Audit practice quizzes, Exercises of Auditing

Download Audit practice quizzes and more Exercises Auditing in PDF only on Docsity!

TERMS OF ENGAGEMENT AND AUDIT PLANNING Pre-Engagement i, Where the client is changing auditors, PSA requires communication between the predecessor and successor auditors. The burden of initiating the communication rests with: A. The client. C. The Philippine SEC. B. The predecessor auditor. D. The successor auditor. 2. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding: A. Disagreements which the predecessor had with the client concerning auditing procedures and accounting principles. 8. The predecessor's evaluation of matters of continuing accounting significance. Cc. The degree of cooperation the predecessor received concerning the inquiry of the client’s legal counsel, D. The predecessor's assessments of inherent risk and judgments about materiality. 3. If the prospective client refuses to permit the predecessor to respond or limits the predecessor's response, the successor should: A. Continue to ask the predecessor auditor questions on facts that might bear on the integrity of 5 management, B, Accept the engagement but only after an equitable increase in the professional fee. Cc. Issue a disclaimer of opinion because the limited response of the predecessor auditor constitutes a significant scope limitation. D. Inquire as to the reasons and consider the implications in deciding whether to accept the engagement. 4. If permission from the client to discuss its affairs with the proposed auditor is denied by the client, the predecessor auditor should: A. Keep silent of the denial. B. Disclose the fact that the permission to disclose is denied by the client. C. Disclose adequately to proposed auditor ail noncompliance made by the client. D. Seek legal advice before responding to the proposed auditor. ‘ i 5. Reasons for discontinuing clients might include the following, except A. _ Difficulty in working with client personnel. B. Evidence indicating a client's management has integrity. C. Inability to negotiate an acceptable increase in the audit fee. D. Client need for specialized services the current audit firm is unable or unwilling to provide. Engagement Letters 6. Engagement letters are widely used in practice for: A. Audits only. Cc. Assurance engagements only. | B. Professional engagements of all types. D. Related services only. 7. An engagement letter is prepared with the interest(s) of _-__in mind. ' A. The auditor. C. The public. 8. The client. D. Both the client and the auditor, 8. The engagement letter will do one, some, or all of the following: | A B c D 1. State whether the CPA will perform audit, review or compilation services. Yes Yes Yes Yes i 2, State whether the CPA will perform tax or management advisory or other services. Yes Yes No Yes | 3. State any restriction to be imposed on the CPA’s work. No Yes Yes Yes 1 4. Identify deadlines for completing the work. Yes Yes No Yes i 5. State the amount and type of work to be done by client's personnel in generating auditor's workpapers. No No Yes 6. State the CPA’s fees for the engagement. Yes Yes No 7. Inform the client that the CPA does not have responsibility for detecting fraud. No No Yes Yes 9. The primary purpose of the engagement letter is to: A. Remind management that the primary responsibility for the financial statements rests with management. B. Provide a written record of the agreement with the client as to the services to be provided. C. Provide a starting point for the auditor’s preparation of the preliminary audit program. D. Satisfy the requirements of the CPA’s liability insurance policy. | } \