1.Which of the following statements are true: A. Accounting firm’s quality contr
ID: 420804 • Letter: 1
Question
1.Which of the following statements are true:
A. Accounting firm’s quality control system should include policies and procedures that address the following five elements: independence, integrity, and objectivity; personnel management; acceptance and continuance of clients and engagements; engagement performace; and monitoring.
B. audit procedure details instructions for the collection of the type of audit steps to complete the audit
C. Calculating ratios is considered a form of substantive evidence.
D. Audit documentation prepared by the client for the auditor, is the property of the client.
2.T/F. The Audit risk model for planning includes planned detection risk, acceptable audit risk, control risk and inherent risk.
3.T/F. There are two types of fraud: employee fraud and management fraud.
4.Which of the following is true?
Cutoff testing applies to PCAOB auditing standards assertions.
Relevant assertions do not assess for RoMMs.
Management assertions can differ depending on the category the assertion falls under.
RoMMs are decided during the planning phase and no adjustment are made once they are finalized
5.Risk assessment procedure including the following
Communication with the engagement team, communication with the client, substantive procedures, and other risk assessment procedures
Collecting audit evidence, testing, inquires of management, recalculation, other risk assessment procedures.
Inquires of management and others within the audit team, analytical procedures, inspection and observation, discussion outside of the company, and other risk assessment procedures.
Questioning of management and others within the company, analytical procedures, observation and inspection, discussion among the audit team, and other risk assessment procedures.
Explanation / Answer
1. Which of the following statements are true:
A. Accounting firm’s quality control system should include policies and procedures that address the following five elements: independence, integrity, and objectivity; personnel management; acceptance and continuance of clients and engagements; engagement performance; and monitoring.
B. audit procedure details instructions for the collection of the type of audit steps to complete the audit
C. Calculating ratios is considered a form of substantive evidence.
D. Audit documentation prepared by the client for the auditor, is the property of the client.
Answer: Option C
Explanation: In financial statement business analysis, computing various ratios like leverage, profitability and working capital ratios form a substantive evidence.
2. The Audit risk model for planning includes planned detection risk, acceptable audit risk, control risk and inherent risk.
Answer: TRUE. The various types of risks involved in audit like detection, acceptability, inherency and control form a part of Audit risk model.
3.T/F. There are two types of fraud: employee fraud and management fraud.
Answer: FALSE. Apart from employee and management fraud, consumer fraud is also important.
4.Which of the following is true?
A. Cutoff testing applies to PCAOB auditing standards assertions.
B. Relevant assertions do not assess for RoMMs.
C. Management assertions can differ depending on the category the assertion falls under.
D. RoMMs are decided during the planning phase and no adjustment are made once they are finalized
Answer: Option C
Explanation: Management assertions fall under three categories. However, each assertion is for s different aspect. These are:
Account balance assertions
Transaction level assertions
Presentation and disclosure assertion
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