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Audit Integrity and Procedures Guide

The document contains 5 multiple choice questions related to auditing standards and procedures: 1. Meeting with management to discuss accounting practices to maximize profits may lead an auditor to suspect management dishonesty. 2. If a client denies a predecessor auditor permission to discuss its affairs with a proposed new auditor, the predecessor should disclose the denial to the proposed auditor. 3. A successor auditor would normally perform an inquiry of the predecessor auditor regarding the client after accepting an audit engagement. 4. An auditor is expected to have a particular knowledge of how the entity operates and a level of knowledge of business less than that possessed by management. 5. Appropriate disclosures to include in an audit engagement letter are

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112 views1 page

Audit Integrity and Procedures Guide

The document contains 5 multiple choice questions related to auditing standards and procedures: 1. Meeting with management to discuss accounting practices to maximize profits may lead an auditor to suspect management dishonesty. 2. If a client denies a predecessor auditor permission to discuss its affairs with a proposed new auditor, the predecessor should disclose the denial to the proposed auditor. 3. A successor auditor would normally perform an inquiry of the predecessor auditor regarding the client after accepting an audit engagement. 4. An auditor is expected to have a particular knowledge of how the entity operates and a level of knowledge of business less than that possessed by management. 5. Appropriate disclosures to include in an audit engagement letter are

Uploaded by

Jane
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

Warning signs that cause the auditor to question management integrity must be taken seriously
and pursued vigorously. Which of the following may lead the auditor to suspect management
dishonesty?
a. The president and chief executive officer of the client corporation has held numerous
meetings with the controller for the purpose of discussing accounting practices that will
maximize reported profits.
b. The client has been named as a defendant in a product liability suit.
c. The client has experienced a decrease in revenue from increased import competition.
d. A new federal regulation making customer licenses more difficult to obtain may adversely
affect the client’s operations.
2. If permission from client to discuss its affairs with the proposed auditor is denied by the client,
the predecessor auditor should:
a. Keep silent of the denial.
b. Disclose the fact that the permission to disclose is denied by the client.
c. Disclose adequately to proposed auditor all noncompliance made by the client.
d. Seek legal advice before responding to the proposed auditor
3. Which of the following would a successor auditor normally perform after acceptance of an audit
client?
a. Inquiry of predecessor auditor regarding the client.
b. Review the SEC filings of the client.
c. Inquiry of Bankers regarding the client.
d. Review of predecessor auditor working papers.
4. An auditor is not expected to have
a. A particular knowledge of the economy and the industry within which the entity operates.
b. A particular knowledge of how the entity operates.
c. A level of knowledge of business ordinarily less than that possessed by management.
d. Knowledge of business which is used in assessing inherent and control risk.
5. Which of the following appropriately include in an audit engagement letter?
I. Because of the test nature and other inherent limitation of an audit, together with
the inherent limitations of any accounting and internal control system, there is an
unavoidable risk that even some material misstatements may remain undiscovered.
II. The audit will be made with the objective of expressing an option on the financial
statements.
III. An audit also include assessing the accounting procedures used and significant
estimates made by management.
a. I and II c. II and III
b. I and III d. I, II and III

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