Section (1)
The following question pertain to the client acceptance
1. When approached to perform an audit for the first time, the CPA should make
inquiries of the predecessor auditor. This is a necessary procedure because the
predecessor may be able to provide the successor with information that will
assist the successor in determining whether:
a) the predecessor's work should be used
b) the company follows the policy of rotating its auditors
c) in the predecessor's opinion internal control of the company had been
satisfactory
d) the engagement should be accepted
2. a successor would most likely make specific inquiries of the predecessor
auditors regarding
a) specialized accounting principles of the client's industry
b) the competence of the client's internal audit staff
c) the unnecessary inherent in applying the sampling procedures
d) the disagreements with management as to auditing procedures
3. which of the following circumstances would most likely pose the greater risk in
accepting a new audit engagement (client )
a) staff will need to be rescheduled to cover this new client
b) there will be a client-imposed scope limitations
c) the firm will have to hire a specialist in one audit area
d) the client's financial reporting system has been in place for 10 years
4. which of the following is NOT a kind of audit evidence
a) Physical examination
b) Confirmation
c) Inspection
d) none is correct
5. which of the following is NOT a kind of audit evidence
a) Analytical procedures
b) Inquiries of the client
c) Recalculation
d) re-preparing FRs
6. there is/are .... types of audit evidence
a) eight
b) nine
c) ten
d) three
7. it is the inspection or count by the auditor of a tangible assets
a) Analytical procedures
b) Inquiries of the client
c) Physical examination
d) all are correct
8. It is a receipt of a written response from a third party verifying the accuracy of
information that was requested by the auditor.
a) Analytical procedures
b) Inquiries of the client
c) Physical examination
d) none is correct
9. it is the auditor’s examination of the client’s documents and records to prove or
substantiate the information that is or should be included in the FSs.
a) Inspection
b) Confirmation
c) Inquiries of the client
d) Physical examination
10. The auditor collect information to be guide the client' FRs by taking a tour the
in the plant to obtain general impression about the client’s facilities or watch
individuals perform accounting tasks to determine whether the person assigned
a responsibility is performing it properly. this evidence is called :
a) Re-performance
b) Observation
c) Inquiries of the client
d) Confirmation
11. Types of Audit Reports include:
a) Standards unqualified (clean) report
b) Unqualified with explanatory paragraph or modified wording report
c) Qualified report
d) All are correct
12. ... Provide uniform wording for the auditor’s reports
a) AICPA auditing standards
b) Professional auditors set this form
c) Accounting firms
d) None is correct
13. ... is issued when auditor has been unable to satisfy himself that the overall FSs
are fairly presented
a) unqualified report
b) qualified audit report
c) disclaimer
d) adverse
14. Auditor has been unable to satisfy himself that the overall FSs are fairly
presented, because of
a) a severe limitation on the scope of the audit
b) A non- independent relationship under the code of professional conduct
between the auditor and the client
c) a or b
d) none is correct
15. The process falls between the auditor be asked to audit a client's financial
reports and giving professional opinion about them in an audit report is called :
a) Audit plan
b) Audit confirm
c) a and b
d) all are correct
16. A qualified audit report can result from:
a) limitation on the scope of the audit or
b) failure to follow GAAPs
c) both a & b
d) all are correct
17. There are three main reasons why an auditor should properly plan audit
engagements including:
To enable the auditor to obtain sufficient competent evidence for the
circumstances. This is essential for minimizing legal liability and maintaining
a good profession reputation.
B. To help keep audit costs reasonable. Given the competitive auditing
environment, keeping costs reasonable helps the firm obtain and retain clients.
C. To avoid misunderstandings with the client. This is important for good client
relations.
D. All of the above
A.
18. When an auditor decides there is higher inherent risk for an account, one
potential effect is that more audit evidence will be required for that account.
A) True
B) False
Answer: A
19. As acceptable audit risk is decreased, the likely cost of conducting an audit
increases.
A) True
B) False
Answer: A
20. Acceptable audit risk is a measure of the auditor’s willingness to accept that the
financial statements do not contain material misstatements after the audit is
completed and a qualified audit report has been issued.
A) True
B) False
Answer: B
21. Two major factors that affect acceptable audit risk are the likely users of the
financial statements and the likelihood of issuing an unqualified audit opinion.
A) True
B) False
Answer: B
22. Two major factors that affect acceptable audit risk are the likely users of the
financial statements and their intended uses of the statements.
A) True
B) False
Answer: A
23. When inherent risk is high, there will need to be:
A)
A lower assessment of audit risk
Yes
More evidence accumulated by
the auditor
Yes
B)
A lower assessment of audit risk
No
More evidence accumulated by
the auditor
No
C)
A lower assessment of audit risk
Yes
More evidence accumulated by
the auditor
No
D)
A lower assessment of audit risk
No
More evidence accumulated by
the auditor
Yes
Answer: A
24. Which of the following statements is true regarding communications between
predecessor and successor auditors?
A) The burden of initiating the communication rests with the predecessor.
B) The predecessor’s response can be limited to stating that no information will be
provided.
C) The predecessor should communicate with the successor only if the client is
public.
D) There must be communication between the predecessor and successor if the
successor is to accept the engagement.
Answer: B
25. The purpose of the requirement in having communication between the
predecessor and successor auditors is to:
A) allow the predecessor to disclose information which would otherwise be
confidential.
B) help the successor auditor to evaluate whether to accept the engagement.
C) help the client by facilitating the change of auditors.
D) ensure the predecessor collects all unpaid fees prior to a change in auditor.
Answer: B
26. The predecessor auditor is required to respond to the request of the successor
auditor for information, but the response can be limited to stating that no
information will be provided when:
A) the predecessor auditor has poor relations with the successor auditor.
B) the client is dissatisfied with the predecessor’s work.
C) there are actual or potential legal problems between the client and the
predecessor.
D) the predecessor believes that the client lacks integrity.
Answer: C
27. Which of the following best expresses the requirement to establish with the
client an understanding of the responsibilities the auditor and company is taking
for the audit engagement?
A) Management asserts there are no material misstatements in the financials.
B) Auditors assert that the primary audit goal is audit efficiency.
C) Auditors assert that their primary responsibility is to plan and perform the audit
in order to provide reasonable assurance as to the detection of material
misstatement due to error or fraud.
D) Management’s assertion that they will provide the auditor with a risk
assessment as to material misstatements due to errors or fraud in the company’s
financial statements.
Answer: C
28. Early appointment of the independent auditor will enable:
A) a more thorough examination to be performed.
B) a proper study and evaluation of internal control to be performed.
C) sufficient competent evidential matter to be obtained.
D) a more efficient examination to be planned.
Answer: D
31) The reasons an auditor may choose not to continue a relationship with an existing
client. Examples include:
A. Previous conflicts over accounting issues, scope of the audit, type of opinion,
or fees, and Management integrity may be deemed to be insufficient.
B. Legal action initiated by either the auditor or client related to prior audit
services, and If fees remain unpaid for services performed more than one year
prior to the date of the current year’s audit report.
C. The presence of excessive risk which could result in financial failure of the
client or lawsuits against the audit firm.
D. All of the above
33) Before accepting a new client, most CPA firms investigate the company to
determine its acceptability. However, AICPA confidentiality requirements prohibit
CPA firms from contacting certain parties–namely the company’s attorneys and
bankers–during this investigation.
A) True
B) False
Answer: B
34) For prospective clients that have previously been audited by another CPA firm,
the predecessor auditor is required to communicate with the successor auditor.
A) True
B) False
Answer: B
35) When a successor auditor contacts a company’s previous auditor, the predecessor
auditor is required to respond fully and without limit to the request for information.
A) True
B) False
Answer: B
36) A predecessor auditor who has been contacted by a successor auditor for
information about the client does not have to obtain permission from the former client
before providing any confidential information to the successor auditor because the
confidentiality requirement does not extend to former clients.
A) True
B) False
Answer: B
37) An auditor must evaluate a specialist’s professional qualifications and understand
the objectives of the specialist’s work.
A) True
B) False
Answer: A
38) To evaluate a specialist’s work the auditor must himself/herself be considered a
specialist.
A) True
B) False
Answer: B