What if the predecessor auditor refuses to give the current auditor of a Nonissuer access to the documents what should the current auditor do?

Test 1 Audit

Analytical procedures performed to assist in forming an overall conclusion suggest that several accounts have unexpected relationships. the results of these procedures most likely indicate that

additional audit procedures are required

One reason the independent auditor applies analytical procedures with regard to the client's operations is to identify

an auditor reviews an audit client's accounting policies when considering which of the following matters?

understanding the entity and its environment, including its internal control

management's responses to inquiries can be corroborated by each of the following except

preparation of the summary of unadjusted differences

which of the following is an aspect of scheduling and controlling the audit engagement

include in the audit plan a column for estimated and actual time

An auditor is required to establish an understanding in writing with a client regarding the services to be performed for each engagement. the understanding generally includes

the auditor's responsibility for ensuring that the audit committee is aware of any significant deficiencies or material weaknesses in control that come to the auditor's attention

which of the following matters does an auditor usually include in the engagement letter

arrangements regarding fees and billing

the element of the audit-planning process most likely to be agreed upon with the clients befor implementation of the audit strategy is the determination of the

timing of inventory observation procedures to be performed

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

AICPA accounting trends and techniques

Analytical procedures enable the auditor to predict the balance or quantity of an item under audit. information to develop this estimate can be obtained from all of the following except

tracing transactions through the system to determine whether procedures are bing applied as prescribed

which of the following procedures would an auditor most likely include in the initial planning of the financial statement audit

determining the extent of the involvement ofthe client's internal auditors

which of the following best describes the primary purpose of audit procedures

an auditor's engagement letter most likely would include a statement regarding

management's responsibility to provide certain written representations to the auditor

which of the following auditor concerns usually is so serious that the auditor might conclude that a financial statement audit cannot be conducted

the integrity of the entity's management is suspect

inherent risk and control risk differ from detection risk in that they

exist independently of the financial statement audit

which of the following statements is corect concerning analytical procedures used in planning an audit engagement

they usually use financial and nonfinancial data aggregated at a high level

Au-c 500 describes five generalizations about the reliability of evidence. the situations given below indicate the relative degrees of assurance provided by two types of evidence obtained in different situations. which describes an exception to one ofthe

the report of an auditor's specialist regarding the valuation of a collection of paintings held as an investment provides greater assurance that the auditor's physical observation of the paintings

which of the following is an analytical procedure that an auditor most likely would perform when planning an audit

comparing current year balances to bedgeted balances

which of the following types of audit evidence is the most persuasive

bank statements obtained from the client

which of the following procedures would a CPA most likely perform in the planning phase of a financial statement audit?

compare financial information with nonfinancial operating data

an auditor who discovers that a client's employees paid small bribes to municipal officials most likely would withdraw from the engagement if

management fails to take the appropriate remedial action

after testing a client's internal control activities, an auditor discovers a number of significant deficiencies in the operation of a client's internal controls. under these circumstances, the auditor most likely would

increase the assessment of control risk and increase the extent of substantive tests.

which of the following statements is correct regarding the predictability of analytical procedures in a financial statement audit?

relationships involving income statement accounts tend to be more predictable than relationships involving only balance sheet accounts

Most of the auditor's work in forming an opinion of financial statements consists of

obtaining and evaluating audit evidence

which of the following factors most likely would lead a CPA to conclude that a potential audit engagement should not be accepted

it is unlikely that sufficient appropriate evidence is available to support an opinion on the financial statements

an auditor assesses the risks of material misstatement because they

affect the level of detection risk that the auditor may accept

which of the following prodedures would an auditor most likely perform in planing a financialstatement audit

performing analytical procedures to identify areas that may represent specific risks

it would not be appropriate for the auditor to initiate discussion with the audit committee concerning

details of the porcedures that the auditor intends to apply

after the audit procedures are completed, a partner of the CPA firm who has not been involved in the audit performs a second or wrap up audit documentation review. this second review usually focuses on

whether the financial statements are consistent with the auditor's understanding of the entity

the risk that an auditor's procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is

A precondition for an audit most likely is not present when management

refuses to acknowledge its responsibility for the fair presentation of the financial statements in accordance with the applicable reporting framework

Analytical procedures used to form an overall conclusion of an audit generally would include

considering the adequacy of the evidence gathered in response to unexpected balances identified in planning

in gathering evidence in the performance of substantive procedures, the auditor most likely

relies on persuasive rather than conclusive evidence in the majority of cases.

when planning an audit, an auditor should

determine materiality for the financial statements as a whole

in the course of the audit of financial statements for the purpose of expressing an opinion the auditor will normally prepare a schedule of uncorrected misstatements. The primary purpose served by this schedule is to

identify the potential financial statement effects of misstatments that were not considered clearly trivial when discovered

in assessing whether to accept a client for an audit engagement, a CPA should consider the

client and CPA business risk

an auditor compares annual revenues and expenses with similar amounts from the prior year and investigates all changes exceeding 10% this would most likely indicate

unrealized gains from increases in the value of available for sale securities were recorded in the income account for trading securities

analytical procedures used in planning an audit should focus on

enhancing the auditors understanding of the client's business

which of the following procedures would a CPA most likely perform in the planning statge of a financial statement audit

Compare recorded financial information with anticipated results from budgets and forecasts

audit risk at the assertion level consists of inherent rick, control risk, and detection rick. Which of the following is true

cash has a greater inherent risk than an inventory of coal because it is more susceptible to theft

in comparison with the detailed audit plan of the independent auditor who is engaged to audit the financial statements of a large publicly held company, the audit client's comprehensive internal plan is

more detailed and covers areas that normally are not considered by the independent auditor

which of the following is a basic tool used by the auditor to control the audit work and review the progress of the audit

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

disagreements with management as to auditing procedures

based on new information gained during an audit of a nonissuer, an auditor determines that it is necessary to modify materiality for the financial statements as a whole

materiality levels for particular classes of transactions, account balances, or disclosures migt also need to be revised

which of the following would be least likely to be comparable between similar corporations in the industry line of business

which of the following elements ultimately determines the specific auditing procedures that are necessary in the circumstances to provide a reasonable basis for an opinion

audit plans should be designed so that

the audit evidence gathered supports the auditor's conclusions

which of the following statements is correct concerning the concept of materiality

materiality is a matter of professional judgment

accounting records alone do not provide sufficient appropriate evidence on which to base an opinion on the financial statements. Thus, the auditor should obtain other information. which of the following is audit evidence other than accounting records

confirmations of accounts receivable

which of the following analytical procedures most likely would be used during the planning stage of an audit

comparing current-year to prior-year sales volumes

which of the following types of risks most likely would increase if accounts receivable are confirmed 3 months before year end?

which of the following audit activities is an analytical procedure used to form an overall conclusion to ensure that the financial statements are free from material misstatement?

comparing the current year's financial statements with those of the prior year

which of the following nonfinancial information would an auditor most likely consider in forming analytical procedures during the planning phase of an audit?

square footage of the selling space

in determining whether transactions have been recorded, the direction of the audit testing should begin from the

original source documents

in planning the audit engagement, the auditor should consider each of the following except

the kind of opinion that is likely to be expressed

misstatements discovered by the auditor were immaterial in the aggregate in prior years. Such misstatements should be

considered in the evaluation of audit findings in the current year

which of the following is a type of known misstatement, except

differences between management and the auditor's judgement regarding estimates

which of the following procedures would be most effective in reducing attention risk?

ordinarily the predecessor auditor permits the auditor to review the predecessor's audit documentation relating to

contingencies and balance sheet accounts

which of the following ultimately determines the specific audit procedures necessary to provide an independent auditor with a reasonable basis for the expression of an opinion

which of the following documents are examples of audit evidence generatedd by the client

shipping documents and receiving reports

which of the following ratios would be the least useful in reviewing the overall profitablility of a manufacturing company?

net income to working capital

to test for unsupported entries in the ledger, the direction of audit testing should be from the

a retailing entity uses the internet to execute and record its purchase transactions the entity's auditor recognizes that the documentation of details of transactions will be retained for only a short period of time. To compensate for this limitation, the

perform tests several times a year rather than at year end

which of the following factors most likely would lead a CPA to conclude that a potential audit engagement should be rejected

it is unlikely that sufficient appropriate audit evidence is available to support an opinion on the financial statements

before accepting an engagement to audit a new client, a CPA is required to obtain

the prospective client's consent to make inquiries of the predecessor, if any

inherent risk and controld risk differ from detection risk in that inherent and control are

functions of the client and its environment, but detection risk is not

which of the following would not be considered an analytical procedure

projecting a deviation rate by comparing the results of a statistical sample with the acutal population characteristics

which of the following statements most likely would be included in an engagement letter from an auditor to a client

the CPA firm will involve information technology specialists in the performace of the audit

which statement about audit evidence is false?

the auditor should not perform a procedure that provides evidence rather than conclusive evidence

observation is considered a reliable audit procedure but one that is limited in usefulness. However, it is used in a number of differenct audit situations. Which of the following statements is true regarding observation as an audit technique

it is the most persuasive about the performance of a process but is limited to the moment in. time at which the observation takes place

what type of analytical procedure would an auditor most likely use in developing relationships among balance sheet accounts when reviewing the financial statements of a nonissuer

which of the following audit techniques most likely will provide an auditor with the most assurance abou the effectiveness of the operation of a control

observation of client personnel

if an auditor of an issuer examines purchase orders obtained from the issuer to verify proper authorization of transactions, then the auditor is conduction

which of the following steps should be performed first in applying analytical procedures?

develop an expectation of a balance or ratio by using relationships that are expected to exist

analytical procedures reveal significant unexpected differences between recorded amounts and the expectations. developed by the auditor. If management is unable to provide an acceptable explanation, the auditor should

perform additional audit procedures to investigate the matter further

when an auditor of a parent nonissuer is also the auditor of a component, then each of the following factors would ordinarily influence the decision to obtain a separate engagement letter from the componenet, except

whether there has been any turnover of the component's board members

before performing substantive procedures at an interim date, an auditor should

consider the increased risk that period end misstatement will not be detected

for all audits of financial statements made in accordance with auditing standards, the use of analytical procedures is required to some extent

risk assessment procedures, not required for substantive procedures, Assist in forming an overall conclusion

the strongest criticism of the reliability of audit evidence that the auditor physically observes is that

the auditor may not be qualified to evaluate the items she is observing

which of the following procedures would an auditor most likely perform in planning a finanancial statement audit

camparing financial statements with anticipated results

when performing analytical procedures as risk assessment procedure, the auditor most likely would develp expectations by reviewing. which of the following sources of information

unaudited information from internal quarterly reports

which of the following types of audit evidence provides the least assurance of reliability?

prenumbered receiving reports completed by the client's employees

which of the following is correct regarding the communication between successor and predecessor auditors?

the successor auditor should request permission from the prospective client to make an inquiry of the predecessor auditor

upon discovering fraudulent data in a client's tax return that the client would not correct, a CPA withdraws from the engagement. How should the CPA resond if asked by the seccessor CPA why the relationship was terminated

I suggest you get the client's permission for us to discuss all matters freely

which of the following factors most likely would cause a CPA to decide not to accept a new audit engagement?

management's disregard of its responsibility to maintain an adequate internal control environment

which of the following activities would be most helpful to a CPA in deciding whether to accept a new audit client?

evaluating the CPA's ability to properly service the client

An auditor is required to obtain an understanding of the entity's business, including business cycles and reasons for business fluctuations. What is the audit purpose most directly served by obtaining this understanding?

to assit the auditor to accurately interpret information obtained during the audit

audit planning for an initial audit most likely includes

performing procedures involving opening balances

an auditor's decision whether to apply analytical procedures as substantive procedures usually is determined by the

precision and reliability of the data used to develop expectations

which of the following factors would most likely influence an auditor's consideration of the reliability of data when performing analytical procedures

whether the data were developed under a systeme with adequate controls

which of the following factors most likely would cause a CPA to not accept a new audit engagement

the prospective client is unwilling to make all financial records available to the CPA

which of the following factors most likely would cause an auditor to decline a new audit engagement

failure of management to satisfy the preconditions for an audit

a document in an auditor's audit documentation includes the following statement "our audit is subject to the inherent risk that material missatements, if they exist, will not be detected" the above passage is most likely from

which of the following factors would most likely cause an auditor not to accept a new audit engagement?

concluding that the entity's management probably lacks integrity

An auditor's engagement letter most likely would include a statement that

limits the auditor's responsibility to detect fraud and error

which of the following factors most likely would cause a CPA to decline to accept a new audit engagement

Management is unwilling to permit inquiry of its legal counsel

which fo the following actions should be taken by a CPA who has been asked to audit the financial statements of a compnay whose fiscal year has ended

ascertain whether circumstances are likely to permit the auditor to obtain sufficient appropriate evidence and express an unmodified opinion

an auditor who discovers that a client's employees have paid small bribes to public officails most likely would withdraw from the engagement if the

employee's actions affect the auditor's ability to rely on management's representations

although planning continues throughout the audit, it initially involves

developing an overall audit strategy

the audit plan usually cannot be finalized until the

understanding of the entity and its environment has been completed

during the initial planning phase of an audit, a CPA most likely would

discuss the timing of the audit procedures with the client's management

which of the following is an auditor least likely to perform in planning a financial statement audit

selecting a sample of vendors' invoices for comparison with receiving reports

which of the following procedures should an auditor most likely include in the planning of an audit of financial statements?

determining the need for specialized skills

audit plans are modified to suit the circumstances of particular engagements. A complete audit plan for an engagement usually should be develped

after the auditor has obtained an understanding of existing internal control

which of the following procedures would an auditor most likely perform in the plannng stage of an audit

make a preliminary judgement about materiality

which of the following is an effective planning and control procedure that helps prevent misunderstandings and inefficient use of audit personnel?

arrange a preliminary conference with the client to discuss audit objectives, fees, timing , and other information

which ofthe following factors does a CPA ordinarily consider in the planning stage of an audit engagement?

financial statement accounts likely to contain misstatement and conditions that require extension of audit tests

analytical procedures are required for which of the following

if the predecessor auditor refuses to give the current auditor of a nonissuer access to the documentation, what should the current auditor do?

review risk assessment of the opening balances of the financial statements

before accepting an audit engagement, an auditor should make specific inquiries of the predecessor auditor regarding the predecessor's

understanding as to the reasons for the change of auditors

which of the following would a successor auditor ask the predecessor to provide after accepting an audit engagement

matters that may facilitate the evaluation of financial reporting consistency between the current and prior years

hill, CPA, has been retained to audit the financial statements of Monday co Monday's predecessor auditor was Post, CPA, who has been notified by Monday that Post's services have been terminated. Under these circumstances, which party should initiate the c

an auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor's

audit documentation, not engagement letter

before accepting an audit engagement, and auditor should make specific inquireies of the predecessor auditor regarding

disagreements that the predecessor had with the client concerning auditing procedures and accounting principles.

an auditor is required to attempt communication with the predecessor auditor prior to

prior to the audit, an auditor ususally discusses the overall audit strategy with the client's engagement. Which of the following matters to the auditor and management agree upon at this time?

the coordination of the assistence of the client's personnel in data preparation

early appointment of the auditor enable preliminary work to be performed by the auditor. this benefits the client because it permits the audit to be performed in

an auditor should make specific and reasonable inquiries of the predecessor auditor regarding the predecessor's

understanding of the reasons for the change in auditors

the acceptable level of detection risk is inversely related to the

assurance provided by substantive procedures

the acceptable level of audit risk decreases, an auditor may

postpone the planned timing of substantive tests from interim dates to the year end

which of the following audit isk components may be assessed n non quantitative terms

the components of audit risk may be assessed in quantitative terms such as percentages or in nonquantitative terms that range from low to high

when expressing an unmodified opinion, the auditor who evaluates the audit findings should determine whether

uncorrected misstatements are material

which of the following would an auditor most likely use in determining the auditor's preliminary judgement about materiality for the financial statements as a whole?

the entity's year-to-date financial results and position

when an auditor increases the assessed risks of material misstatement because certain control activities were determined to be ineffective, the auditor most likely would increase the

extent of tests of details

the ultimate purpose of assessing control risk in a financial statement audit is to contribute to the auditor's evaluation of the risk that

material misstatements may exist in the financial statements

detection risk differs from both control risk and inherent risk in that detection risk

can be changed at the auditor's discretion

in a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following?

the susceptibility of a financial statement assertion to a material misstatement before consideration of related controls

What happens if predecessor auditors refuse communication?

What is the appropriate response if a prospective client does not give permission to a proposed new auditor to communicate with the existing or predecessor auditor?

What responsibilities does the predecessor auditor have if any regarding the successor auditor's inquiries according to the auditing standards?

What is the responsibility of a successor auditor with respect to communicating with the predecessor?