auditing chapter 3
Terms in this set (21)
When initiating communications with predecessor auditors, prospective auditors should expect
To take responsibility for obtaining the client's consent for the predecessor to give information about prior audits.
To conduct interviews with the partner and manager in charge of the predecessor public accounting firm's engagement.
To obtain copies of some or all of the predecessor auditors' audit documentation. (all of the above)
Generally accepted auditing standards require that auditors always prepare and use
A written audit plan.
When planning an audit, which of the following is not a factor that affects auditors' decisions about the quantity, type, and content of audit documentation?
The auditors' judgment about their independence with regard to the client.
Audit documentation that shows the detailed evidence and procedures regarding the balance in the accumulated depreciation account for the year under audit will be found in the
Current file audit documentation.
An auditor's permanent file audit documentation most likely will contain
Excerpts of the corporate charter and bylaws.
Which of the following is not a benefit claimed for the practice of determining materiality in the initial planning stage of an audit?
Being able to decide early what type of audit opinion to issue.
Spreadsheet software would be most useful for which of the following audit activities?
Preparing a comparison of current-year expenses with those from the previous year.
Which of the following is an advantage of computer-assisted audit techniques (CAATs)?
The software can be used for audits of clients that use differing computer equipment and file formats.
A primary advantage of using CAATs in the audit of an advanced computerized system is that it enables the auditor to
Utilize the speed and accuracy of the computer.
An audit engagement letter should normally include which of the following matters of agreement between the auditor and the client?
Schedules and analyses to be prepared by the client's employees.
When auditing Vandalay Jewelry, Costanza, CPA was not familiar with the quality and cut of the company's precious jewel inventory. To address this shortcoming, Costanza hired Benes, an expert in jewel valuation, to assist in the inventory valuation. Should Costanza refer to Benes's work in the audit report?
The auditors' report should mention the use of the specialist only when the specialist's findings affect the auditors' conclusions.
Which of the following engagement planning procedures would most likely assist the auditor in identifying related-party transactions before the balance-sheet date?
Scanning the minutes for significant transactions with members of the board of directors.
Which of the following communications is most likely to be written before the balance-sheet date?
An engagement letter.
Which of the following procedures would most likely be performed during planning?
Identifying related parties.
Prior to accepting a new audit engagement, a public accounting firm should
Attempt to contact the predecessor auditors.
Evaluate the integrity of management.
Assess the firm's resources to ensure that they are sufficient to permit them to accept the engagement. (all the above)
An audit plan contains
Specifications of procedures the auditors believe appropriate for the financial statements under audit.
The revenue cycle of a company generally includes which accounts?
Cash, accounts receivable, and sales.
When auditing the existence assertion for an asset, auditors proceed from the
General ledger back to the supporting original transaction documents.
Confirmations of accounts receivable provide evidence primarily about which two assertions?
Existence and rights and obligations.
With respect to the concept of materiality, which one of the following statements is correct?
Materiality is a matter of professional judgment.
When evaluating whether accounting estimates made by management are reasonable, the audit team would be most interested in which of the following?
Evidence of a conservative systematic bias.