Topic 5- CPA
The element of the audit planning process most likely to be agreed upon with the client before
implementation of the audit strategy is the determination of the
a. Timing of inventory observation procedures to be performed.
b. Evidence to be gathered to provide a sufficient basis for the auditor's opinion.
c. Procedures to be undertaken to discover litigation, claims, and assessments.
d. Pending legal matters to be included in the inquiry of the client's attorney. ✔✔A
Option "a" is correct because the auditor will normally wish to observe the counting of
inventory and there is therefore a need for coordination of timing between the auditor and the
client.
Option "b" is incorrect because the client will not determine the evidence to be gathered to
provide a sufficient basis for the auditor's opinion.
Option "c" is incorrect because procedures relating to discovery of litigation, claims, and
assessments will be determined subsequent to implementation of the audit strategy.
Option "d" is incorrect because procedures relating to the discovery of pending legal matters
will be determined subsequent to implementation of the audit strategy.
When a CPA is approached to perform an audit for the first time, the CPA should make inquiries
of the predecessor auditor. This is a necessary procedure because the predecessor may be able
to provide the successor with information that will assist the successor in determining
a. Whether the predecessor's work should be utilized.
b. Whether the company follows the policy of rotating its auditors.
c. Whether in the predecessor's opinion internal control of the company has been satisfactory.
d. Whether the engagement should be accepted. ✔✔D
Option "a" is incorrect because the auditor may review the predecessor auditor's workpapers
only to help isolate matters of continuing accounting significance.
Option "b" is incorrect because the requirement that the successor auditor communicate with
the predecessor auditor discourages the process of rotating auditors, especially due to client-
auditor disagreements about accounting principles and audit procedures.
Option "c" is incorrect because the predecessor's opinion of the client's internal control is not
relevant to the successor auditor.
Option "d" is correct because the successor auditor is required to communicate with the
predecessor auditor to obtain information concerning the client to help determine whether the
engagement should be accepted.
The element of the audit planning process most likely to be agreed upon with the client before
implementation of the audit strategy is the determination of the
a. Timing of inventory observation procedures to be performed.
b. Evidence to be gathered to provide a sufficient basis for the auditor's opinion.
c. Procedures to be undertaken to discover litigation, claims, and assessments.
d. Pending legal matters to be included in the inquiry of the client's attorney. ✔✔A
Option "a" is correct because the auditor will normally wish to observe the counting of
inventory and there is therefore a need for coordination of timing between the auditor and the
client.
Option "b" is incorrect because the client will not determine the evidence to be gathered to
provide a sufficient basis for the auditor's opinion.
Option "c" is incorrect because procedures relating to discovery of litigation, claims, and
assessments will be determined subsequent to implementation of the audit strategy.
Option "d" is incorrect because procedures relating to the discovery of pending legal matters
will be determined subsequent to implementation of the audit strategy.
When a CPA is approached to perform an audit for the first time, the CPA should make inquiries
of the predecessor auditor. This is a necessary procedure because the predecessor may be able
to provide the successor with information that will assist the successor in determining
a. Whether the predecessor's work should be utilized.
b. Whether the company follows the policy of rotating its auditors.
c. Whether in the predecessor's opinion internal control of the company has been satisfactory.
d. Whether the engagement should be accepted. ✔✔D
Option "a" is incorrect because the auditor may review the predecessor auditor's workpapers
only to help isolate matters of continuing accounting significance.
Option "b" is incorrect because the requirement that the successor auditor communicate with
the predecessor auditor discourages the process of rotating auditors, especially due to client-
auditor disagreements about accounting principles and audit procedures.
Option "c" is incorrect because the predecessor's opinion of the client's internal control is not
relevant to the successor auditor.
Option "d" is correct because the successor auditor is required to communicate with the
predecessor auditor to obtain information concerning the client to help determine whether the
engagement should be accepted.
