chapter 4 test solutions only - Chapter 04 - Engagement...

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Chapter 04 - Engagement Planning Chapter 04 1. Which of the following auditor concerns most likely could be so serious that the auditor concludes that a financial statement audit cannot be conducted? B. The integrity of entity's management is suspect. 2. Before accepting an engagement to audit a new client, an auditor is required to A. Make inquiries of the predecessor auditor after obtaining the consent of the prospective client. 3. Which of the following factors most likely would cause an auditor not to accept a new audit engagement? C. Concluding that the entity's management probably lacks integrity. 4. The auditor is not required to ask the predecessor auditor about C. The fees charged for the previous audit. 5. Audit documentation does not normally include the B. Industry accounting guides. 6. Hill, CPA, has been retained to audit the financial statements of Monday Co. Monday's predecessor auditor was Post, CPA, who has been notified by Monday that Post's services have been terminated. Under these circumstances, which party should initiate the communications between Hill and Post? A. Hill, the auditor. 7. Which of the following provides the best method of obtaining an understanding of a continuing client's business for planning an audit? B. Reviewing prior year audit documentation and the permanent file for the client. 8. Generally accepted auditing standards states that analytical procedures: B. Should be applied in the planning and final review stages of the audit and can be used as a substantive test during the audit. 9. The pre-engagement activities of an audit engagement for a public accounting firm do not include B. Obtaining predecessor audit documentation. 10. In the planning stage, analytical procedures are used to A. Identify potential problem areas. 4-1
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Chapter 04 - Engagement Planning 11. Assume that application of analytical procedures revealed significant unexplained differences between recorded amounts and the expectations (estimates) developed by the auditor. If management is unable to provide an acceptable explanation, the auditor should B. Perform additional audit procedures to investigate the matter further. 12. For audits of financial statements made in accordance with generally accepted auditing standards, the use of analytical procedures is required to some extent C. As a substantive test: No; In the final review stage: Yes 13. Which of the following would not likely be found in the minutes of the board of directors? D. Approval of a new desktop computer for the controller. 14. Public records from which of these sources could be used to find the owner of an office building? C. City and county tax assessor-collector files. 15. Horizontal analysis refers to B. Changes of financial statement numbers and ratios across several years. following procedures would an auditor most likely perform in planning a financial
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This note was uploaded on 02/20/2012 for the course ACCTG 471 taught by Professor Muthannette during the Fall '08 term at Pennsylvania State University, University Park.

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chapter 4 test solutions only - Chapter 04 - Engagement...

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