ACC 406 AUDIT EXAM 1 QUESTIONS WITH
CORRECT ANSWERS 2025/2026
Major phases of the audit - CORRECT ANSWER -1. Client acceptance/continuance
2. Preliminary engagement activities
3. Plan the audit
4. Consider and audit internal control
5. Audit business processes and related accounts
6. Complete the audit
7. Evaluate results and issue audit report
Client acceptance/continuance - CORRECT ANSWER -1)Review financial information
2)Inquire third parties about clients integrity
3)Communicate with predecessor auditor
4)Determine independence
5)Determine firms technical skills and knowledge of industry
Preliminary engagement activities - CORRECT ANSWER -1. determine the audit engagement
team requirements (training and proficiency)
2. assess compliance with ethical and independence requirements
3. establish an understanding with the client(Engagement letter, Use work of internal auditors,
Role of audit committee)
Engagement Letter - CORRECT ANSWER -A letter that formalizes the contract between the
auditor and the entity and outlines the responsibilities of both parties.
, Plan the Audit - CORRECT ANSWER -1. Risk assessment procedures: (Inquire of management,
required preliminary analytical procedures, observation/inspection)
- Plan materiality and tolerable misstatement
2. Determine audit steps (Reliance versus substantive approach)
-Auditing standards require the auditor to obtain an understanding of internal control in order
to plan an audit
Audit Risk Model Formula - CORRECT ANSWER -AR = IR x CR x DR
Audit Risk Model - CORRECT ANSWER -1. Risk assessment
2. Determine audit steps
3. Test of controls
4. Substantive tests
Primarily used for the purpose of determining the audit plan
Filling the assurance bucket - CORRECT ANSWER -Evidence first comes with... (1 is bottom of
bucket 4 is top)
1) Risk assessment procedures
2) Test of controls
3) Substantive analytical procedures
4) Remaining assurance needed from test of details
Consider and audit internal controls - CORRECT ANSWER -Test of controls; audit procedures to
test the operating effectiveness of controls in preventing or detecting and correcting material
misstatements
CORRECT ANSWERS 2025/2026
Major phases of the audit - CORRECT ANSWER -1. Client acceptance/continuance
2. Preliminary engagement activities
3. Plan the audit
4. Consider and audit internal control
5. Audit business processes and related accounts
6. Complete the audit
7. Evaluate results and issue audit report
Client acceptance/continuance - CORRECT ANSWER -1)Review financial information
2)Inquire third parties about clients integrity
3)Communicate with predecessor auditor
4)Determine independence
5)Determine firms technical skills and knowledge of industry
Preliminary engagement activities - CORRECT ANSWER -1. determine the audit engagement
team requirements (training and proficiency)
2. assess compliance with ethical and independence requirements
3. establish an understanding with the client(Engagement letter, Use work of internal auditors,
Role of audit committee)
Engagement Letter - CORRECT ANSWER -A letter that formalizes the contract between the
auditor and the entity and outlines the responsibilities of both parties.
, Plan the Audit - CORRECT ANSWER -1. Risk assessment procedures: (Inquire of management,
required preliminary analytical procedures, observation/inspection)
- Plan materiality and tolerable misstatement
2. Determine audit steps (Reliance versus substantive approach)
-Auditing standards require the auditor to obtain an understanding of internal control in order
to plan an audit
Audit Risk Model Formula - CORRECT ANSWER -AR = IR x CR x DR
Audit Risk Model - CORRECT ANSWER -1. Risk assessment
2. Determine audit steps
3. Test of controls
4. Substantive tests
Primarily used for the purpose of determining the audit plan
Filling the assurance bucket - CORRECT ANSWER -Evidence first comes with... (1 is bottom of
bucket 4 is top)
1) Risk assessment procedures
2) Test of controls
3) Substantive analytical procedures
4) Remaining assurance needed from test of details
Consider and audit internal controls - CORRECT ANSWER -Test of controls; audit procedures to
test the operating effectiveness of controls in preventing or detecting and correcting material
misstatements
