AUD Exam: A2 - Engagement
Quality and Acceptance, Planning,
and Internal Control with questions
and well verified answers actual
exam!!! 2026
MCQ-02673: Which of the following matters generally is included in an auditor's engagement
letter?
A. Management's responsibility for the fair presentation of the financial statements.
B. The factors to be considered in setting preliminary judgments about materiality.
C. Management's vicarious liability for violations of laws and regulations committed by its
employees.
D. The auditor's responsibility to search for significant internal control deficiencies. -
ANSWER -Choice "A" is correct. An understanding with the client should be established
regarding management's responsibilities, which include the preparation and fair presentation
of the financial statements in accordance with the applicable financial reporting framework.
The understanding should be documented through a written communication, such as an
engagement letter.
MCQ-04620: A successor auditor should request the new client to authorize the predecessor
auditor to allow a review of the predecessor's:
A. Engagement letter - Yes, Working papers - Yes
,B. Engagement letter - Yes, Working papers - No
C. Engagement letter - No, Working papers - Yes
D. Engagement letter - No, Working papers - No - ANSWER -Choice "C" is correct. It is
not appropriate for the auditor to request a review of the predecessor auditor's engagement
letter. This is a business matter between the client and the predecessor auditor that has no
impact on the current period audit. Conversely, review of the predecessor auditor's working
papers (audit documentation) is appropriate and customary to facilitate the auditor's audit.
MCQ-16298: Each of the following identifies one of the principal purposes of an auditor's
communication with those charged with governance, except:
A. To provide an overview of the scope and timing of the audit.
B. To report timely observations arising from the audit that are relevant to the responsibilities
of those overseeing the financial reporting process.
C. To obtain approval of the planned scope of the audit procedures.
D. To obtain information relevant to the audit. - ANSWER -Choice "C" is correct. Those
charged with governance do not provide approval on the planned scope of the audit
procedures. The planned audit procedures are the decision of the auditor based on their
professional judgment.
MCQ-12552: The primary objective of an auditor when considering the acceptance of an initial
audit engagement of a nonissuer is to:
A. Establish whether the preconditions for an audit are present.
B. Agree with management on the timing of tests at interim and year end.
C. Limit the auditor's responsibility if management fails to provide written representations.
D. Specify the degree to which management intends to rely on the auditor's testing of internal
controls. - ANSWER -Choice "A" is correct. The primary objective of an auditor when
considering the acceptance of an initial audit engagement of a nonissuer is to establish
whether the preconditions for an audit are present.
MCQ-11013: Before accepting an audit engagement, a CPA should evaluate whether
conditions exist that raise questions as to the integrity of management. Which of the following
conditions most likely would raise such questions?
A. There are significant difference between the entity's forecasted financial statements and
the financial statements to be audited.
,B. The CPA will not be permitted to have access to sensitive information regarding the salaries
of senior management.
C. There have been substantial inventory write-offs just before year-end in each of the past
four years.
D. The CPA becomes aware of the existence of related party transactions while reading the
draft financial statements. - ANSWER -Choice "B" is correct. An auditor may question
the integrity of management if the auditor is not permitted to have access to sensitive
information regarding the salaries of senior management. The auditor should have access to all
information that is relevant to the preparation and fair presentation of the financial
statements.
MCQ-05345: Which of the following factors most likely would lead a CPA to conclude that a
potential audit engagement should not be accepted?
A. There are significant related party transactions that management claims occurred in the
ordinary course of business.
B. Internal control activities requiring the segregation of duties are subject to management
override.
C. Management continues to employ an inefficient system of information technology to record
financial transactions.
D. It is unlikely that sufficient appropriate audit evidence is available to support an opinion on
the financial statements. - ANSWER -Choice "D" is correct. If it is unlikely that sufficient
appropriate audit evidence will be available to support an opinion on the financial statements,
it would be pointless to conduct an audit.
MCQ-04736: An auditor's engagement letter most likely would include a statement regarding:
A. Management's responsibility to provide certain written representations to the auditor.
B. Conditions under which the auditor may modify the preliminary judgment about materiality.
C. Internal control activities that would reduce the auditor's assessment of risk.
D. Materiality matters that could modify the auditor's preliminary assessment of fraud risk. -
ANSWER -Choice "A" is correct. The auditor is required to establish an understanding
with the client, and this understanding should be documented in the form of an engagement
letter. The understanding (and therefore the letter) should encompass management's
responsibilities, which include providing the auditor with a representation letter at the
conclusion of the engagement.
, MCQ-05718: Which of the following statements most likely would be included in an
engagement letter from an auditor to a client?
A. The CPA firm will provide absolute assurance about whether the financial statements are
free of material misstatement.
B. The CPA firm is responsible for ensuring that the client complies with applicable laws.
C. The CPA firm will involve information technology specialists in the performance of the audit.
D. The CPA firm will adjust the financial statements to correct misstatements before issuing a
report. - ANSWER -Choice "C" is correct. The auditor's understanding with the client
often includes discussion of any specialists who will be involved in the engagement.
MCQ-11017: Which of the following statements would most likely appear in an auditor's
engagement letter?
A. Management is responsible for reporting to us any inadequate provisions for the
safeguarding of assets.
B. We will identify internal controls relevant to specific assertions that may prevent or detect
material misstatements.
C. Management agrees to correct all deficiencies in internal control activities identified by us.
D. Management is responsible for making all financial records and related information
available to us. - ANSWER -Choice "D" is correct. An engagement letter is likely to
include a statement that management is responsible for making all financial records and
related information available to the auditor. An engagement letter should include the
responsibilities to management.
MCQ-14884: In connection with an audit of a nonissuer, the auditor would ordinarily use an
engagement letter to:
A. Mutually agree upon contingent fees between the company and the auditor.
B. Assert that a properly planned audit with detect and identify all material misstatements.
C. Specify any arrangements concerning the involvement of the company's internal auditors on
the audit.
D. Determine which of the company's financial statement notes will be compiled by the
auditor during the audit. - ANSWER -Choice "C" is correct. Content of an engagement
letter would ordinarily include, among other items, information regarding the involvement of
other auditors, specialists, internal auditors, or other staff of the entity.
Quality and Acceptance, Planning,
and Internal Control with questions
and well verified answers actual
exam!!! 2026
MCQ-02673: Which of the following matters generally is included in an auditor's engagement
letter?
A. Management's responsibility for the fair presentation of the financial statements.
B. The factors to be considered in setting preliminary judgments about materiality.
C. Management's vicarious liability for violations of laws and regulations committed by its
employees.
D. The auditor's responsibility to search for significant internal control deficiencies. -
ANSWER -Choice "A" is correct. An understanding with the client should be established
regarding management's responsibilities, which include the preparation and fair presentation
of the financial statements in accordance with the applicable financial reporting framework.
The understanding should be documented through a written communication, such as an
engagement letter.
MCQ-04620: A successor auditor should request the new client to authorize the predecessor
auditor to allow a review of the predecessor's:
A. Engagement letter - Yes, Working papers - Yes
,B. Engagement letter - Yes, Working papers - No
C. Engagement letter - No, Working papers - Yes
D. Engagement letter - No, Working papers - No - ANSWER -Choice "C" is correct. It is
not appropriate for the auditor to request a review of the predecessor auditor's engagement
letter. This is a business matter between the client and the predecessor auditor that has no
impact on the current period audit. Conversely, review of the predecessor auditor's working
papers (audit documentation) is appropriate and customary to facilitate the auditor's audit.
MCQ-16298: Each of the following identifies one of the principal purposes of an auditor's
communication with those charged with governance, except:
A. To provide an overview of the scope and timing of the audit.
B. To report timely observations arising from the audit that are relevant to the responsibilities
of those overseeing the financial reporting process.
C. To obtain approval of the planned scope of the audit procedures.
D. To obtain information relevant to the audit. - ANSWER -Choice "C" is correct. Those
charged with governance do not provide approval on the planned scope of the audit
procedures. The planned audit procedures are the decision of the auditor based on their
professional judgment.
MCQ-12552: The primary objective of an auditor when considering the acceptance of an initial
audit engagement of a nonissuer is to:
A. Establish whether the preconditions for an audit are present.
B. Agree with management on the timing of tests at interim and year end.
C. Limit the auditor's responsibility if management fails to provide written representations.
D. Specify the degree to which management intends to rely on the auditor's testing of internal
controls. - ANSWER -Choice "A" is correct. The primary objective of an auditor when
considering the acceptance of an initial audit engagement of a nonissuer is to establish
whether the preconditions for an audit are present.
MCQ-11013: Before accepting an audit engagement, a CPA should evaluate whether
conditions exist that raise questions as to the integrity of management. Which of the following
conditions most likely would raise such questions?
A. There are significant difference between the entity's forecasted financial statements and
the financial statements to be audited.
,B. The CPA will not be permitted to have access to sensitive information regarding the salaries
of senior management.
C. There have been substantial inventory write-offs just before year-end in each of the past
four years.
D. The CPA becomes aware of the existence of related party transactions while reading the
draft financial statements. - ANSWER -Choice "B" is correct. An auditor may question
the integrity of management if the auditor is not permitted to have access to sensitive
information regarding the salaries of senior management. The auditor should have access to all
information that is relevant to the preparation and fair presentation of the financial
statements.
MCQ-05345: Which of the following factors most likely would lead a CPA to conclude that a
potential audit engagement should not be accepted?
A. There are significant related party transactions that management claims occurred in the
ordinary course of business.
B. Internal control activities requiring the segregation of duties are subject to management
override.
C. Management continues to employ an inefficient system of information technology to record
financial transactions.
D. It is unlikely that sufficient appropriate audit evidence is available to support an opinion on
the financial statements. - ANSWER -Choice "D" is correct. If it is unlikely that sufficient
appropriate audit evidence will be available to support an opinion on the financial statements,
it would be pointless to conduct an audit.
MCQ-04736: An auditor's engagement letter most likely would include a statement regarding:
A. Management's responsibility to provide certain written representations to the auditor.
B. Conditions under which the auditor may modify the preliminary judgment about materiality.
C. Internal control activities that would reduce the auditor's assessment of risk.
D. Materiality matters that could modify the auditor's preliminary assessment of fraud risk. -
ANSWER -Choice "A" is correct. The auditor is required to establish an understanding
with the client, and this understanding should be documented in the form of an engagement
letter. The understanding (and therefore the letter) should encompass management's
responsibilities, which include providing the auditor with a representation letter at the
conclusion of the engagement.
, MCQ-05718: Which of the following statements most likely would be included in an
engagement letter from an auditor to a client?
A. The CPA firm will provide absolute assurance about whether the financial statements are
free of material misstatement.
B. The CPA firm is responsible for ensuring that the client complies with applicable laws.
C. The CPA firm will involve information technology specialists in the performance of the audit.
D. The CPA firm will adjust the financial statements to correct misstatements before issuing a
report. - ANSWER -Choice "C" is correct. The auditor's understanding with the client
often includes discussion of any specialists who will be involved in the engagement.
MCQ-11017: Which of the following statements would most likely appear in an auditor's
engagement letter?
A. Management is responsible for reporting to us any inadequate provisions for the
safeguarding of assets.
B. We will identify internal controls relevant to specific assertions that may prevent or detect
material misstatements.
C. Management agrees to correct all deficiencies in internal control activities identified by us.
D. Management is responsible for making all financial records and related information
available to us. - ANSWER -Choice "D" is correct. An engagement letter is likely to
include a statement that management is responsible for making all financial records and
related information available to the auditor. An engagement letter should include the
responsibilities to management.
MCQ-14884: In connection with an audit of a nonissuer, the auditor would ordinarily use an
engagement letter to:
A. Mutually agree upon contingent fees between the company and the auditor.
B. Assert that a properly planned audit with detect and identify all material misstatements.
C. Specify any arrangements concerning the involvement of the company's internal auditors on
the audit.
D. Determine which of the company's financial statement notes will be compiled by the
auditor during the audit. - ANSWER -Choice "C" is correct. Content of an engagement
letter would ordinarily include, among other items, information regarding the involvement of
other auditors, specialists, internal auditors, or other staff of the entity.
