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1. Question: Which of the following factors most likely would cause a CPA to not accept a new audit engagement? Your Answer: The prospective client has already completed its physical inventory count. The CPA lacks an understanding of the prospective client's operations and industry. The CPA is unable to review the predecessor auditor's audit documentation. The prospective client is unwilling to make all financial records available to the CPA. CORRECT Instructor Explanation: Choice "d" is correct. An auditor must consider the availability and adequacy of the client's accounting records and the integrity of management in deciding whether or not to accept a new audit engagement. A prospective client that is unwilling to provide all financial records would give the auditor cause for concern about both of these issues. Choice "a" is incorrect. The auditor may apply acceptable alternative procedures to audit inventory. Choice "b" is incorrect. The auditor can accept the engagement and obtain an understanding of the client's operations and industry after acceptance. Choice "c" is incorrect. Inability to review the predecessor's audit documentation means the auditor will expend greater effort auditing beginning balances. It does not mean the engagement should be declined. Points Received: 10 of 10 Comments: 2. Question: Which of the following matters generally is included in an auditor's engagement letter? Your Answer: Management's responsibility for the entity's compliance with laws and regulations. CORRECT The factors to be considered in setting preliminary judgments about materiality. Management's vicarious liability for illegal acts committed by its employees. The auditor's responsibility to search for significant internal control deficiencies. Instructor Explanation: .... View Full Document

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