ACC 480 Chapter 3 MR Exam Questions And Answers 100% Verified

ACC 480 Chapter 3 MR Exam Questions And Answers 100% Verified Hawkins requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's working papers. The prospective client's refusal to permit this will bear directly on Hawkins' decision concerning the: A) adequacy of the preplanned audit program. B) ability to establish consistency in application of accounting principles between years. C) apparent scope limitation. D) integrity of management. - answerD) integrity of management. 15) In assessing whether to accept a client for an audit engagement, a CPA should consider: A) the current financial health of the prospective client. B) the integrity of management. C) the CPA's overall engagement risk. D) All of these choices are correct. - answerD) All of these choices are correct. 16) Evaluating a prospective client requires which of the following steps? A) Communicate with the predecessor auditor. B) Preplan the audit. C) Establish the terms of the engagement. D) None of these. - answerA) Communicate with the predecessor auditor. 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, in the predecessor's opinion, the financial statements are materially correct. C) whether, in the predecessor's opinion, the company's internal controls have been satisfactory. D) whether the engagement should be accepted. - answerD) whether the engagement should be accepted. Which of the following should an auditor obtain from the predecessor auditor prior to accepting an audit engagement? A) Analysis of balance sheet accounts. B) Analysis of income statement accounts. C) All matters of continuing accounting significance. D) Facts that might bear on management integrity. - answerD) Facts that might bear on management integrity. Which of the following factors most likely would cause a CPA not to accept a new audit engagement? A) The prospective client's unwillingness to permit inquiry of its legal counsel. B) The inability to review the predecessor auditor's documentation. C) The CPA's lack of understanding of the prospective client's operations and industry. D) Indications that management has not investigated employees in key positions before hiring them. - answerA) The prospective client's unwillingness to permit inquiry of its legal counsel. An auditor who discovers that a client's employees paid small bribes to municipal officials most likely would withdraw from the engagement if: A) the payments violated the client's policies regarding the prevention of illegal acts. B) the client receives financial assistance from a federal government agency. C) documentation that is necessary to prove that the bribes were paid does not exist. D) management fails to take the appropriate remedial action. - answerD) management fails to take the appropriate remedial action. A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor's: A) engagement letter. B) audit working papers. C) engagement letter and audit working papers. D) It would not be typical to allow a review of either the engagement letter or the audit working papers. - answerB) audit working papers. Evaluating a prospective client requires which of the following steps? A) Communicate with the SEC. B) Preplan the audit. C) Determine if the firm is independent of the client. D) Communicate with the AICPA. - answerC) Determine if the firm is independent of the client. Which of the following factors most likely would lead a CPA to conclude that a potential audit engagement should be rejected? A) The details of most recorded transactions are not available after a specified period of time. B) Internal control activities requiring segregation of duties are subject to management override. C) It is unlikely that sufficient appropriate evidence is available to support an opinion on the financial statements. D) Management has a reputation for consulting with several accounting firms about significant accounting issues. - answerC) It is unlikely that sufficient appropriate evidence is available to support an opinion on the financial statements.