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Audit committees should be made up of the most qualified directors regardless of whether they are part of management of the company.

False
LO: 06-02
Topic: Obtaining Clients
Bloom's: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium

2. Analytical procedures are seldom used during the risk assessment stage of an audit engagement because they are substantive procedures.

False
LO: 06-04
Topic: Understanding Client and Environment
Bloom's: Remember
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Risk Analysis
Difficulty: Easy

3. Preliminary arrangements with clients should be set forth in the management letter.

False
LO: 06-03
Topic: Planning the Audit
Bloom's: Remember
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Easy

4. An audit plan includes a detailed listing of the audit procedures to be performed in the verification of items in the financial statements.

False
LO: 06-03
Topic: Planning the Audit
Bloom's: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium

5. The auditors' tests of controls are designed to substantiate the fairness of specific financial statement accounts.

False
LO: 06-01
Topic: Audit Process
Bloom's: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium

6. At least a portion of the auditors' consideration of internal control usually is performed at an interim date rather than at the balance sheet date.

True
LO: 06-07
Topic: Assessing Risks and Designing Audit Procedures
Bloom's: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium

7. The substantive approach to an audit is appropriate for many small businesses.

True
LO: 06-08
Topic: Audit Program
Bloom's: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium

8. Confirming a bank account establishes existence but not rights to the cash balance.

False
LO: 06-08
Topic: Audit Program
Bloom's: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Hard

9. The completeness of recording of assets is generally verified by tracing from the source documents to the recorded entry.

True
LO: 06-08
Topic: Audit Program
Bloom's: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Hard

10. Vouching the acquisition of assets is an audit procedure that is often performed to establish the valuation of the assets.

True
LO: 06-07
Topic: Assessing Risks and Designing Audit Procedures
Bloom's: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Hard

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