1. When an auditor accepts an audit engagement but does not possess the industry expertise of the business entity involved, the auditor should:

Multiple Choice

First inform management that an unqualified opinion cannot be issued.

Refer a substantial portion of the audit to another CPA who will act as the principal auditor.

Obtain a knowledge of matters that relate to the nature of the entity's business.

Engage financial experts familiar with the nature of the business entity.

2.

A form filed with the SEC when a company changes auditors is a:

Multiple Choice

Form B-1.

Form S-1.

Form 10-K.

Form 8-K.

3.

Which of the following situations would an auditor consider a potential risk factor for misstatements from fraudulent financial reporting?

Multiple Choice

Management is interested in maintaining the entity's earnings trend by using aggressive changes in accounting principles.

The entity distributes financial forecasts to financial analysts that predict conservative operating results.

Several members of the board of directors have recently sold shares of the entity's stock.

Several members of management have recently purchased additional shares of the entity's stock.

4.

Which of the following nonfinancial information would an auditor most likely consider in performing analytical procedures during risk assessment?

Multiple Choice

Management's plans to repurchase stock.

Square footage of selling space.

Objectivity of audit committee members.

Turnover of personnel in the factory.

5.

To best test existence, an auditor would sample from the:

Multiple Choice

Source documents to journals.

Source documents to the general ledger.

General ledger to the financial statements.

General ledger to source documents.

6.

Which of the following procedures is not performed as a part of planning an audit engagement?

Multiple Choice

Verifying each cutoff procedure.

Designing an audit plan.

Developing an overall audit strategy.

Reviewing the working papers of the prior year.

7.

When a company has changed auditors, according to the Professional Standards:

Multiple Choice

The successor may choose not to attempt any communication with the predecessor auditor.

The successor must discuss with the predecessor matters bearing on the engagement prior to accepting the engagement.

The predecessor must always respond fully to all inquiries made by the successor auditor.

The successor auditor has the responsibility to initiate contact with the predecessor auditor to ask about the client before the engagement is accepted; the predecessor has no responsibility to initiate this contact, even when aware of matters bearing on the integrity of management.

8.

Tracing from source documents forward to ledgers is most likely to address which assertion related to posted entries?

Multiple Choice

Valuation.

Rights.

Existence.

Completeness.

9.

Preliminary arrangements agreed to by the auditors and the client should be documented in writing by the auditors. This documentation is known as:

Multiple Choice

A confirmation letter attached to the constructive services letter.

A client representation letter.

An engagement letter.

A memorandum to be placed in the permanent section of the auditing working papers.

10.

Tests for unrecorded assets typically involve tracing from:

Multiple Choice

Recorded journal entries to observations.

Recorded journal entries to documents.

Source documents to observations.

Source documents to recorded journal entries.