the assertions.

Question 13

Which ratio would an engagement partner most likely consider in the overall review stage of an audit?

Answer 13

COGS/Inventory (Inventory Turnover ratio). Evaluates if inventory is slow moving.

Question 14

The adequacy of accounting records

Answer 14

most likely influences an auditors determination of the auditability of an entities financial statements

Question 15

what ultimately determines the sufficiency and appropriateness of audit evidence to support the auditors conclusion?

Answer 15

professional judgement

Question 16

Before applying principal substantive tests to an entity’s accounts receivable at an interim date, an auditor should

Answer 16

Assess the difficulty in controlling the incremental audit risk.

Question 17

The PCAOB identifies each of the following as a financial statement assertion to be addressed by the auditor except for

Answer 17

cutoff. this is included in the AICPA’s risk assessment standards

Question 18

An auditor isn’t required to document

Answer 18

senior management’s awareness of (& agreement with) the tolerable misstatement specified by the auditor for material elements of the financial statements.

Question 19

Judgmental Misstatement

Answer 19

Differences in estimates, such as a difference in fair value estimate. Unreasonable and inappropriate accounting estimates and policies.