1. Who may identify matters to be included in a letter of inquiry sent to a client’s legal counsel?

Auditors. Company management.

a. Yes Yes
b. No No
c. Yes No
d. No Yes

2. Which of the following is not one of the three main reasons why it is essential that audit files be
thoroughly reviewed by another member of the audit firm at the completion of the audit?
a. To evaluate the performance of inexperienced personnel.
b. To counteract the bias that frequently enters into the auditor’s judgment.
c. To make sure that the audit meets the CPA firm’s standard of performance.
d. To evaluate the accuracy of the auditing firm’s time budget for the engagement.

3. Which of the following subsequent events is most likely to result in an adjustment to a

company’s financial statements?
a. Merger or acquisition activities.
b. Bankruptcy (due to deteriorating financial condition) of a customer with an outstanding
accounts receivable balance.
c. Issuance of common stock.
d. An uninsured loss of inventories due to a fire.

4. With which of the following client personnel would it generally not be appropriate to inquire
about commitments or contingent liabilities?
a. Controller.
b. President.
c. Accounts receivable clerk.
d. Vice president of sales.

5. At what stages of the audit must analytical procedures be used?

a. Planning and testing.
b. Testing and completion.
c. Planning and completion.
d. Planning, testing, and completion.

6. Which of the following procedures and methods are important in assessing a company’s ability
to continue as a going concern?

Discussions with management regarding Reviewing quarter on the internal control

future plans related to sales activities, questionnaire specifically asking the
cost controls, and marketing efforts. client to evaluate the ability to continue.
a. Yes Yes
b. No No
c. Yes No
d. No Yes