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Auditing review questions

24. In accepting an engagement, an auditor takes on professional responsibilities to:
a. the public.
b. the client.
c. other members of the public accounting profession.
d. the public, the client, and other members of the public accounting profession.
e. the client and the public.

25. The importance of the accept/reject decision for a particular client is reflected in the inclusion of "acceptance and continuation of clients" as:
a. the subject of Statement of Financial Accounting Standards 96.
b. the subject of Statement on Auditing Standards 7.
c. a separate rule in the AICPA Code of Conduct.
d. an explicit part of the General Standards.
e. one of the quality control elements for CPA firms.

26. In the communication with the predecessor auditor, the potential successor should make specific and reasonable inquiries regarding matters that may affect the decision to accept the engagement. Which of the following items is least likely to be included in the inquiries?
a. the integrity of management
b. disagreements with management about accounting matters
c. specific areas of audit difficulty and cost
d. the predecessor's understanding of the reasons for a change in auditors
e. disagreements with management about auditing matters

29. Which key financial ratio is defined as the estimate of the number of days from the time a company purchases inventory, sells it, and collects the receivable?
a. Inventory turnover.
b. Accounts receivable turnover.
c. Gross operating cycle.
d. Net operating cycle.
e. Accounts payable turnover.

31. Which of the following is not an example of a significant inherent risk?
a. Management override of internal controls.
b. The impact of technological developments.
c. Inadequate accounting skills.
d. Management turnover.
e. Contentious accounting issues.

32. Which of the following risk factors is an example of an assertion specific inherent risk factor?
a. Management override of internal controls.
b. The impact of technological developments.
c. Inadequate accounting skills.
d. Management turnover.
e. Contentious accounting issues.

Solution Preview

24. In accepting an engagement, an auditor takes on professional responsibilities to:
a. the public.
b. the client.
c. other members of the public accounting profession.
d. the public, the client, and other members of the public accounting profession.
e. the client and the public.

The auditor has responsibility to the client, to the public and to the profession. Pick D.

25. The importance of the accept/reject decision for a particular client is reflected in the inclusion of "acceptance and continuation of clients" as:
a. the subject of Statement of Financial Accounting Standards 96.
b. the subject of Statement on Auditing Standards 7.
c. a separate rule in the AICPA Code of Conduct.
d. an explicit part of the General Standards.
e. one of the quality control elements for CPA ...

Solution Summary

A sentence or two explains the selection.

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