During the first phase of an audit,a CPA most likely would
A) Identify specific internal control activities that are likely to prevent fraud.
B) Evaluate the reasonableness of the company's accounting estimates.
C) Evaluate the integrity of management.
D) Inquire of the company's attorney as to whether any unrecorded claims are probable or asserted.

Question

Quizplus · Accepted Answer

During the first phase of an audit, the CPA would evaluate the integrity of management by assessing the tone at the top, assessing the ethical values, and studying the management style of the key personnel, top management, and the board of directors. This helps in determining the risk of misstatements and identifying areas that require particular attention during the audit process. Option A is performed during the second phase of the audit when the auditor identifies the potential existence of significant risks of material misstatements, assesses the risks, and evaluates the design of the controls. Option B is done during the third phase, where the auditor evaluates the reasonableness of the accounting estimates, including identifying and assessing significant assumptions, reviewing supporting data, and assessing the methods used. Option D is performed during final review and events occurring after the balance sheet date, which is the last phase of the audit.

During the First Phase of an Audit,a CPA Most Likely