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AUDITING - CHAPTER 8 1. Which of the following eliminates voluminous details from the auditor's working trial balance by classifying and summarizing similar or related items? a. Account analyses. b. Lead schedules. c. Control accounts. d. Supporting schedules. 2. An auditor who accepts an audit engagement and does not possess the industry expertise of the business entity should a. engage financial experts familiar with the nature of the business entity. b. obtain a knowledge of matters that relate to the nature of the entity's business. c. refer a substantial portion of the audit to another CPA who will act as the principal auditor. d. first inform management that an unqualified opinion cannot be issued. 3. Early appointment of the independent auditor will enable a. a more thorough examination to be performed. b. a proper study and evaluation of internal control to be performed. c. sufficient competent evidential matter to be obtained. d. a more efficient examination to be planned. 4. The first standard of fieldwork requires, in part, that audit work be properly planned. Proper planning as intended by the first standard of fieldwork would occur when the auditor a. physically observes the movement of securities already counted to guard against the substitution of such securities for others that are not actually on hand. b. uses negative accounts receivable confirmations instead of positive confirmations because the latter require mailing of second requests and review of subsequent cash collections. c. compares all cash as of a particular date to avoid performing time-consuming cash cutoff procedures. d. eliminates the possibility of counting inventory items more than once by arranging to make extensive test counts. 5 . A CPA is conducting the first examination of a non-public company's financial statements. The CPA hopes to reduce the audit work by consulting with the predecessor auditor and reviewing the predecessor's working papers. This procedure is a. acceptable if the client and the predecessor auditor agree to it. b. acceptable if the CPA refers in the audit report to reliance upon the predecessor auditor's work. c. required if the CPA is to render an unqualified opinion. d. unacceptable because the CPA should bring an independent viewpoint to a new engagement. 6. Before applying principal substantive tests to the details of asset and liability accounts at an interim date, the auditor should a. assess the difficulty in controlling incremental audit risk. b. investigate significant fluctuations that have occurred in the asset and liability accounts since the previous balance-sheet date. c. select only those accounts which can effectively be sampled during year-end audit work. d.
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This note was uploaded on 02/22/2010 for the course CCA 401 taught by Professor Mohammad during the Spring '10 term at Abraham Baldwin Agricultural College.

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