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Unformatted text preview: 8-1CHAPTER 8 : Audit Planning and Analytical Procedures 1. Which of the following is not one of the three main reasons why the auditor should properly plan engagements? a. To enable proper on-the-job training of employees. b. To enable the auditor to obtain sufficient competent evidence. c. To avoid misunderstandings with the client. d. To help keep audit costs reasonable. 2. A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the a. inherent risk. b. acceptable audit risk. c. statistical risk. d. financial risk. 3. A measure of the auditor’s assessment of the likelihood that there are material misstatements in an account before considering the effectiveness of the client’s internal control is a. control risk. b. acceptable audit risk. c. statistical risk. d. inherent risk. 4. The auditor is likely to accumulate more evidence when the audit is for a company a. whose stock is publicly held. b. which has extensive indebtedness. c. which is to be sold in the near future. d. All three of the above. 5. Which of the following is not a document or record that should be examined early in the engagement? a. Management letter. b. Corporate charter and bylaws. c. Contracts. d. Minutes of board of directors’ and stockholders’ meetings. 6. The purpose of an engagement letter is to a. document the CPA firm’s responsibility to external users of the audited financial statements. b. document the terms of the engagement to writing in order to minimize misunderstandings. c. notify the audit staff of an upcoming engagement so that personnel scheduling can be facilitated. 8-2d. all of the above. 7. One means of informing the client that the auditor is not responsible for the discovery of all acts of fraud is the a. engagement letter. b. representation letter. c. responsibility letter. d. client letter. 8. An extensive understanding of the client’s business and industry and knowledge about the company’s operations are essential for doing an adequate audit. For a new client, most of this information is obtained a. from the predecessor auditor. b. from the Securities and Exchange Commission. c. from the permanent file. d. at the client’s premises. 9. The official record of the meetings of the board of directors and stockholders is contained in the corporate a. bylaws. b. charter. c. minutes. d. license. 10. An understanding of a client’s external environment includes a. general economic conditions. b. the extent of competition within the industry. c. regulatory requirements. d. all of the above. 11. A tour of the client’s facilities is helpful in obtaining an understanding of the client’s operations because a. the auditor will be able to assess the physical safeguards over assets....
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This note was uploaded on 01/20/2010 for the course ECONO econ132 taught by Professor Anderson during the Fall '09 term at UCSB.
- Fall '09