Multiple Choice Questions Assertions and Procedures 1. The objective of the ordinary audit of financial statements is. the expression of an opinion on: a. The fairness of the financial statements in all material respects. b. The accuracy of the financial statements. c. The accuracy of the annual report. = d. The accuracy of the statement of finanicial position and the statement of comprehensive income. The responsibility for the preparation of the financial statements and . the accompanying footnotes belongs to: a. The auditor. b. The management. c. Both management and the auditor equally. d, Management for the statements and the auditor for the notes. Auditors accumulate evidence to: a. Defend themselves in the event of a lawsuit. b. Justify the conclusions they have otherwise reached. c. Satisfy the requirements of the Secutities and‘ Exchange Commission, : d. Enable them to reach conclusions about the fairness of the financial statements. Management representations that are. embodied in the account balance, transaction class and disclosure components of financial statements. They include existence or occurrence, completeness, rights and obligations, valuation or allocations and presentation and disclosures a. Management representation letter b. Management responsibility statement c. Accounting policies d. Assertions5. Management assertions are a. b. G d. Directly related to the PFRS Stated in the notes to the financial statements. Explicitly expressed representations about the company’s financial condition. Provided to the auditor in the assertions letter, but are not disclosed on the financial statements. 6. Management assertions are a. b. a Implied or expressed representations about classes of transactions and the related accounts in the financial statements Stated in the footnotes to the financial statements Explicitly expressed representations about the financial statements Provided to the auditor in the assertions letter, but are not disclosed on the financial statements Which of the following statements is true? The auditor’s objectives follow and are closely related to management assertions * Management assertions follow and are closely related to the - auditor’s objectives The auditor’s responsibility is to find and disclose fraudulent assertions Assertions about presentation and disclosure deal with whether the accounts have been included in the financial statements at appropriate amounts 8. Which of the following statements is true? a. b. ‘The evidence which the auditor accumulates remains the same from audit to audit, but the audit objectives vaty, depending on the circumstances The audit objectives remain the same from audit to audit, but the evidence varies, depending on the circumstances9. c. The circumstances may vary from audit to audit, but the evidence accumulated remains the same d. The audit objectives may vary from audit to audit, but the circumstances remain the same Substantive procedures are designed to obtain evidence based on the representations of client’s management as embodied in the financial statement components, EXCEPT: a. Completeness b. Existence c. Valuation d. Legality ). Which of the following is not a management assertion? a. Obligations classified as long-term liabilities in the statement of financial position will not mature within one year b. Property is recorded at historical cost and such cost is systematically allocated to appropriate accounting periods. c. Finished goods-inventory in the statement of financial position are available for sale : d. Net income reflects the eatnings power of the enterprise. . Which of the following is an example of an assertion made by management in an entity’s financial statements? a. The financial statements were prepared in an unbiased manner b. Reported inventory balances reflect all related transactions for the period c. Reported accounts receivable do not include any uncollectible accounts d. The:scope of the auditor’s investigation was not limited in any, way by management Which of the following is not one of the five broad categories. of “management assertions? a, General or specific transaction objectives b. Existence or occurrence.c. Valuation or allocation d. Presentation and disclosute 13. This assertion addresses whether all transactions that should be included in the financial statements are in fact included. a. Occurrence b. Completeness c. Rights and obligations d. Existence 14. Which of the following assertions does not relate to balances at period end? a Existence b. , Occurrence c. Valuation or Allocation d. Rights and Obligation 15. Which of the following statements is correct? a: Existence relates‘to whether the amounts in accounts are understated. b. Completeness relates to whether balances exist. Existence relates to whether the balances are valid. d. Occurrence relates. to whether the amounts in accounts occurred in the proper year. 9 16. Which of the following statement is not correct? a. There are many ways an auditor can accumulate evidence to meet the overall audit objectives. ie b. Sufficient appropriate evidence must be accumulated to meet the auditor’s professional responsibility. The cost of accumulating the evidence should be minimized. 4. . Gathering evidence and minimizing costs are equally important considerations that affect the apptoach the auditor selects. 9{7 Assettions ate representations by management that are embodied in financial statement components. An example of an assertion about existence is whether a. _Alllsales transactions for the period ate included in the income statement. b. Capitalized leased property in the statement of financial position represents the cost of the company’s right to the leased asset. c, Raw :materials in the statement of financial position are available for use in production. d. Receivables in the statement of financial position are stated at amortized cost . “That investment in equity securities are stated at fair value” is a management assertion as to a. Existence b. Completeness c. Valuation d. Rights and obligation “That the company has rights over all its property and equipment” is a management assertion as to a, Existence b. Completeness c. Valuation =~ d. Rights and obligation ). In auditing intangible assets, an auditor most likely would review or fe-compute amortization and determine whether amortization period is reasonable in support management’s financial statement assertion of a. Existence b. Completeness c. Valuation d. Rights and obligation 13521, Which of the following most likely would give the most assurance concerning the valuation assertions of accounts receivables? a. db. Tracing amounts in the subsidiary ledger to details on shipping documents. Comparing receivables turnover ratios to industry statistics for reasonableness. Inquiring about receivables pledged under loan agteement. Assessing the allowance for credit losses account for reasonableness. 22. Which of the following statements is not correct? a Tt would be a violation of the completeness assertion if management would record a sale that did not take place ‘The completeness assertion deals with matters opposite from those of the existence/occurrence assertion ‘The completeness assertion is concerned with possibility of omitting items from the financial statements that should have been included. The existence/occurrence assertion is concerned with inclusion of amount that should not have been 23, The financial statement assertions of existence and completeness emphasize opposite audit concerns a. Existence deals with -potential overstatement and b. completeness deals with understatement Existence deals with potential understatement and completeness deals with overstatement Existence and completeness may each deal, with overstatements or understatements, but not in the same transaction Existence always deals with overstatements but completeness may deal with either over or understatements 24. Which of the following statements is not true? : :a. Anexample of a completencss assertion would be that note payable in the statement of financial position includes all such obligations of the entity, b. An example of an existence/occurtence assertion would be that sales in the income statement tepresent exchanges of goods or services that actually took place c. An example of a rights /obligations assertion would be that amounts capitalized for leascs in the statement of financial position represent the cost of the entity’s rights to leased property, d. An cxample of a presentation/disclosure assertion would be that investment property is reported at fair value 25. An auditor most likely would inspect loan agreements under which an entity’s inventories are pledged to support management’s financial statement assertion of a. Presentation and disclosure b. Valuation or allocation c: . Existence or occurrence d. Completeness 26. Confirmation of accounts receivable is a procedure that would most likely obtain evidence concerning management's assertion of a. Presentation and disclosure b. Valuation or allocation c,. Existence or occurrence d. Completeness 21. In testing for cut-off, the objective is to determine a. Whether all of the current period’s transactions are recorded b. That no transactions -from the prior period are included in the curtent petiod’s balances c. That no transactions of the current period have been delayed and recorded in the subsequent period. d. Whether transactions are recorded in the proper period 13731. 32, . An auditor most likely would make inquities of production and sales personnel concerning possible obsolete or slow-moving inventory to support management’s financial statement assertion of a. Presentation and disclosure b. Valuation or allocation c. Existence or occurrence d. Completeness ). During an audit of an entity’s stockholders’ equity, the auditor determines whether there are restrictions on retained carnings resulting from loan agreements. This audit procedure most likely is intended to verify management's assertion of a. Presentation and disclosure b. Valuation or allocation c. , Existence or occurrence d. Completeness ). Computation of receivable and inventory turnover satisfies the audit objective of a. Presentation and disclosure b. Valuation or allocation c. Existence or occurrence d. Completeness An auditor would most likely review an entity’s periodic accounting for the numerical sequence of shipping documents and invoices to support management’s assertion of a. Presentation and disclosure b. Valuation or allocation c, Existence or occurrence d. Completeness In determining whether transactions have been recorded, the direction of test would be from a. General ledger 13833. 34. 35. 36. 37. b. Source documents c. Trial balance d. General journal In testing the existence assertion for an asset, an auditor ordinarily works from the . Financial statements to potentially unrecorded items b. Potentially unrecorded items to the financial statements c. Supporting evidence to accounting records. d. Accounting records to supporting evidence a, When the auditor examines the client’s documents and records to substantiate information on the financial statements, it is commonly referred to as a. Inquiry b. Confirmation c. Vouching d. Physical examination When the auditor uses tracing as an audit procedure for tests of transactions, the auditor is primarily concerned with which audit objective? a. Occurrence b. Completeness c. Cutoff dd. Classification When the auditor used the audit procedure vouching, the auditor is primarily concerned with which of the following audit objectives when testing classes of transactions? a. Occurrence b. Completeness c. Authorization d. Classification - Which of the following is an example of vouching? 13938. 39. AL. 4 Trace inventory purchases from the acquisitions journal to supporting invoices b. Trace selected sales invoices to the sales journal c. Trace details of employee paychecks to the payroll journal 4. Allof the above'are examples of vouching ‘A document which the auditor receives from the client, but which was prepared by someone outside the client’s organization, is a(n) a. Confirmation b. Internal document c. External document d. Inquiry Confirmations are most likely to be used to verify a. Individual transactions between organizations, such as sales transactions 7 b. Bank balances and accounts receivables c. Fixed asset additions d. All three of the above . In performing your audit for a privately-held firm your inquiries have yielded that one of the company's owner's primary motivations is to pay the least amount of income tax that is possible. Based on this observation which audit objective for ending inventory -would the auditor be most concerned about ascertaining? a. Completeness b. Accuracy c. Rights and obligations d. Existence After the auditor has completed all audit procedures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented. This is a highly subjective process that relies heavily on , a.‘ The generally accepted auditing standards. b. The Code of Ethics for Professional Accountants. 140c d. The PFRS. The auditor's professional judgment. 42, Which of the following audit procedures is used extensively throughout the audit and often is complementary to performing ~ other audit procedures? > b. c d. Inspection Observation Inquiry Confirmation 43. Which statement is incorrect about making inquiries as audit procedure? a. Responses to inquiries may provide the auditor with information not previously possessed or with corroborative audit evidence. Responses to inquiries might provide information that differs significantly from other information that the auditor has obtained. Responses to inquiries may provide a basis for the auditor to modify or perform additional audit procedures. Inquiry alone is sufficient to test the operating effectiveness of controls. 44. Observation a. b. Consists of looking at a process or procedure being performed by others. Consists of seeking information of knowledgeable persons, both financial and non-financial, throughout the entity or outside the entity. Is the process of obtaining a representation of information or of an existing condition directly from a third party. Is the auditor’s independent execution of procedures ot controls that were originally performed as part of the entity’s internal control. 1A145. 47. 48, 49. This consists of checking the mathematical accuracy of documents or records. a, Reperformance b. Recalculation c. Confirmation d. Inspection Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every: a. Transaction b. Financial statement account c. Material financial statement account. d. Financial statement account that will be relied upon by third parties The sequence of steps in gathering evidence as the basis of the auditor’s opinion is a. Substantive tests, documentation of internal, and tests of controls b. Documentation of internal control, tests of controls, and substantive tests c. Documentation of internal control, substantive tests, and tests of controls ° a. Tests of controls, documentation of internal control, and substantive tests An audit process is a well-defined methodology for organizing an audit to ensure that a. The evidence gathered is both sufficient and competent b. All appropriate audit objectives are specified c. All appropriate audit objectives afe met d. Allof the above If the auditor were responsible for making certain that all the assertions of management in the statements were correct. a. Bankruptcies could no longer occur b. - Bankruptcies would be reduced to a very a small number c. Audits would be much easier to complete 1A9d. Audits would not be economically feasible. Pre-engagement Activities 50. Investigation of new clients and re-evaluation of existing ones is an essential part of deciding a Inherent risk b. Whether to accept engagement c. Statistical risk id. Financial risk 51. Which of the following is the correct order of steps in the audit process? : A. Perform tests of control B. Develop.an overall strategy for the expected conduct and scope of the audit C. Obtain client’s written representation D. Prepare an engagement letter E. Perform substantive tests _a.D, A,B, E,C 3 c D,B,GAE b. D,B, A, B,C d. D,BE,A,C 52. Which of the following would an auditor least likely perform as part of the auditor’s preliminary engagement activities? a Perform procedures regarding the continuance of the client relationship and the specific audit engagement. ; b. Evaluate compliance with ethical requirements, including independence. Establish. an understanding of the terms of the engagement. d. Obtain understanding of the. legal and regulatory framework applicable to the entity. 2 53. Which of the following is not one of the reasons why auditor should perform preliminary engagement activities? ~ 14355. 56. a. To ensure that the auditor maintains the necessary independence and ability to perform the engagement. b. To help ensure’that there are no issues with management integrity that may affect the auditor’s willingness to continue the engagement. c. To ensure that there is no misunderstanding with the client as to the terms of the engagement. d. To ensure that sufficient appropriate evidence will be obtained to support the auditor’s opinion on the financial statements. Which of the following is not normally performed in the preplanning or pre-engagement phase? a. Deciding whether to accept or reject an audit engagement b. Inquiring from predecessor auditor c. Preparing an engagement letter d. Making a preliminary estimate of materiality In making a decision to accept or continue with a client, the auditor should consider: a. b. cs Its competence Yes Yes No Its independence Yes No Yes Its ability to serve the client properly Yes Yes Yes The integrity of client’s management Yes Yes No d. Yes No No Yes Before accepting an engagement to audit a new client, a CPA is required to obtain a. Apreliminary understanding of the prospective client’s industry and business. The prospective client’s signature to the engagement letter. c. An--undetstanding of the prospective client’s control environment. d. A representation letter from the prospective client.57. Preliminary knowledge about the client’s business and industry must be obtained prior to the acceptance of the engagement primarily to b G: d. Determine the degree of knowledge and expertise required by the engagement. Determine the integrity of management. Determine whether the firm is independent with the client. Gather evidence about the fairness of the financial statements, | 58. ACPA firm’s quality control procedures pertaining to the acceptance of a prospective audit client would most likely include a. Inquiry of management as to whether disagreements between the predecessor auditor and the prospective client were resolved satisfactorily. Consideration of whether sufficient competent evidential matter may be obtained to afford a reasonable basis for an opinion. Inquiry of third parties, such as the prospective client’s bankers’ and. attomeys, about information regarding the prospective client and its management. Consideration of whether the internal control structure is sufficiently effective to permit a reduction in the required substantive tests. 59. Prior to the acceptance of an audit engagement with a client who has terminated the services of the predecessor auditor, the CPA should a Contact the predecessor auditor without advising the prospective client and request a complete report of the circumstance leading to the termination with the understanding that all information disclosed will be kept confidential. Accept the engagement without contacting the predecessor auditor’since the CPA can include audit procedures to verify the reason given by the client for the termination. 145¢. Not communicate with the predecessor auditor because this would in effect be asking the auditor to violate the confidential relationship between the auditor and client. d. Advise the client of the intention to contact the predecessor auditor and request permission for the contact. 60. The purpose of the requirement in having communication between the predecessor and successor auditors is to a. Allow the predecessor to disclose information which would otherwise be confidential. b. Help the successor auditor evaluate whether to accept the engagement. Help the client by facilitating the change of auditors. d. Ensure the predecessor collects all unpaid fees prior to a change in auditor. ° 61, Jem, CPA, has been retained to audit the financial statements of ZVP Co. ZVP’s predecessor auditor was Moshe, CPA, who has been notified by ZVP that Moshe's services have been terminated. Under these circumstances, which party should initiate the communication between Jem and Moshe? a. Jem, the successor auditor b. Moshe, the predecessor auditor c. ZVP's controller. d. The chairman of ZVP's board of directors 62. In an audit, communication between the predecessor and the successor auditor should be a. Authorized in an engagement letter b. Acknowledged in a representation letter ¢. Either written or oral 4. Done with or without the client’s permission -63. 64. 65. 66. ‘The predecessor auditor is required to respond to the request of the successor auditor for information, but the response can be limited to stating that no information will be provided when a, The predecessor auditor has poor relations with the successor auditor, b. The client is dissatisfied with the predecessor's work. c. There are actual ot potential legal problems between the client and the predecessor auditor. d, The predecessor believes that the client lacks integrity. Arnel, CPA, is succeeding Von, CPA, on the audit engagement’of Jin Corporation. Amel plans to consult Von and to review Von's prior yeat working papers. Arnel may do so if a. Vonand Jin consent : b. Jin consents . Vonconsents d. Vonand Amel consent Upon discovering material misstatements in a client’s financial statements that the client would not revise, the auditor withdrew from the engagement. If asked by the successor auditor about the termination the engagement, the predecessor auditor should “a. State that he found material misstatements that the client would not revise b. Suggest that thie successor auditor ask the client ¢. Suggest that the successor auditor obtain the client’s permission to discuss the reasons d. Indicate that a misunderstanding occurred Before accepting an engagement to audit a new client, a CPA is required to obtain a. A detailed understanding of the prospective client’s industry and business ‘ b. A letter of representation from the prospective client’s management, 147c. An understanding of the prospective client’s control environment d. The prospective client's consent to make inquiries of the predecessor auditor, if ariy. 67. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding a. Disagreements the predecessor had with the’ client concerning auditing procedures and accounting principles b. The predecessor's evaluation of matters of continuing accounting significance. c. The degree of cooperation the predecessor received concerning the inquiry of the client’s lawyer. d. The prédecessor’s assessments of inherent tisk and judgments about materiality. : 68. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessbr auditor regarding the predecessor's a. Opinion of any subsequent events occurring since the predecessor's audit report was issued b. Understanding as to the reasons for the change of auditors Awareness of the consistency in the application of PFRS between periods d. Evaluation of all matters of continuing accounting significance 69. A successor 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. 70. Which of the following should an incoming auditor obtain from the predecessor auditor prior to accepting an audit engagement a. Analysis of statement of financial position accounts b. Analysis of income statement accountsc d. All matters of continuing accounting significance Facts that might bear on the integrity of management 71, What information should a successor auditor obtain during the inquiry of the predecessor auditor prior to acceptance of the audit? a b. c d 1. Facts that beat on the integrity of management Il. Whether statistical ot non-statistical sampling was used to gather evidence IIL Disagreement with management concerning auditing procedures IV. The effect of the client’s internal audit function on the scope of the independent auditot’s examination Tand I and IIL Tand IV Il and IV 72. A successor auditor should request the new client to authorize the ptedecessor auditor to allow a review of the predecessor’s a. b. (a d. Engagement letter Working Paper Yes Yes Yes No - No Yes No No 73. Which of the following factors. most likely would cause an auditor not to accept a new audit engagement? a. b. Cs An inadequate understanding of the entity's interval control: structure The close proximity to the end of the entity’s fiscal year Concluding that the entity's management probably lacks integrity ; An inability to perform preliminary analytical procedures before assessing control isk74, 15. 16. 77. Which of the following factors most likely would influence an auditor’s determination of the auditability of the entity's financial statements a. The complexity of the accounting system b. The existence of related party transactions c. The'adequacy of the accounting records d. The operating effectiveness of control procedures In auditing the financial statements of Star Corp., Land discovered information leading Land to believe that Star’s ptior year’s financial statements, which are audited by Jell, require substantial revisions, Under these circumstances, Land should a. Notify Star’s audit committee and stockholders that the prior yea’s financial statements cannot be relied on. b. Request Star to reissue the prior year’s financial statements with the appropriate revisions. : c. Notify Jell about the information and make inquiries about the integrity of Star’s management d. Request Star to atrange a meeting among the, three parties to resolve the matter Zion requested permission to communicate with the predecessor auditor and review certain portions of the predecessor auditor's work papers. The prospective client's refusal to permit this will bear directly on Hawkin's decision concerning the: a, Adequacy of the preplanned audit program b. Ability to, establish consistency in application of accounting principles between years c. Apparent scope limitation d. Integrity of management Ordinarily, the predecessor auditor permits the successor auditor to review the predecessor's working paper analyses relating to Contingencies Position Accounts Yes Yes 150 : .78. 79. b. Yes No c No Yes d No No Which of the following is not correct regarding the communications between successor and predecessor auditors? a. The burden of initiating the communication rests with the predecessor auditor b, The burden of initiating the communication rests with the successor auditor c. The predecessor auditor must receive their former client’s permission’ prior to divulging information to the successor auditor d. The predecessor auditor may choose to provide a limited response to.a successor auditor. The predecessor auditor is required to respond to the request of the successor auditor for information, but the response can be limited to stating that no information will be provided when a. Predecessor auditor has poor relations with successor auditor b. Client is dissatisfied with predecessor’s work c. There are legal problems between client and predecessor d. Predecessor believes that client lacks integrity ~ Establishing the Terms of Engagement 80. ‘The purpose of an engagement letter is to: a. Document the CPA firm's responsibility to external users of the audited financial statements. b. Document the terms of the engagement. ¢ Notify the audit staff of an upcoming engagement so that “petsonnel scheduling can be facilitated. d. Emphasize management's responsibility for approving th audit program, ne 15181. 83. 85. Before performing any audit procedures. The auditor and the client should agree on the Type of opinion to be expressed Terms of the engageme a Yes Yes b. No Yes c No Yes d. Yes Yes Engagement letters a. May be either oral or written. b. Must be written. c. Must be written and notarized. d. Must be written if the client is regulated by the Securities and Exchange Commission. 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) 2 Memorandum to be placed in the permanent section of the auditing working papers b. Engagement letter c. Client representation letter d. Comfort letter The auditor should document the understanding established with a client through a(n) a. Oral communication with the client b. Written communication with the client c. Written or oral communication with the client d. Completely detailed audit plan Which of the following could be a valid reason for sending an engagement letter? a ob oc d To avid misunderstanding with respect to engagement “Yes Yes No: Y¢s To confirm the auditor's acceptance of the appointment Yes Yes Yes 152 NoTo document the objective and scope of the audit Yes Yes Yes Yes To ensure that all misstatements will be detected Yes No No Yes 86. ‘The auditor's responsibility for the detection of fraud can be found in the a. Engagement letter. b. Representation letter, c. Responsibility letter. d, Confirmation letter. 87. [fan auditor believes that an understanding with the client has not teen established, he or she should ordinarily a. Perform the audit with increased professional skepticism b. Decline to accept or perform the audit c. Assess the conttol risk at the maximum level and perform a primarily substantive audit d. Modify the scope of the audit to reflect an increased risk of material misstatement due to fraud 88. Engagement letter that documents and’ confirms the auditor's ~ acceptance of the engagement would normally be sent to the client. a. Before the audit report is issued b. After the audit report is issued. cc. Atthe end of fieldwork. d. *Before the commencement of the engagement 89. ‘An engagement letter should ordinarily include information on the ‘” objectives of the engagement and Limitation of he CPA's responsibilities. Client's responsibilities engagement a Yes Yes Yes b. Yes No Yes 1531. 92. 93. G Yes No No d. No No No Which of the following matters is generally included in the engagement letter? a. Management’s responsibility for the entity’s compliance with Jaws and regulations b. The factors to be considered in setting preliminary judgments about materiality c. Management’s explicit liability for illegal acts committed by its employees d. An auditor’s guarantee that all material misstatements will be detected Which of the following would be least likely to be included in the auditor’s engagement letter? : a. Forms of the report b. Extent of his responsibilities to his client c. Objectives and scope of the audit d. Type of opinion to be issued Which of the following is not one of the principal contents of an engagement letter? -- a. Objective of the financial statements b. Unrestricted access to records and documents. ° c. Limitations of the engagement d. Management's responsibility for the financial statements An engagement letter would not normally include a. Billing arrangement b. Arrangement concerning client’s assistance c. Details of the procedure that will be performed d. Expectation of receiving a tepresentation letter from the management94. The audit engagement letter should generally include a reference to each of the following except a. The expectation of teceiving a written management fepresertation letter b. A request for the client to confirm the tetms of the engagement c. A description of the auditor's method of sample selection d. The risk that material misstatements may remain undiscovered. 95. After preliminary audit, arrangements have been made, an engagement confirmation letter should be sent to the client. The letter usually would not include a. Arreference to the auditor’s responsibility for the detection of errors or irregularities b. Ancstimate of the time to be spent on the audit work by audit staff and management A statement that management advisory services would be made available upon request dA statement that a management letter will be issued outlining comments and suggestions as to any procedures requiring the client's attention 96. "Arrangements concerning which of the following are least likely to be included in engagement letter? a esponsibilities t in client securities a a forms of teports to be issued in addition to the audit teport 97. The use of an engagement letter is the best method of documenting 1. The required communication of significant deficiencies in internal control structure IL. Significantly lower materiality levels than those used inthe prior audit IIL. The description of any letters or reports that the auditor expects to issue 15598. 101. IV. Notification of any changes in the original arrangements of the audit a Tand II b. TandIV ec Wand IIT d. IlLandIV In which of the following situations would the auditor be unlikely to send a new engagement letter to a continuing client? a. A change in terms of the engagement b. A significant change in the nature or size of the client’s business c. A recent change of client management d. A recent change in the partner and/or staff in the audit engagement In a continuing engagement, the continuing auditor would most likely send a new engagement letter when a. There is a change in the partner assigned to the engagement b. There is a recent change in client's management c. There are new accounting pronouncements affecting the client’s financial statements d. There are expected minor changes in the nature or size of the sped i client’s business. Bhan ot 2ronbuh 6 ne oath. ). When the auditor of a parent entity is also the Raktor de its subsidiary, branch ot division (component); which of the following factors would least likely influence the auditor’s decision to send separate letter toa component of a parent entity? Geographical location of the sompontat b. Legal requirements c. Degree of ownership by parent d. Degree of independence of component’s management. Pp The purpose of an engagement letter is to 156102. Document the CPA firm’s responsibility to external users of the audited financial statements Document the terms of the engagement to writIng in order to minimize misunderstandings, Notify the audit staff of an upcoming engagement so that personnel scheduling can be facilitated All ofthe above One means of informing the client that the auditor is not responsible for the discovery of all acts of fraud is the b. c da Engagement letter Representation letter Responsibility letter Client letter