Before the audit begins, the auditor performs pre-engagement acceptance or continuance procedures.This includes: Throughout this process, you can expect: Once the pre-engagement assessment is complete, the auditor issues an Engagement Letter with:
Notes
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SET 81.What will an auditor who has been proposed for an auditengagement usually do prior to accepting a new client?a.Draft the financial statements of the client as a measureof goodwill.b.With the permission from the prospective client,contact the predecessor auditor to determine if thereare any disagreements between the client and theaudit firms.c.Obtain the potential client's permission to talk to theformer auditor and review work papers.d.Perform a peer review on the potential client inaccordance with professional standards.2.Which of the following statements is true with regard to therelationship among audit risk, audit evidence, and materiality?a.The lower the inherent risk and control risk, the lower theaggregate materiality threshold.b.Under conditions of high inherent and control risk,the auditor should place more emphasis on obtainingexternal evidence and should reduce reliance oninternal evidence.c.Where inherent risk is high and control risk is low, theauditor may safely ignore inherent risk.d.Aggregate materiality thresholds should not changeunder conditions of changing risk levels.
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Fraud Examination
Albrecht/Albrecht
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AT–Prelim Rev [875 MCQs]Red SirugPage 69 of 853.Which of the following is most likely to be an overall responseto fraud risks identified in an audit?a.Supervise members of the audit team less closely andrely more upon judgment.b.Use less predictable audit procedures.c.Use only certified public accountants on the engagement.d.Place increased emphasis on the audit of objectivetransactions rather than subjective transactions.4.Which of the following represents a procedure that the auditormay use because plausible relationships among financialstatement balances are expected to exist?a.Attributes testingb.Enterprise risk assessmentc.Inherent tests of controld.Analytical review5.Which of the following statements is incorrect regardingobtaining an understanding of the entity and its environment?a.Obtaining an understanding of the entity and itsenvironment is an essential aspect of performing an auditin accordance with PSAs.b.Understandingoftheentityanditsenvironmentestablishes frame of reference within which the auditorplans the audit and exercises professional judgmentabout assessing risks of material misstatement in thefinancial statements and responding to those risksthroughout the audit.c.The auditor's primary consideration is whether theunderstanding that has been obtained is sufficient toassess the risks of material misstatement in the financialstatements and to design and perform further auditprocedures.d.The depth of the overall understanding that isrequired by the auditor in performing the audit is atleast equal to that possessed by management inmanaging the entity.
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Fraud Examination
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