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1.

Material misstatements may emanate from all of the following except.
a. fraud
b.
error
c. Noncompliance with laws and regulations
d. Inadequacy of accounting records.
2. The level of assurance provided by an audit of detecting a material misstatement is referred to as:
a. Reasonable assurance
b. Moderate assurances
c. Absolute assurance
d. Negative assurance
3. An intentional act by one or more individuals among management, employees, or third parties which
results in misrepresentation of financial statements refers to
a. Error
c. Fraud
b. Noncompliance
d. Illegal acts
4. In the context of financial statement presentation, fraud occurs when:
a. A misstatement is made and there is both knowledge of its falsity and the intent to deceive.
b. A misstatement is made and there is knowledge of its falsity but no intent to deceive.
c. The auditor fails to comply with PSA.
d.
The auditor has an absence of reasonable care in the performance of the audit.
5. The responsibility for the detection and prevention of errors, fraud and noncompliance with laws and
regulations rests with
a. Auditor
c. client management
b. Client’s legal counsel d. internal auditor
6. The responsibility of adopting sound accounting policies, maintaining adequate internal control, and
making fair representation in the financial statement rests
a. With the management
b. With the independent auditor
c. Equally with management and the auditor
d. With the internal audit department
7. The management responsibility to detect and prevent fraud end error is accomplished by
a. Implementing adequate quality control
b. Having an annual audit of financial statements
c. Implementing adequate accounting and internal control system
d. Issuing a representation letter to the auditor
8. Which of the following statements best describes the auditor’s responsibility regarding the detection of
materials errors and frauds?
a. The auditor is responsible for the failure to detect material errors and frauds only when such failure
results from the misapplication of PSA.
b. The audit should be designed to provide reasonable assurance the material errors and frauds will be
detected
c. The auditor is responsible for the failure to detect material errors and fraud only when the auditor fails
to confirm receivables or observe inventories.
d. Extended auditing procedures are required to detect unrecorded transactions even if there is no
evidence that material errors and frauds may exist.
9. The auditor’s best defense when material misstatements in the financial statements are not uncovered in
the audit is that
a. The audit was conducted in accordance with generally accepted accounting principles.
b. Client is guilty of contributory negligence
c. The audit was conducted in accordance with PSA.
d. The financial statements are client’s responsibility
10. Which is the following is most correct regarding the distinction(s) between the auditor’s responsibilities for
searching for errors and frauds
a. Little
b. A significant
c. No
d. Various
11. The following statements relate to the auditor’s responsibility for the detection of errors and fraud. Identify
the correct statements.
I.
Due to the inherent limitations of the audit, there is a possibility that material
misstatements in the financial statements may not be detected
II.
The subsequent discovery of material misstatement of the financial information resulting
from fraud or error does not, in itself, indicate that the auditor failed to follow the basic
principles and procedures of an audit.
a. I only
b. II only
c. Both statements are correct
d. Both statements are incorrect

Management fraud b. concealing his actions by debiting an expense account. Line employees of the entity b. 22. Manipulation b. 16. Window dressing c. Transactions without substance have been recorded III. Theft of assets and employee fraud b. Misrepresentation . Suppression or omission of the effects of transactions from the records or documents c. d. Auditors have more responsibility for finding fraud than errors The primary factor that distinguishes errors from frauds is a. Whether the misstatement is concealed d. Assets have been misappropriated II. Misinterpretation of facts that existed when financial statements were prepared d. Company management changes inventory count tags and overstates ending inventory. b. Management fraud and employee fraud d. Records and documents have been manipulated and falsified IV. Frauds occur more often than errors in financial statements c. Misappropriation of assets or group of assets Which of the following statements best identifies the two types of fraud? a. Misappropriation of asset and defalcation c. All of the above are false d. Only statements II and IV are true Which of the following is an example of an error? a. The effects of the transactions have been omitted from the records a. Lapping Which of the following could be an example of fraud? a. Recording of transactions without substance d. Fraudulent financial reporting and management fraud Fraudulent financial reporting is often called a. Clerical errors in accounting data underlying the financial statements c. 23. 20. An employee steals small tools from the company and neglects to return them. Whether the underlying cause of misstatement relates to misapplication of accounting principles or to clerical processing b. Mistakes in the application of the accounting principles b. Misappropriation of assets d. Clerical mistakes in the processing of transactions d. An error is unintentional. auditor’s responsibility for failure to detect fraud arises When the failure clearly results from non-compliance to PSA Whenever the amounts involved are material Only when the examination was specially designed to detect fraud Only when such failure clearly results from negligence so gross as to sustain an inference of fraud on the part of the auditor Which of the following statements is correct regarding errors and fraud? a. Entity’s management d. 21. while understanding cost of goods sold b. thus overstating expenses. Fraudulent financial reporting is most likely to be committed by whom? a. Examples of errors are when I.12. Employee fraud Which of the following is an example of fraudulent financial reporting? a. whereas fraud is intentional b. 19. The entity’s auditors Which one of the following terms relates to the embezzling of receipts? a. Defalcation b. Misapplication of accounting policies Which of the following is an “error” as distinguished from “fraud” a. c. 18. Embezzlement of company’s furid b. Defalcation c. The a. 14. The treasurer diverts customer payments to his personal due. c. Errors are always fraud and frauds are always errors d. All of the above statements are true b. the cost is reported as a miscellaneous operating expense d. 15. Only statements I and III are true c. Outside members of the entity’s board of directors c. Whether the misstatement is perpetrated by an employee or by a member of management c. An employee omitted an entry to record a bank transfer to cover a cash shortage. 17. Whether the underlying cause of misstatement is intentional or unintentional The term “error” refers to unintentional misrepresentation of financial information. 13.

Greater for management fraud because of management’s ability to override existing internal controls c. Require that the statement be out in writing b. An auditor is responsible to detect material errors. which of the following would the auditor likely detect? a. Greater for management fraud because managers are inherently more deceptive than employees b. The risk of not detecting material fraud is higher than the risk of not detecting a material misstatement arising from error Which of the following statements about fraud or error is incorrect? a. 31. c. It is usually easier for the auditor to uncover errors than fraud c. Misapplication Which of the following statements best describes an auditor’s responsibility to detect errors and fraud? a. the chance a normal audit would uncover such acts is: a. but has no responsibility to detect material fraud that are concealed through employee collusion or management override of the internal control structure c. The auditor planned the audit in a negligent manner c. An unprofessional behavior b. 26. the auditor’s risk of failing to discover the fraud is: a. 30. 25. the auditor should assess the risk that fraud or error may cause the financial statements to contain material misstatements d. An auditor has no responsibility to detect errors and fraud unless analytical procedures or tests of transactions identify conditions causing a reasonably prudent auditor to suspect that the financial statements were materially misstated d. It is usually equally difficult for the auditor to uncover errors or fraud d. The responsibility for the prevention and detection of fraud and error rests with management b. An auditor has no responsibility to detect errors and fraud because an auditor is not an insurer and an audit does not constitute a guarantee In connection with the audit of financial statements. Believe on the statement in order to maintain the professional client-auditor relationship Which of the following statements is true? a. None of the above If an auditor conducted an audit in accordance with auditing standards. an independent auditor could be responsible for failure to detect a material fraud if a. Very high c. 27.24. Due diligence d. 34. Recorded transactions in subsidiaries d. Greater for employee fraud because of the larger number of employees in the organization\ The most difficult type of misstatement to detect is fraud based on a. Corroborate the evidence with other supporting documentation whenever possible d. the auditors should\ a. An attitude of professional skepticism c. Unrecorded transactions b. A rule in the code of professional ethics Professional skepticism dictates that when management to the auditors. An auditor should assess the risk that errors and fraud may cause the financial statements to contain material misstatements and should design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statements b. Errors in postings recorded transactions c. Accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier d. Fraud involving collusion Which of the following statements is incorrect? a. Statistical sampling techniques were not used on the audit engagement. 32. It is usually easier for the auditor to uncover fraud than errors b. The auditor is not and cannot be held responsible for the prevention of fraud and error . 33. b. Zero d. The auditor is not and cannot be held responsible for the detection of fraud or errors c. 28. The fraud was perpetrated by one employee who circumvented the existing internal controls “the auditor would ordinarily expect to find evidence to support management representations and not assume that they are necessarily correct”. This is an example of a. the auditor does not design procedures to uncover fraud or errors In comparing management fraud with employee fraud. Disregard the statement because it ranks low of the evidence quality scale c. Usually. Related party receivable If several employees collude to falsify documents. Greater for employee fraud because of the higher crime rate among blue collar workers d. Misappropriation d. 29. The nonrecording of transactions c. In planning an audit. The overrecording of transactions b. Counterfeit signatures on paid checks d. Very low b.

. or deliberate failure to record transactions c. 36. Condition of internal control b. Management characteristics c. Business risk Audits of financial statements are designed to obtain assurance of detecting misstatement due to Errors Fraudulent Misappropriation financial reporting of assets a. The professional standards do not require the auditor to discover information that is indicative of fraud d. 37. Factor that indicates internal control weaknesses At which stage(s) of the audit may fraud risk factors be identified? Planning Obtaining Conducting Understanding fieldwork a. such as collusion. If the evidence allows the auditors to do so. The auditor designs only procedures to detect material error but no procedures are designed to detect material fraud b. Errors b. auditor’s are required to explicitly assess the risk of material misstatement due to a. which of the following would an auditor least likely consider? a. Observe test counts of inventory at certain locations on an unannounced basis b. Perform analytical procedures rather than taking test counts. Factor whose presence often has been observed in circumstances where fraud has occurred c. Failure to correct known material internal control weaknesses on timely basis b. because: a. Factor whose presence indicates that the risk of fraud is high b. 39. Quality of managements’ business decision s d. forgery. The responsibility for the prevention and detection of fraud and error rests with management The auditor should plan and perform the audit with an attitude of professional skepticism. Factor whose presence requires modification of planned audit procedures d. YES YES YES b. Financial stability of the entity industry condition When considering fraud risk factors relating to management’s characteristics. 35. 40.b. Internal control b. Auditors gathered enough evidence to provide a reasonable basis for performing an opinion\ d. YES YES YES b. Fraud c. 38. Auditors know how the amounts and disclosures in the financial statements were produced b. Auditors give assurance that the financial statements are accurate c. Fraud ordinarily involves acts designed conceal it. Compliance with PFRS c. significant portion of management’s compensation represented by bonuses based upon achieving unduly aggressive operating results d. YES NO YES d. 44. 41. 42. Noncompliance d. recognizing that conditions or events may be found that fraud or error may exist d. which of the following is least likely to indicate a risk of possible misstatements due to fraud? a. auditors give assurance in the form of opinion. YES YES NO c. YES YES NO c. as to whether the financial statements taken as a whole are fairly presented in conformity with PFRS The risk of not detecting material misstatement resulting from fraud is greater than the risk of not detecting a material misstatement arising from error. Nonfinancial management’s preoccupation with the selection of accounting principles c. 43. NO YES NO Which of the following best describes what is meant by the term “fraud risk factor” a. The likelihood of detecting fraud is ordinarily higher than that of detecting error In performing a financial statement audit. Fairness of the financial statement amounts Which of the following is not an assurance that the auditors give to the parties who rely on the financial statements? a. NO YES YES Which of the following is a category of risk factors that should be considered when assessing risk of misstatements arising from misappropriation of assets? a. It is the responsibility of the management to detect fraud and auditor’s responsibility is confined only to the detection of material errors When performing a financial statement audit. YES NO NO d. c. Use of unusually conservative accounting practices Which of the following is most likely to be a response to the auditor’s assessment that the risk of material misstatement due to fraud for the existence of inventory is high? a.

c. 46. Differences exist between control accounts and supporting subsidiary records c. Operating and financing decisions are dominated by one person Which of the following circumstances most likely would cause an auditor to believe that material misstatements exist in an entity’s financial statement? a. Management does not correct material internal control weakness that it knows about c. Negative cash flows from operations d. 53. Management places substantial emphasis on meeting earning projections c. Management is dominated by several individuals b. 51. No No Which of the following most likely to be considered a risk factor relating to fraudulent financial reporting? a. Management places substantial emphasis on meeting earnings projections d. There are numerous delays in preparing timely internal financial reports b. Turnover of senior accounting personnel is low b. Audit trials of computer-generated transactions exist only for a short period of time c. The accounting department is overstaffed b. Request that inventory counts at the various locations be counted on different dates so as to allow the same auditor to be present at every count Which of the following characteristics most likely would heighten an auditor’s concern about the risk of intentional manipulation of financial statements? a. Improper interest expense accrual d. 49. Transactions are not supported by proper documentation d. d. 50. Introduction of significant new products Which of the following conditions or events would least likely increase the risk of fraud or error? a. Computer generated documents c. Lack of transaction trail Which of the following conditions identified during fieldwork of an audit is most likely to affect the auditor’s assessment of the risk of misstatement due to fraud? a. 52. Request that inventories be counted prior to year end. No Yes d. 55. Insiders recently purchased additional shares of the entity’s stock c. Missing documents d. Differences are reflected in the customers’ confirmation replies d. Domination of management by top executives b. There are significant unusual transactions near year-end d. Improper revenue recognition c. Questions with respect to competence or integrity of management b. Checks for significant amounts outstanding at year end b. There have been two new controllers this year Which of the following circumstances would least likely cause an auditor to consider whether material misstatement exist in an entity’s financial statements?. Unusual pressures within the entity c. a. Unusual transactions d. Yes Yes b. Year-end adjusting journal entries Which of the following would be least likely to suggest to an auditor that the client’s statements are materially misstated? a. The chief financial officer does not sign the management representation letter until the last day of the auditor’s fieldwork d. 54. Supporting records that should be readily available are frequently not produced when requested Which of the following circumstances would least likely cause an auditor to consider whether a material misstatement exists? a. 48. Small high-peso inventory items Which of the following is most likely to be presumed to represent fraud risk on an audit? a. There is inadequate working capital due to declining profit d. Large amount of cash processed c. The rate of change in the entity’s industry is slow Individuals who commit fraud are ordinarily able to rationalize the act and also have an Incentive Opportunity a. Operating and financing decisions are dominated by top management b. The turnover of senior accounting personnel is exceptionally low b. The industry in which the entity operates is declining c. Yes No c. 47. plant and equipment asset account b. 45. Capitalization of repairs and maintenance into the property. There were substantial payments for services that appear excessive in relation to services provided Which of the following conditions would not normally cause the auditor to question whether material errors or possible fraud exists? a. There are frequent changes of auditors and lawyers .

An unmodified opinion c. he or she may correctly infer that: a. When the auditor believes a misstatement is or may be the result of the fraud but that the effect of the misstatements is not material to the financial statements. Which of the following is most likely to be an overall response to fraud risk identified in an audit? a. Unmodified opinion with emphasis of matter paragraph 65. Management is dominated by several individuals b. Make the investigation necessary to determine whether errors or fraud have in fact occurred c. The auditor cannot assume that fraud or error is an isolated occurrence unless there is an evidence to the contrary b. the auditor would most likely issue a(n) a. the auditor should issue a report that contains a. he should immediately communicate it to the management even if the potential effect on financial statements is immaterial c. Qualified or adverse opinion c. Equipment is often sold at a loss before being fully depreciated 57. If the auditor believes that the fraud or error has a material effect on the financial statements but the client is not willing to correct the misstatement. If an auditor believes that material errors or fraud exist. Qualified or disclaimer of opinion d. In such a case the CPA should a. Bank reconciliation statements usually include in-transit deposits d. Any system defects encountered during the engagement have been corrected to the auditor’s satisfaction . Place increased emphasis on the audit of objective transactions rather than subjective transactions 60. Use less predictable audit procedures c. There is a significant and prolonged understaffing of the accounting department 59. Either qualified opinion or a disclaimer of opinion 66. Supervise members of the audit team less closely and rely more upon judgment b. There is a significantly low turnover of senior accounting personnel d. Normally. the CPA discovers specific circumstances that led him to the belief that employee fraud that has a material effect on the financial statements may have occurred. No embezzlements remain undetected c. If the auditor is precluded by the entity from obtaining evidence to evaluate whether fraud or error that may be material to that financial statements has occurred. Tract fully approach the suspected employee and attempt to resolve the matter with him b. Fraud and error should be reported to a level of management at least one level above those involved d. Either qualified or adverse opinion d. After advising the client of his findings suggest that an investigation be made to discover whether fraud has in fact occurred 61. An adverse opinion b. which of the following steps is required? a. Which of the following characteristics most likely would heighten an auditor’s concern about the risk of material misstatements in an auditor’s financial statements? a.56. Unmodified report b. If the auditor suspects that error may exist. Consider the implications and discuss the matter with appropriate levels of management b. All of the following conditions are indicators of possible pressures on an entity except a. Which of the following is an incorrect statement? a. The industry in which the entity operates is declining b. Contact regulatory authorities 63. During the course of an audit engagement. The entity does not correct internal control deficiencies that it knows about 58. the auditor should a. Ascertain that the client understand that the ordinary examination is not primarily designed to disclose fraud or defalcations c. Request that management investigate whether errors or fraud have in fact occurred d. The client is heavily dependent on one or a few products or customers d. When a user sees that a unmodified opinion has been expressed by an external auditor. Perform appropriate modified or additional procedures to confirm or dispel the auditor’s suspicion d. Commence a fraud examination d. The entity’s industry is experiencing declining customer demand b. No material errors were found during the engagement b. Consider the implications for other aspects of the audit b. the CPA does not have any responsibility confidential information noted during the audit to the regulatory authorities 64. The rate of change in the entity’s industry is slow c. Only use certified public accountants on the engagement d. There are frequent changes of auditors or legal counsel c. Which of the following conditions or events increase the risk of error or fraud? a. There is inadequate working capital due to declining profits or too rapid expansion c. Resign from the audit c. Consider whether errors or fraud were the result of employee’s failure to comply with specific controls 62.

67. More on discovering errors than employee fraud b. 70. Consider the effects on the financial statements. Fraud b. Tests of transactions c. Noncompliance d. whether due to fraud or error d. Directly b. 71. The auditor is not and cannot be held responsible for the detection of fraud and error d. Report the fraud to a level of management at least one level below those involved in the fraud d. Equally on discovering either one d. 73.d. immaterially if indirect When then auditor knows that a noncompliance with laws and regulation has occurred. Only indirectly c. Both directly and indirectly d. the auditor must a. Discuss the matter with the client’s legal counsel . 69. Plan and perform the engagement with an attitude of professional skepticism b. Report the fraud to the SEC c. which are contrary to the prevailing laws and regulations a. Independent auditor b. Issue an adverse opinion b. Report the fraud to the audit committee b. Management d. Defalcation Most noncompliance affect the financial statements: a. the profession has placed the responsibility: a. Extend the work to audit most recorded transactions and records of an entity These are acts of omissions or commissions by the entity being audited. and ability of personnel assigned significant engagement responsibilities are commensurate with the auditor’s assessment of the level of risk c. either intentional or unintentional. 77. Internal auditors Which of the following is the auditor least likely to do when aware of a noncompliance a. Misappropriation c. Understanding the entity’s internal control d. Design audit tests to detect unrecorded transactions d. Any differences between management and the auditor on accounting matters have been resolved to the auditor’s satisfaction When comparing the auditor’s responsibility for detecting employee fraud and for detecting errors. Determine that the amounts involved are immaterial. The audit team may be selected in ways that ensure that the knowledge. Tests of controls b. including the adequacy of disclosure d. skill. 76. Materially if direct. The audit team may approach the audit with a heighten level of professional skepticism What is an auditor’s responsibility who discovers that management is involved in a potentially immaterial fraud? a. 72. 74. Client’s legal counsel c. 75. The auditor is responsible for the failure to detect fraud only when such failure clearly results from non performance of audit procedures specifically described in the engagement letter b. The auditor should plan and audit to provide a guarantee that the financial statements are free of material misstatements. 68. and if so. The auditor is responsible for the failure to detect fraud only when an unmodified opinion is issued The auditor’s evaluation of the likelihood of material employee fraud is normally done initially as a part of : a. Not rely on internal controls that are designed to prevent or detect errors or fraud c. Withdraw from the engagement c. The assessment of whether to accept the audit engagement An auditor should recognize that the application of auditing procedures may produce evidence indicating the possibility of errors or fraud and therefore should: a. Report the matter to the proper government authorities Generally the decision to notify parties outside the client’s organization regarding noncompliance with laws and regulations is the responsibility of the a. The auditor’s ability to assess control risk below the maximum may be reduced and the auditor should be sensitive to the ability of management to override controls b. On the senior auditor for detecting errors and on the manager for detecting employee fraud Judgments about the increased risk of misstatement of the financial statements due to fraud may influence the auditor’s professional judgments in the following ways except: a. The auditor is required to provide reasonable assurance that the both material errors and fraud are detected c. More on discovering employee fraud than errors c. there is no reporting responsibility Which of the following statements best describes the auditor’s responsibility regarding the detection of fraud? a.

except: a. The auditor should perform procedures to identify instances of noncompliance with laws and regulations c. Purchasing a real property for a price that is significantly higher than the seller’s book value d. b. Purchasing land for a price significantly different from the seller’s recorded amount c. Client does not take remedial action that the auditor considers necessary c. 86. Obtain understanding of the nature of the act. Auditors usually rely on lawyers’ representations to detect noncompliance c. The effectiveness of audit procedures may be affected by the limitations of the audit d. Payment of commission to sales agent d. 80. effect on the financial statements. Obtain evidence about the potential effect of the noncompliance on the financial statements c. that typically do not have a material. the risk of not detecting material misstatement due to noncompliance is high. Notify the regulatory agencies b. Noncompliance was committed last year when financial statements were not audited d. Determine who was responsible for the act c. 79. Payment of fines or penalties b. 84. Payments without proper documentation c. Noncompliance was a violation of PFRS b. Apply audit procedures specifically directed to ascertaining whether noncompliance has occurred b. Contact the local law enforcement officials regarding potential criminal wrongdoing d. or government employees c. b. 81. Auditor has already assessed control risk at the maximum level If specific information comes to an auditor’s attention that implies an existence of noncompliance with laws that could result in a material. There are many laws and regulations. This can be attributed to all of the following factors. 85. related parties. Discuss the evidence with the client’s audit committee. The determination of whether a particular act constitutes noncompliance is ultimately based on the judgment of the auditor Which of the following circumstances is not an indication of possible noncompliance? a.78. Payment for unspecified services to consultants. Investigation by government agencies b. An audit in accordance with PSA cannot be expected all noncompliance with laws and regulations b. the auditor should a. or others with equivalent authority and responsibility Which of the following does not properly described a procedure that the auditor normally performs in connection with noncompliance? a. Inquire of management concerning the entity’s policies and procedures regarding compliance with laws and regulations . Consider the impact of the noncompliance on the relationship with the company’s management Which of the following statements about noncompliance is incorrect? a. Payment for specified services to consultant According to PSA250. It is management’s responsibility to ensure that entity’s operations are conducted in accordance with laws and regulations c. Media comment b. An auditor cannot be held responsible for preventing noncompliance d. The auditor should obtain a general understanding of legal and regulatory framework applicable to the entity b. 82. The auditor should obtain sufficient appropriate evidence about compliance with laws and regulations Which of the following procedures would an auditor be unlikely to perform when obtaining a general understanding about the laws and regulations affecting the clients business? a. Modify the opinion on the client’s financial statements An auditor who discovers that the client has not complied with laws and regulations that has a material effect on the financial statements most likely would withdraw from the engagement if the a. Seek the advice of an informed expert qualified to practice law as to possible contingent liabilities c. Purchasing at prices significantly above or below market price d. but indirect effect on the financial statements. 83. Noncompliance may involve conduct designed to conceal it When the auditor becomes aware of information concerning a possible instance of noncompliance. The auditors should obtain oral representation that management has disclosed to the auditor all known actual or possible noncompliance with laws and regulations d. Payment for goods or services to the country from which the goods or services originated Which of the following conditions would least likely indicate the occurrence of rioncompliance? a. Existence of an accounting system which fails to provide an adequate audit trail or sufficient evidence Which of the following conditions would most likely indicate a possible noncompliance with laws and regulations? a. and the circumstances in which it has occurred and sufficient other information to evaluate the possible effect on the financial statements d. relating principally to the operating aspects of the entity. the auditor should next a. 87. Report the matter to an appropriate level of management at least one level above those involved d.

Obtain a representation letter from the client’s legal counsel After obtaining sufficient level of understanding about the client’s legal and regulatory framework. Monitor entity’s legal requirements and ensure that operating procedures are designed to meet these requirements d. Inquire of management concerning entity’s policies and procedures regarding compliance with laws and regulations d. 91. Employees’ actions affect the auditor’s ability to rely on management’s representations d. Issue a disclaimer of opinion instead During the annual audit of Joax Corp. but they refused to take any action because the amounts involved were immaterial to the financial statements. evaluating and accounting for litigation. Inquiring from the client’s lawyers b. a publicly held company. With from the engagement and indicate the reasons to the audit committee in writing b. Inquire of management as to the laws or regulations that may ne expected to have a fundamental effect on the operations of the entity Which of the following procedures would assist the auditor in identifying noncompliance with laws and regulations? a. evaluating and accounting for litigation claims and assessments d. Client receives financial assistance from various government agencies b. Management representation letter d. determined that illegal political contributions had been made during each of the past seven years. Discuss with the client management the policies or procedures adopted for identifying. Preliminary judgment about materially levels An auditor who discovers that a client’s employees have paid small bribes to public officials most likely would withdraw from the engagement if the a. including the ear under audit. CPA. claims and assessments If the client refuses to accept an audit report that is qualified due to noncompliance with laws and regulations. Notes to the financial statements fail to disclose the employees’ actions . Perform procedures to help identify instance of noncompliance with laws and regulations c. Joy should reconsider the intended degree of reliance to be placed on the a. Withdraw from the engagement and indicate the reasons to the SEC or other regulatory body in writing d. 92.. Letter of audit inquiry to the client’s attorney b. Evidence that is necessary to p-rove that the illegal acts were committed does not exist c. Discuss with management the policies or procedures adopted for identifying. the auditor should a. Issue an adverse opinion if management agrees to fully disclose the matter c. 90. Joy. Joy notified the board of directors about the illegal contributions. 88. Inquire of management as to the laws or regulations that may be expected to have a fundamental effect on the operations of the entity c. 89. a continuing auditor. the auditor should: a. Prior years’ audit programs c. Inspecting correspondence with relevant regulatory agencies c.b. Develop a code of conduct and ensure that these employees comply with such code b.