Aud practical test A2
Engagement Quality and Acceptance, Planning, and Internal Control
Study online at https://quizlet.com/_fcsxjd
1. The engagement letter should include a An auditor's engagement letter most likely
statement regarding the inherent limita- would include a statement regarding:
tions of the audit. This inherent limitation
statement describes the unavoidable risk
that some material misstatements may
not be detected, even though the audit
is properly planned and performed in ac-
cordance with GAAS.
2. The initiative to communicate with the Hill, CPA, has been retained to audit the fi-
predecessor auditor rests with the suc- nancial statements of Monday Co. Monday's
cessor auditor. Note, however, that the predecessor auditor was Post, CPA, who has
successor auditor must first receive per- been notified by Monday that Post's services
mission from the client. have been terminated. Under these circum-
stances, which party should initiate the com-
munications between Hill and Post?
3. . A CPA cannot render an opinion on fi- Which of the following factors most likely
nancial statements unless he or she has would lead a CPA to conclude that a potential
obtained sufficient appropriate audit evi- audit engagement should be rejected?
dence supporting that opinion. If such ev-
idence were unlikely to be available, the
CPA would most likely reject the potential
audit engagement.
4. A predecessor auditor is an independent Which of the following individuals would be
CPA from a different audit firm who was considered a predecessor auditor?
engaged to perform but did not com-
plete an audit of the financial statements
or is an independent CPA from a different
1/5
, Aud practical test A2
Engagement Quality and Acceptance, Planning, and Internal Control
Study online at https://quizlet.com/_fcsxjd
audit firm who has reported on the most
recent audited financial statements.
5. The successor auditor is required to A successor auditor should make specific and
make inquiries of the predecessor au- reasonable inquiries of the predecessor audi-
ditor before accepting an engagement. tor regarding the predecessor's:
These inquiries should include the prede-
cessor's understanding as to the reasons
for the change in auditors.
6. The AICPA's Statements on Quality Con- A CPA firm evaluates its personnel advance-
trol Standards assert that profession- ment experience to ascertain whether individ-
al development policies and procedures uals meeting stated criteria are assigned in-
should be established by the firm in creased degrees of responsibility. This is evi-
order to provide reasonable assurance dence of the firm's adherence to which of the
that personnel will have the knowledge following prescribed standards:
required to perform their work and
progress within the firm.
7. Inadequate financial records may pre- Which of the following factors most likely
clude the auditor from obtaining suffi- would influence an auditor's determination of
cient appropriate audit evidence. the auditability of an entity's financial state-
ments?
8. The auditor should assess the integrity of Which of the following is not assessed by the
client management (and not its own in- auditor as part of the decision regarding the
tegrity) when deciding whether to accept acceptance of a new client?
a new client.
9. A successor auditor's inquiries of the pre- A successor auditor's inquiries of the prede-
decessor auditor should include ques- cessor auditor should include questions re-
tions regarding the predecessor's under- garding:
2/5
Engagement Quality and Acceptance, Planning, and Internal Control
Study online at https://quizlet.com/_fcsxjd
1. The engagement letter should include a An auditor's engagement letter most likely
statement regarding the inherent limita- would include a statement regarding:
tions of the audit. This inherent limitation
statement describes the unavoidable risk
that some material misstatements may
not be detected, even though the audit
is properly planned and performed in ac-
cordance with GAAS.
2. The initiative to communicate with the Hill, CPA, has been retained to audit the fi-
predecessor auditor rests with the suc- nancial statements of Monday Co. Monday's
cessor auditor. Note, however, that the predecessor auditor was Post, CPA, who has
successor auditor must first receive per- been notified by Monday that Post's services
mission from the client. have been terminated. Under these circum-
stances, which party should initiate the com-
munications between Hill and Post?
3. . A CPA cannot render an opinion on fi- Which of the following factors most likely
nancial statements unless he or she has would lead a CPA to conclude that a potential
obtained sufficient appropriate audit evi- audit engagement should be rejected?
dence supporting that opinion. If such ev-
idence were unlikely to be available, the
CPA would most likely reject the potential
audit engagement.
4. A predecessor auditor is an independent Which of the following individuals would be
CPA from a different audit firm who was considered a predecessor auditor?
engaged to perform but did not com-
plete an audit of the financial statements
or is an independent CPA from a different
1/5
, Aud practical test A2
Engagement Quality and Acceptance, Planning, and Internal Control
Study online at https://quizlet.com/_fcsxjd
audit firm who has reported on the most
recent audited financial statements.
5. The successor auditor is required to A successor auditor should make specific and
make inquiries of the predecessor au- reasonable inquiries of the predecessor audi-
ditor before accepting an engagement. tor regarding the predecessor's:
These inquiries should include the prede-
cessor's understanding as to the reasons
for the change in auditors.
6. The AICPA's Statements on Quality Con- A CPA firm evaluates its personnel advance-
trol Standards assert that profession- ment experience to ascertain whether individ-
al development policies and procedures uals meeting stated criteria are assigned in-
should be established by the firm in creased degrees of responsibility. This is evi-
order to provide reasonable assurance dence of the firm's adherence to which of the
that personnel will have the knowledge following prescribed standards:
required to perform their work and
progress within the firm.
7. Inadequate financial records may pre- Which of the following factors most likely
clude the auditor from obtaining suffi- would influence an auditor's determination of
cient appropriate audit evidence. the auditability of an entity's financial state-
ments?
8. The auditor should assess the integrity of Which of the following is not assessed by the
client management (and not its own in- auditor as part of the decision regarding the
tegrity) when deciding whether to accept acceptance of a new client?
a new client.
9. A successor auditor's inquiries of the pre- A successor auditor's inquiries of the prede-
decessor auditor should include ques- cessor auditor should include questions re-
tions regarding the predecessor's under- garding:
2/5
