Microsoft TeamsEditViewWindowHelpFri Feb 11 10:35:19Search2 AAP-Final-Exam-LPU.pdfCloseActivityChat11) An auditor's engagement letter most likely will includeA. A request for permission to contact the client's lawyer for assistance in identifying litigation, claims, and assessments.B. A reminder that management is responsible for illegal acts committed by employees.C. The auditor's preliminary assessment of the risk factors relating to misstatements arising from fraudulent financialreporting.D. Management's acknowledgment of its responsibility for such internal control as it determines is necessary to enablethe preparation of financial statements that are free from material misstatement.Teams12) Early appointment of the independent auditor will enableA. A more thorough examination to be performed.B. A proper study and evaluation of internal control to be performed.C. Sufficient competent evidential matter to be obtained.D. A more efficient examination to be planned.Assignments13) An auditor who accepts an audit engagement and does not possess the industry expertise of the business entity, shouldA. Engage financial experts familiar with the nature of the business entity.B. Obtain knowledge of matters that relate to the nature of the entity's business.C. Refer a substantial portion of the audit to another CPA who will act as the principal auditor.D. First inform management that an unqualified opinion cannot be issued.CalendarCalls14) Engagement letters are widely used in practice for professional engagement of all types. The primary purpose of theengagement letter is toA. Remind management that the primary responsibility for the financial statements rests with management.B. Satisfy the requirements of the CPA's liability insurance policy.C. Provide a starting point for the auditor's preparation of the preliminary audit program.D. Provide a written record of the agreement with the client as to services to be provided.Files15) Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditorregardingA. Disagreements of 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 predecessor's assessments of inherent risk and judgments about materiality.16) Which of the following factors would most likely cause a CPA to decide not to accept a new audit engagement?A. The CPA's lack of understanding of the prospective client's internal auditor's computer-assisted audit techniques.B. Management's disregard of its responsibility to maintain an adequate internal control environment.C. The CPA's inability to determine whether related-party transactions were consummated on terms equivalent to arm'slength transaction.D. Management's refusal to permit the CPA to perform substantive tests before the year-end.17) Which of the following is not normally performed in the preplanning or pre-engagement phase?A. Deciding whether to accept or reject an audit engagementB. Inquiring from predecessor auditorC. Preparing an engagement letterD. Making a preliminary estimate of materiality18) The following are considered by a CPA firm in deciding whether to accept a new client, exceptA. The client's probability of achieving an unmodified opinionB. The client's financial abilityC. The client's relations with its previous CPA firmD. The client's standing in the business community19) If a change in the type of engagement from higher to lower level of assurance is reasonably justified, the report based onthe revised engagementA. Omits reference to the original engagementB. Should always refer to any procedures that may have been performed in the original engagement.C. Should refer to the original engagement in a separate paragraph preceding the opinion paragraph.D. Should qualify the opinion due to a scope limitation.20) One of the first things that the auditor will do after accepting a new client isAppsA. Tour the client's facilitiesHelp Microsoft TeamsEditViewWindowHelpFri Feb 11 10:35:28Search2 AAP-Final-Exam-LPU.pdfCloseActivity20) One of the first things that the auditor will do after accepting a new client isA. Tour the client's facilitiesChatTeamsB. Study the client's internal control structureC. Communicate with predecessor auditorD. Contact client's attorney to discover legal obligationsAssignments21) An audit engagement letterA. May not be prepared each period for a recurring audit engagementB. Is prepared for the benefit of the audit, audit client and general publicC. Shall include specific audit procedures to be performed by the auditorD. Is usually sent by auditor to the client upon the commencement of the auditCalendar22) The engagement letterA. Can affect legal responsibility to the clientB. Can be used to alter the auditor's responsibilities under the standards on auditingC. Is used only if it is an engagement, but has no effect for review or compilation servicesD. Affects the CPA firm's responsibility to external users of audited financial statementsCalls23) Which of the following is not involved during pre-planning phase?A. Obtaining information about client's legal obligationB. Obtaining an engagement letterC. Selecting staff for engagementD. Deciding whether to accept or continue an audit engagementFiles24) Which of the following matters is least likely to be discussed in an engagement letter?A. The fact that the auditor does not plan to detect material irregularitiesB. The fact that the financial statements are the responsibility of managementC. Assistance to be provided by client personnelD. Timing of the performance of the examination25) To obtain an understanding of a continuing client's business in planning an audit, an auditor most likely wouldA. Review prior year working papers and the permanent file for the clientB. Read specialized industry journalsC. Perform tests of details of transactions and balancesD. Reevaluate the client's internal control environment26) It is a type of an engagement in which the financial statements for the prior period were not audited.A. Initial audit engagementB. Continuing audit engagementC. Previous audit engagementD. Future audit engagement27) Who is responsible for the prevention and detection of material misstatements in the financial statements?A. Management and those charged with governanceB. Internal auditorC. Independent external auditorD. Government auditor28) Which of the following statements concerning materiality as regards to audit is incorrect?A. It may be viewed as the largest amount of misstatements that the auditor could tolerate in the financial statements orthe smallest aggregate amount that could misstate the financial statements.B. In designing an audit plan, the auditor should make a preliminary estimate of materiality for use during the examinationas some matters are important for fair presentation of financial statements while other matters are not important.C. It is specifically provided and quantified in the Philippine Standards on Auditing (PSAS) for each industry.D. It is a matter of professional judgment and necessarily involves quantitative and qualitative factors.Apps29) The following are the uses of materiality in an audit, exceptA. In the planning stage, to determine the scope of audit procedures.B. In the testing stage, to determine the amount of evidence to accumulate.C. In the completion phase, to evaluate the effect of misstatement on the financial statements.D. In the pre-engagement phase, to determine the capability of the client to pay audit fees.30) The following statements concerning the planning stage are correct exoeptHelp

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