Reviewer Module1 3
Reviewer Module1 3
Reviewer Module1 3
Which of the following factors most likely would influence an auditor’s determination of the
auditability of the entity’s financial statements?
2. The auditor should document the understanding established with a client through a(n)
3. A CPA firm’s quality control procedures pertaining to the acceptance of a prospective audit client
would most likely include
a) Inquiry of third parties, such as the prospective client’s bankers and attorneys, about
information regarding the prospective client and its management.
b) Consideration of whether sufficient competent evidential matter may be obtained to afford a
reasonable basis for an opinion.
c) Inquiry of management as to whether disagreements between the predecessor auditor and the
prospective client were resolved satisfactorily.
d) Consideration of whether the internal control structure is sufficiently effective to permit a
reduction in the required substantive tests.
6. If an auditor believes that an understanding with the client has not been established he or she should
ordinarily
7. According to PSA 210, the auditor and the client should agree on the terms of engagement. The
agreed terms would need to be recorded in a(n)
8. Arrangements concerning which of the following are least likely to be included in an engagement
letter?
10. Engagement letter that documents and confirms the auditor’s acceptance of the engagement would
normally be sent to the client
11. In making a decision to accept or continue with a client, the auditor should consider:
Its competence Its independence Its ability to serve the client The integrity of client's
management
12. Which of the following would an auditor least likely perform as a part of the auditor’s preliminary
engagement activities?
a) Obtain understanding of the legal and regulatory framework applicable to the entity.
b) Perform procedures regarding the continuance of the client relationship and the specific audit
engagement.
c) Evaluate compliance with ethical requirements, including independence.
d) Establish and understanding of the terms of the engagement.
13. Which of the following is not one of the reasons why the auditor should perform preliminary
engagement activities?
a) To ensure that there is no misunderstanding with the client as to the terms of the engagement.
b) To ensure that the auditor maintains the necessary independence and ability to perform the
engagement.
c) To help ensure that there are no issues with management integrity that may affect the auditor’s
willingness to continue the engagement.
d) To ensure that sufficient appropriate evidence will be obtained to support the auditor’s opinion
on the financial statements.
14. Preliminary knowledge about the client’s business and industry must be obtained prior to the
acceptance of the engagement primarily to
15. Which of the following is not normally performed in the pre-planning or pre-engagement phase?
16. Which of the following factors most likely would case an auditor not to accept a new audit
engagement?
17. Before performing any audit procedures, the auditor and the client should agree on the
18. An engagement letter should ordinarily include information on the objectives of the engagement
and
II. Significantly lower materiality levels than those used in the prior audit
III. The description of any letters or reports that the auditor expects to issue
IV. Notification of any changes in the original arrangements of the audit
20. Investigation of new clients and re-evaluation of existing ones is an essential part of deciding
a) Inherent risk
b) Whether to accept the engagement
c) Statistical risk
d) Financial risk
21. Qualitative factors can affect an auditor’s assessment of materiality. Which of the following
qualitative factors could influence the assessment of materiality?
I. Misstatements that are otherwise immaterial may be material if they affect earnings trends.
22. A measure of how willing the auditor is to accept that the financial statements may be materially
misstated after the audit is completed and an unqualified opinion has been issued is the
a) Inherent risk
b) Acceptable audit risk
c) Statistical risk
d) Financial risk
24. Which of the following us not normally performed in the planning stage of an audit?
a) Direct
b) Inverse
c) Parallel
d) None
28. A document that details what the auditor will do to gather sufficient, appropriate evidence is the
a) Audit strategy
b) Audit program
c) Audit procedure
d) Audit risk model
a) Given equal peso amounts, frauds are usually considered more important that errors.
b) Qualitative factors as well as quantitative factors affect materiality
c) The most important base used as the criterion for deciding materiality is total assets.
d) Materiality is a relative rather than an absolute concept.
33. RRR Corporation has a few large accounts receivable that total one million pesos whereas RBT
Corporation has many small accounts receivables that total one million pesos. Misstatement in any one
account is more significant for RRR Corporation because of the concept of
a) Comparative analysis
b) Materiality
c) Audit risk
d) Reasonable assurance
34. Audit programs should be designed that
35. When planning a financial statement audit, the auditor should assess inherent risk at the
36. Which of the following is not correct regarding an auditor’s decision that a lower acceptable audit
risk is appropriate?
37. The major concern when using nonfinancial date in analytical procedures is the
39. Which of the following procedures would a CPA ordinarily performs during audit planning?
1. Which of the following factors most likely would influence an auditor’s determination of the
auditability of the entity’s financial statements?
2. The auditor should document the understanding established with a client through a(n)
3. A CPA firm’s quality control procedures pertaining to the acceptance of a prospective audit client
would most likely include
Inquiry of third parties, such as the prospective client’s bankers and attorneys, about information
regarding the prospective client and its management.
The prospective client's consent to make inquiries or the predecessor auditor if any
6. If an auditor believes that an understanding with the client has not been established he or she should
ordinarily
7. According to PSA 210, the auditor and the client should agree on the terms of engagement. The
agreed terms would need to be recorded in a(n)
Engagement letter
8. Arrangements concerning which of the following are least likely to be included in an engagement
letter?
The client’s business risk and the CPA firm’s engagement risk
10. Engagement letter that documents and confirms the auditor’s acceptance of the engagement would
normally be sent to the client
11. In making a decision to accept or continue with a client, the auditor should consider:
Its competence Its independence Its ability to serve the client The integrity of client's
management
12. Which of the following would an auditor least likely perform as a part of the auditor’s preliminary
engagement activities?
Obtain understanding of the legal and regulatory framework applicable to the entity.
13. Which of the following is not one of the reasons why the auditor should perform preliminary
engagement activities?
To ensure that sufficient appropriate evidence will be obtained to support the auditor’s opinion on the
financial statements.
14. Preliminary knowledge about the client’s business and industry must be obtained prior to the
acceptance of the engagement primarily to
15. Which of the following is not normally performed in the pre-planning or pre-engagement phase?
16. Which of the following factors most likely would case an auditor not to accept a new audit
engagement?
17. Before performing any audit procedures, the auditor and the client should agree on the
18. An engagement letter should ordinarily include information on the objectives of the engagement
and
III. The description of any letters or reports that the auditor expects to issue
20. Investigation of new clients and re-evaluation of existing ones is an essential part of deciding
21. Qualitative factors can affect an auditor’s assessment of materiality. Which of the following
qualitative factors could influence the assessment of materiality?
I. Misstatements that are otherwise immaterial may be material if they affect earnings trends.
22. A measure of how willing the auditor is to accept that the financial statements may be materially
misstated after the audit is completed and an unqualified opinion has been issued is the
24. Which of the following us not normally performed in the planning stage of an audit?
Inverse
27. Auditors are responsible for determining whether financial statements are materially misstated, so
upon discovering a material misstatement they must bring it to the attention of
28. A document that details what the auditor will do to gather sufficient, appropriate evidence is the
Audit program
The most important base used as the criterion for deciding materiality is total assets.
33. RRR Corporation has a few large accounts receivable that total one million pesos whereas RBT
Corporation has many small accounts receivables that total one million pesos. Misstatement in any one
account is more significant for RRR Corporation because of the concept of
Materiality
35. When planning a financial statement audit, the auditor should assess inherent risk at the
37. The major concern when using nonfinancial date in analytical procedures is the
39. Which of the following procedures would a CPA ordinarily performs during audit planning?