CHAPTER 5 Auditing-Theory-MCQs-by-Salosagcol-with-answers

CHAPTER 5 d.
Von and Arnel consent

1. This consists of checking the mathematical accuracy of
documents of records. 10. An incoming auditor should request the new client to authorize
a. Reperformance the predecessor auditor to allow a review of the predecessor’s
b. Confirmation Engagement letter
c. Recalculation Working Paper
d. Inspection a. Yes
Yes
2. Which of the following assertions does not relate to balances at b. Yes
period end? No
a. Existence c. No
b. Occurrence Yes
c. Valuation or allocation d. No
d. Rights and obligations No
3. Which of the following assertions does not relate to classes of 11. Engagement letter that documents and confirms the auditor’s
transactions and events for the period? acceptance of the engagement would normally be sent to the
a. Completeness client
b. Valuation a. Before the audit report is issued
c. Cut-off b. After the audit report is issued
d. Accuracy c. At the end of fieldwork
d. Before the commencement of the engagement
4. An assertion that transactions are recorded in the proper
accounting period is: 12. Which of the following is not one of the principal contents of an
a. Classification engagement letter?
b. Occurrence a. Objective of the financial statements
c. Accuracy b. Unrestricted access to records and documents
d. Cut-off c. Limitations of the engagement
d. Management’s responsibility for the financial
5. Which of the following is not normally performed in the statements
preplanning or pre-engagement phase?
a. Deciding whether to accept or reject an audit 13. Arrangements concerning which of the following are least likely
engagement to be included in engagement letter?
b. Inquiring from predecessor auditor a. Auditor’s responsibilities
c. Preparing an engagement letter b. Fees and billing
d. Making a preliminary estimate of materiality c. CPA investment in client securities
d. Other forms of reports to be issued in addition to the
6. Before accepting an engagement to audit a new client, a CPA is audit report
required to obtain
a. A preliminary understanding of the prospective 14. The audit engagement letter should generally include a reference
client’s industry and business to each of the following except
b. The prospective client’s signature to the engagement a. The expectation of receiving a written management
letter representation letter
c. An understanding of the prospective client’s control b. A request for the client to confirm the terms of
environment engagement
d. A representation letter from the prospective client c. A description of the auditor’s method of sample
selection
7. Preliminary knowledge about the client’s business and industry d. The risk that material misstatements may remain
must be obtained prior to the acceptance of the engagement undiscovered
primarily to
a. Determine the degree of knowledge and expertise 15. Which of the following would be least likely to be included in
required by the engagement the auditor’s engagement letter
b. Determine the integrity of management a. Forms of the report
c. Determine whether the firm is independent with the b. Extent of his responsibilities
client c. Objectives and scope of the audit
d. Gather evidence about the fairness of the financial d. Type of opinion to be issued
statements
16. According to PSA 210, the auditor and the client should agree
8. In an audit, communication between the predecessor and on the terms of engagement. The agreed terms would need to be
incoming auditor should be recorded in a(n)
a. Authorized in an engagement letter a. Memorandum to be placed in the permanent section of
b. Acknowledged in a representation letter the auditing working papers
c. Either written or oral b. Engagement letter
d. Written and included in the working papers c. Client representation letter
d. Comfort letter
9. Arnel, CPA, is succeeding Von, CPA, on the audit engagement
of Almar Corporation. Arnel plans to consult Von and to review 17. Which of the following factors most likely would influence an
Von’s prior year working papers. Arnel may do so if auditor’s determination of the auditability of the entity’s
a. Von and Almar consent financial statements
b. Almar consents a. The complexity of the accounting systems
c. Von consents b. The existence of related party transactions
c. The adequacy of the accounting records
d. The operating effectiveness of control procedures
18. Which of the following factors most likely would cause an

auditor not to accept a new audit engagement?
a. An inadequate understanding of the entity’s interval
control structure
b. The close proximity to the end of the entity’s fiscal
year
c. Concluding that the entity’s management probably
lacks integrity
d. An inability to perform preliminary analytical
procedures before assessing control risk
19. Which of the following should an auditor obtain from the

predecessor auditor prior to accepting an audit engagement
a. Analysis of balance short accounts
b. Analysis of income statements accounts
c. All matters of continuing accounting significance
d. Facts that might bear on the integrity of management
20. An incoming auditor most likely would make specific inquiries

of the predecessor auditor regarding
a. Specialized accounting principles of the client’s
industry
b. The competency of the client’s internal audit staff
c. The uncertainty inherent in applying sampling
procedures
d. Disagreements with management as to auditing
procedures

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CHAPTER 5 d.

Von and Arnel consent

18. Which of the following factors most likely would cause an

19. Which of the following should an auditor obtain from the

20. An incoming auditor most likely would make specific inquiries

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