Audit: Auditing and Substantive Tests

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Question #1 (AICPA.900546AUD-AU)|  | |
The first general standard requires that an audit of financial statements is to be performed by a person or persons having | A.  Seasoned judgment in varying degrees of supervision and review.| | B.  Adequate technical training and proficiency.|

| The first general standard requires that the audit be performed by individuals with adequate technical training and proficiency as an auditor. The auditor must have obtained a proper education in accounting and auditing and then increase his/her knowledge and proficiency through experience. | | C.  Knowledge of the standards of field work and reporting.| | The first general standard requires that the audit be performed by individuals with adequate technical training and proficiency as an auditor. Knowledge of the standards of field work and reporting would be one facet of the knowledge constituting adequate technical training. | | D.  Independence with respect to the financial statements and supplementary disclosures.| Question #2 (AICPA.921110AUD-AU)|  | |

As the acceptable level of detection risk increases, an auditor may change the | A.  Assessed level of control risk from below the maximum to the maximum level.| | B.  Assurance provided by tests of controls by using a larger sample size than planned.| | C.  Timing of substantive tests from year end to an interim date.| | Performing substantive tests at an interim date increases the risk that misstatements that exist at the balance sheet date will not be detected by the auditor. Evidence collected at an interim date is therefore less strong than evidence collected at year end. Increasing detection risk means that the auditor can obtain less or weaker evidence. As a result, the auditor may be able to push the timing of substantive tests from year end to an interim date. | | D.  Nature of substantive tests from a less effective to a more effective procedure.| Question #3 (AICPA.911104AUD-AU)|  | |

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.| | The successor auditor is required to communicate with the predecessor auditor before accepting an audit engagement. The successor should make specific inquiries regarding the predecessor's understanding of the reason for the change in auditors and disagreements the predecessor had with the client concerning auditing procedures and accounting principles.| | B.  The predecessor's evaluation of matters of continuing accounting significance.| | The successor auditor is required to communicate with the predecessor auditor before accepting an audit engagement. The successor should make specific inquiries regarding the predecessor's understanding of the reason for the change in auditors and disagreements the predecessor had with the client concerning auditing procedures and accounting principles. The successor auditor would NOT inquire as to 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 predecessor's assessments of inherent risk and judgments about materiality.| Question #4 (AICPA.941130AUD-AU)|  | |

The ultimate purpose of assessing control risk is to contribute to the auditor's evaluation of the risk that | A.  Tests of controls may fail to identify procedures relevant to assertions.| | The ultimate purpose of assessing control risk is NOT to contribute to the auditor's evaluation of the risk that tests of controls may fail to identify procedures relevant to the assertions. Tests of controls are performed AFTER procedures relevant to the financial statement assertions have been identified. The primary purpose of such tests is to determine the...
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