C) prepare a going concern opinion for the client.D) advise the client to have extensive disclosure to alleviate investor concerns.Answer: A6) Auditors perform preliminary analytical procedures to better understand the client's business and to assess client business risk.Answer: TRUE7) In order to be meaningful, a company's ratios should be compared to their prior year's ratios, not industry benchmarks.Answer: FALSE8) Preliminary analytical procedures can help the auditor assess client business risk.Answer: TRUE16) To maximize audit efficiency, the auditor should allocate less tolerable misstatement to accounts that can be verified by using low-cost audit procedures, such as analytical procedures, than to accounts that are more costly to audit.Answer: TRUECPA TAKE NEW CLIENT 33) Before accepting a new client, most CPA firms investigate the company to determine its acceptability. However, AICPA confidentiality requirements prohibit CPA firms from contacting certain parties–namely the company's attorneys and bankers–during this investigation.Answer: FALSE38) Because of audit risk, some CPA firms now refuse any new clients in certain high-risk
industries.Answer: TRUE29) Discuss the essential activities involved in the initial planning of an audit.1.Client acceptance or continuation. In the case of a new client, the auditor must determine whether the client is one with which they wish to be associated with. In the case of a continuing client, an auditor must determine whether continuing the relationship is appropriate and in the firm's best interest.2.The auditor should identify why the client wants or needs an audit. The auditor should determine the reason for the audit as soon as practical. The remainder of the planning activities may be impacted by the client's reason for requesting the audit.3.Obtain an understanding with the client about the terms of the engagement. An understanding with the client should be obtained to avoid misunderstandings. Auditors are required to obtain an understanding with their clients. This understanding must be written.4.Develop an overall audit strategy. The strategy should consider the reasons for the audit, including engagement staffing and any required audit specialists. Setting a strategy helps the auditor determine the resources required for the engagement.Audit program 1) The document that details the specific audit procedures for each type of test is theA) audit strategy.B) audit program.C) audit procedure.D) audit risk model.Answer: B3) When designing the audit program and the particular audit tests, the auditor should keep in mind that
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- Auditor's report