Which of the following is the most likely first step the auditors would perform at the beginning of an initial audit engagement?

Which of the following forms of advertising is permissible?

Advertising that indicates the auditor’s educational and professional attainments.

Before accepting an engagement to audit a new client, an auditor is required to:

make enquiries of the predecessor auditor after obtaining the consent of the prospective client.

In assessing whether to accept a client for an audit engagement, an auditor should consider the:

Entity’s business risk.Auditor’s engagement risk.Integrity of management.

A prospective client’s refusal to give permission to communicate with the previous auditor and review certain portions of the previous auditor’s working papers will bear directly on the auditor’s decision concerning the:

Enquiry of the previous auditor is:

required about matters that have a bearing on acceptance of the client.

When an auditor is approached to perform an audit for the first time, the auditor should make enquiries of the previous 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:

whether the engagement should be accepted.

What is the responsibility of an auditor with respect to communicating with the previous auditor in connection with a prospective new audit client?

The auditor should obtain permission from the prospective client to contact the previous auditor.

Which of the following items should an auditor obtain from the previous auditor prior to accepting an audit engagement?

Facts that might bear on the integrity of management.

Which of the following factors most likely would cause an auditor to not accept a new audit engagement?

The conclusion that the entity’s management probably lacks integrity.

Engagement letters include all of the following except:

a list of adjusting journal entries.

The scope and nature of an auditor’s contractual obligation to a client ordinarily is established in the:

An audit firm’s quality control procedures pertaining to the acceptance of a prospective audit client would most likely include:

enquiry of third parties, such as the prospective client’s bankers and solicitors, about information regarding the prospective client and its management.

An auditor who finds that the client has committed an illegal act would be most likely to withdraw from the engagement when the:

illegal act affects the auditor’s ability to rely on management representations.

Prior to the acceptance of an audit engagement with a client who has terminated the services of the previous auditor, the proposed auditor should?

advise the client of the intention to contact the previous auditor and request permission for the contact.

Requires an understanding of the entity.

Audit planning assists the auditor to:

Identify and resolve potential problems on a timely basis.Devote appropriate attention to important areas of the audit.Perform the audit effectively and efficiently.

Which of the following situations would most likely require special audit planning by the auditor?

Inventory is comprised of precious gemstones.

An auditor obtains knowledge about a new client’s business and its industry in order to:

understand the events and transactions that may have an effect on the client’s financial report.

An auditor searching for related-party transactions should obtain an understanding of each subsidiary’srelationship to the total entity because:

the business structure may be deliberately designed to obscure related-party transactions.

Which of the following procedures would not be used to obtain an understanding of the entity and its environment?

Verify proper evaluation of inventory subject to technological obsolescence.

An auditor who accepts an audit engagement and does not possess the industry expertise of the business entity should:

obtain knowledge of matters that relate to the nature of the entity’s business.

Which of the following actions is the most likely first step that an auditor will perform after accepting an initial audit engagement?

Tour the client’s facilities and review the general records.

Which of the following items is not an important consideration in an auditor’s evaluation of an entity’s business risk?

Auditing standards require the auditor to evaluate the entity’s business risk in order to provide suggestions to improve the entity’s profitability.

An audit program should be designed for each individual audit and should include audit steps and procedures to:

ensure an efficient and effective audit.

Which of the following would be included in the audit strategy document?

The decision as to the combination of substantive testing and tests of control that would be adopted.

Time budgets on audit engagements are not used for which of the following reasons?

To ensure that audit staff working on the engagement are paid the correct amount.

Analytical procedures used in planning an audit should focus on identifying:

areas that may represent specific risk relevant to the audit.

Which of the following procedures is not a typical analytical procedure?

Comparison of recorded amounts of major disbursements with appropriate invoices.

Analytical procedures may be classified as being primarily:

Analytical procedures are:

required for planning and overall review of the financial report.

The auditor generally gives most emphasis to ratio and trend analysis in the examination of:

An example of an analytical procedure is the comparison of:

financial information with similar information regarding the industry in which the entity operates.

Which of the following tends to be most predictable for purposes of analytical procedures applied as substantive tests?

Relationships involving income statement accounts.

Analytical procedures that are required in all audits of financial reports are analytical procedures:

used in the planning and overall review stages.

In applying analytical procedures, the identification of the relationships and types of data used, as well as conclusions reached when recorded amounts are compared to expectations, requires:

An auditor compares this year’s revenues and expenses with those of the previous year and investigates all changes exceeding 10 per cent. By carrying out this procedure the auditor would be most likely to learn that:

the client changed its capitalisation policy for small non-current assets.

Which of the following is not a benefit of analytical procedures?

Provides adjustments to error levels during tests of control.

An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities?

One reason why the independent auditor performs analytical procedures of the client’s operations is to identify:

The auditor is most likely to rely on analytical procedures alone if a balance is:

immaterial and internal controls are good.

Significant unexpected differences identified by analytical procedures will usually necessitate?

investigation by the auditor.

Which of the following is a nonfinancial performance measure?

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of:

The auditor notices significant fluctuations in key elements of the company’s financial report. If management is unable to provide an acceptable explanation, the auditor should:

perform additional audit procedures to investigate the matter further.

An auditor would place most reliance on the results of analytical procedures when there is:

immaterial balance, low inherent risk, low control risk.