Audit Engagements Flashcards
MCQ-03333
The responsibilities of an auditor include all of the following except which one?
A. Appropriate competence and capabilities to perform the audit.
B. A minimum amount of technical knowledge of and experience in the industry in
which the audit client operates.
C. Complying with relevant ethical requirements.
D. Maintaining professional skepticism and exercising professional judgment
throughout the planning and performance of the audit.
Choice “B” is correct. This is not a responsibility of the auditor. The appropriate amount
of technical knowledge of the industry can be obtained by the auditor. Experience in
the industry is not required.
Choice “A” is incorrect. An auditor is responsible for ensuring the members of the
engagement team have the appropriate competence and capabilities to perform the
audit.
Choice “C” is incorrect. An auditor is responsible for complying with all relevant ethical
requirements.
Choice “D” is incorrect. An auditor is responsible for maintaining professional
skepticism and exercising professional judgment throughout an audit.
MCQ-02820
Which of the following is not an example of the application of professional skepticism?
A. Designing additional auditing procedures to obtain more reliable evidence in
support of a particular financial statement assertion.
B. Obtaining corroboration of management’s explanations through consultation with
a specialist.
C. Inquiring of prior year engagement personnel regarding their assessment of
management’s honesty and integrity.
D. Using third-party confirmations to provide support for management’s
representations.
Choice “C” is correct. The auditor should consider that fraud might occur regardless of any past experience with the entity. An assessment of management’s honesty and integrity performed during the previous year would not necessarily be relevant to the current year’s audit.
Choice “A” is incorrect. An auditor might apply professional skepticism by performing
additional audit procedures designed to improve the reliability of evidence.
Choice “B” is incorrect. Corroborating management’s explanations is an example of the
application of professional skepticism, because the auditor is obtaining additional
support rather than simply accepting the explanation as given.
Choice “D” is incorrect. Using third-party confirmations to provide support for
management’s representations is an example of the application of professional
skepticism, because the auditor is obtaining additional support rather than simply
accepting the explanation as given.
MCQ-04299
An auditor of a nonissuer exercising professional skepticism with respect to the risks of
material misstatement due to fraud will most appropriately:
A. Adopt an attitude of acceptance unless evidence indicates otherwise.
B. Authenticate documents used as audit evidence.
C. Consider the reliability of information to be used as audit evidence.
D. Assess the entity’s document-retention controls before using documents as audit
evidence.
Choice “C” is correct. An auditor exercising professional skepticism with respect to the
risks of material misstatement due to fraud will most appropriately consider the reliability of information to be used as audit evidence.
Choice “A” is incorrect. An auditor exercising professional skepticism should critically
assess audit evidence rather than adopting an initial attitude of acceptance.
Choice “B” is incorrect. An auditor is not required to authenticate audit evidence. The
auditor may accept records and documents as genuine unless the auditor has reason
to believe the contrary.
Choice “D” is incorrect. An auditor exercising professional skepticism does not need to
assess the entity’s document-retention controls before using documents as audit
evidence.
MCQ-03367
To obtain reasonable assurance, an auditor should:
A. Plan the work and properly supervise any assistants.
B. Examine all available corroborating evidence supporting management’s
assertions.
C. Design the audit to detect all instances of illegal acts.
D. Ensure that management does not conceal any fraudulent activities on the part of
employees.
Choice “A” is correct. To obtain reasonable assurance, an auditor must plan the work
and properly supervise assistants, as well as determine and apply appropriate materiality levels, identify and assess risks of material misstatement whether due to fraud or error, and obtain sufficient appropriate audit evidence.
Choice “B” is incorrect. An auditor examines some (but not all) available corroborating
evidence supporting management’s assertions. Examination of all evidence would not
be feasible.
Choice “C” is incorrect. An auditor has a reasonable responsibility to design the audit to
detect material instances of illegal acts, errors, and irregularities. It would not be
feasible to design an audit to detect all instances of illegal acts.
Choice “D” is incorrect. It would not be possible for the auditor to ensure that
management does not conceal any fraudulent activities of employees.
MCQ-05709
Which of the following terms identifies a requirement for audit evidence?
A. Appropriate.
B. Adequate.
C. Reasonable.
D. Disconfirming
Choice “A” is correct. The auditor must obtain sufficient appropriate audit evidence to
afford a reasonable basis for the opinion.
Choice “B” is incorrect. Auditing standards do not use the word adequate in describing
the requirements for audit evidence; the term is sufficient appropriate audit evidence.
Choice “C” is incorrect. Auditing standards use the word reasonable to describe the
type of assurance gained by the auditor as the basis for the opinion, and not to
describe a specific requirement for audit evidence.
Choice “D” is incorrect. Auditing standards do not use the word disconfirming in
describing the requirements for audit evidence.
MCQ-03312
In order to express an opinion, the auditor obtains a level of assurance about whether the
financial statements are free from material misstatement, whether due to error or fraud.
Which of the following is required of the auditor in obtaining this level of assurance?
A. Plan the work and properly supervise any assistants.
B. Obtain absolute assurance that the financial statements are not misstated due to
fraud on the part of management.
C. Determine the applicable financial reporting framework and prepare an adequate
description of the framework for inclusion in the financial statements.
D. Exercise his or her specific legal powers and authority in investigating suspicious
activities of the entity’s employees, including management.
Choice “A” is correct. The auditor, in order to express an opinion, must obtain a reasonable level of assurance about whether the financial statements are free from material misstatement, whether due to error or fraud. In order to obtain reasonable
assurance, the auditor must (a) plan the work and properly supervise any assistants;
(b) determine and apply appropriate materiality levels; (c) identify and assess risks of
material misstatement, whether due to error or fraud; and (d) obtain sufficient
appropriate audit evidence.
