Audit Chapter 6 Test Questions and Answers All Correct
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Course
Audit
Institution
Audit
Audit Chapter 6 Test Questions and Answers All Correct
When planning an audit, an auditor should:
A. Consider whether the extent of substantive procedures may be reduced based on the results of the internal control questionnaire.
B. Make preliminary judgments about materiality levels for audi...
Audit Chapter 6 Test Questions and
Answers All Correct
When planning an audit, an auditor should:
A. Consider whether the extent of substantive procedures may be reduced based on the
results of the internal control questionnaire.
B. Make preliminary judgments about materiality levels for audit purposes.
C. Conclude whether changes in compliance with prescribed control procedures justifies
reliance on them.
D. Prepare a preliminary draft of the management representation letter. - Answer ✔ B.
Make preliminary judgments about materiality levels for audit purposes.
An auditor who accepts an audit engagement and does not possess the industry
expertise of the business entity, should:
A. Engage financial experts familiar with the nature of the business entity.
B. Obtain a knowledge of matters that relate to the nature of the entity's business.
C. Refer a substantial portion of the audit to another CPA who will act as the principal
auditor.
D. First inform management that an unqualified opinion cannot be issued. - Answer ✔ B.
Obtain a knowledge of matters that relate to the nature of the entity's business.
The auditors will not ordinarily initiate discussion with the audit committee concerning
the:
A. Extent to which the work of internal auditors will influence the scope of the
examination. B. Extent to which change in the company's organization will influence the
scope of the examination. C. Details of potential problems which the auditors believe
might cause a qualified opinion. D. Details of the procedures which the auditors intend
to apply. - Answer ✔ D. Details of the procedures which the auditors intend to apply.
Which statement is correct relating to a potential successor auditor's responsibility for
communicating with the predecessor auditors in connection with a prospective new
audit client?
A. The successor auditors have no responsibility to contact the predecessor auditors.
B. The successor auditors should obtain permission from the prospective client to
contact the predecessor auditors.
C. The successor auditors should contact the predecessors regardless of whether the
prospective client authorizes contact.
D. The successor auditors need not contact the predecessors if the successors are
aware of all available relevant facts. - Answer ✔ B. The successor auditors should
obtain permission from the prospective client to contact the predecessor auditors.
Which of the following situations would most likely require special audit planning by the
auditors?
, A. Some items of factory and office equipment do not bear identification numbers.
B. Depreciation methods used on the client's tax return differ from those used on the
books.
C. Assets costing less than $500 are expensed even though the expected life exceeds
one year.
D. Inventory is comprised of precious stones. - Answer ✔ D. Inventory is comprised of
precious stones.
With respect to the auditor's planning of a year-end audit, which of the following
statements is always true?
A. An engagement should not be accepted after the fiscal year-end.
B. An inventory count must be observed at the balance sheet date.
C. The client's audit committee should not be told of any specific audit procedures which
will be performed.
D. It is an acceptable practice to carry out parts of the examination at interim dates. -
Answer ✔ D. It is an acceptable practice to carry out parts of the examination at interim
dates.
Hawkins requested permission to communicate with the predecessor auditor and review
certain portions of the predecessor auditor's working papers. The prospective client's
refusal to permit this will bear directly on Hawkins' decision concerning the:
A. Adequacy of the preplanned audit program.
B. Ability to establish consistency in application of accounting principles between years.
C. Apparent scope limitation.
D. Integrity of management. - Answer ✔ D. Integrity of management.
The auditor faces a risk that the audit will not detect material misstatements in the
financial statements. In regard to minimizing this risk, the auditor primarily relies on:
A. Substantive procedures.
B. Tests of controls.
C. Internal control.
D. Statistical analysis. - Answer ✔ A. Substantive procedures.
An abnormal fluctuation in gross profit that might suggest the need for extended audit
procedures for sales and inventories would most likely be identified in the planning
phase of the audit by the use of:
A. Tests of transactions and balances.
B. An assessment of internal control.
C. Specialized audit programs.
D. Analytical procedures. - Answer ✔ D. Analytical procedures.
Before accepting an audit engagement, a successor auditor should make specific
inquiries of the predecessor auditor regarding the predecessor's:
A. Awareness of the consistency in the application of generally accepted accounting
principles between accounting periods.
B. Evaluation of all matters of continuing accounting significance.
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