Audit Quiz - Chapter 8 Flashcards
One of the primary benefits from planning an audit is to help the auditor obtain sufficient and appropriate evidence for expressing an opinion.
True
Understanding the client’s business and industry is essential to performing an effective audit of a public or private company.
True
A predecessor auditor has the option to communicate with the successor auditor regarding prior audit engagements.
False
Securing the permission of the audit client is not required by the predecessor auditor when being requested to respond to a successor auditor’s inquiry.
False
A non-response from a predecessor auditor regarding a new audit client should be ignored if alternative information can be secured.
False
Investigating new clients and reevaluating existing ones are an essential part of deciding acceptable audit risk.
True
A high Acceptable Audit Risk means that the auditor is willing to accept low uncertainty.
False
Inherent Risk is uncontrollable and can’t be mitigated by additional internal controls.
False
The engagement letter is a contractual agreement between the CPA and audit client disclosing the audit expectations, auditor and management responsibilities, audit fees, timeframes, and an understanding regarding “guarantees” and the discovery of fraud.
True
Audit company activities with related parties should be identified and closely scrutinized.
True
Audit company activities can be susceptible to fraud.
True
Legitimate Arms-Length loans from public companies to company executives are permitted under the Sarbanes-Oxley Act.
False
Public Company Corporate Minutes provide minimal insight for audit planning purposes.
False
Client Business Risk is the risk that the client will fail to achieve its business objective.
True
A significant and unexpected downturn in the economic decreases client business risk.
False
