The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the:
Which of the following is true about management representations obtained during an engagement to review the financial statements of a nonissuer?
Choice 'a' is correct. Written representations from the current management are required for all periods being reported on.
Choice 'b' is incorrect. Written representations from the current management are required for all periods being reported on, even if the current management was not present during all such periods.
Choice 'c' is incorrect. Written representations should be addressed to the accountant. The letter should be signed by members of management whom the accountant believes are responsible for and knowledgeable about the matters covered in the representation letter.
Choice 'd' is incorrect. Written representations should include information concerning subsequent events.
Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding the predecessor's:
Which of the following statements is a basic element of the auditor's standard report?
Choice 'c' is correct. The auditor's standard audit report includes a statement that 'An audit includes assessing...significant estimates made by management...'
Choice 'a' is incorrect. The standard audit report does not state that disclosures provide reasonable assurance that the financial statements are free of material misstatement. The correct statement is:
'...standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement.'
Choice 'b' is incorrect. The standard audit report does not state that the auditor evaluated the overall internal control. The correct statement is 'An audit includes...evaluating the overall financial statement presentation.' Internal control is not mentioned in the standard audit report.
Choice 'd' is incorrect. The standard audit report does not state 'The financial statements are consistent with those of the prior period.' According to the second standard of reporting, consistency is implicitly reported. Only if there is an inconsistency is an explicit statement included.
In an attest engagement, use of the accountant's report should be restricted to specified parties in all of the following situations, except:
Choice 'b' is correct. There is no requirement that the accountant's report be restricted to specified parties when reporting on an assertion about the subject matter instead of reporting directly on the subject matter.
Choice 'a' is incorrect, since use of the accountant's report should be restricted to specified parties when the criteria used to evaluate the subject matter are appropriate for only a limited number of parties.
Choice 'c' is incorrect, since use of the accountant's report should be restricted to specified parties when reporting directly on the subject matter and a written assertion has not been provided.
Choice 'd' is incorrect, since use of the accountant's report should be restricted to specified parties when reporting on an agreed-upon procedures engagement.
