Question 1

A/an _______ is responsible for the audit engagement, its performance, and for the auditor's report that is issued on behalf of the firm.

Accepted Answer

The answer of A/an _______ is responsible for the audit...

Question 2

Which of the following characteristics exist in critical accounting communications?
A)the nature of the estimate is material due to the levels of subjectivity
B)judgment is necessary to account for highly uncertain matters or the susceptibility of such matters to change
C)the impact of the estimate on financial condition or operating performance is material
D)All of these answer choices are correct.

Accepted Answer

All of these characteristics exist in critical accounting communications. The nature of the estimate is material due to the levels of subjectivity, judgment is necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the impact of the estimate on financial condition or operating performance is material. Therefore, all of the answer choices are correct.

Question 3

Type _______ subsequent events are those that provide evidence about conditions that developed subsequent to year-end.

Accepted Answer

The answer of Type _______ subsequent events are those that...

Question 4

Define a management representation letter.
A)A letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements and details of any verbal representations made by management during the course of the audit.
B)A written statement by management provided to the auditor to confirm certain matters or to support other audit evidence.
C)A letter from auditor informing management about concerns.
D)A written statement containing details of any verbal representations made by management during the course of the audit.

Accepted Answer

A management representation letter is a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence.

Question 5

What is a written representation?
A)A written statement by management provided to the auditor to confirm certain matters or to support other audit evidence.
B)A letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements.
C)A written statement containing details of any verbal representations made by management during the course of the audit.
D)A letter from auditor to the management informing their concerns.

Accepted Answer

A written representation is a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence. It is an important part of the audit process as it provides documentary evidence of management's assertions about the financial statements. Written representations may be required by accounting standards or by the auditor as part of their audit procedures.

Question 6

A _______ is an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.

Accepted Answer

The answer of A _______ is an existing condition or...

Question 7

A/an _______ is an audit inquiry sent to a firm's in-house legal counsel to obtain information about litigation, assessments, and claims.

Accepted Answer

The answer of A/an _______ is an audit inquiry sent...

Question 8

Which of the following refer(s) to accounting policies and practices that are most important to the portrayal of the company's financial condition and results and that require management's most difficult, subjective, or complex judgments?
A)Critical accounting policies and practices
B)Critical accounting estimates
C)Critical accounting projections
D)A disclosure agreement

Accepted Answer

Critical accounting policies and practices are the most important for portraying a company's financial condition and results and require management's most difficult, subjective or complex judgments. Critical accounting estimates and projections are also important, but they are subsets of critical accounting policies and practices. A disclosure agreement is not relevant to this question.

Question 9

Under the _______, an entity is viewed as continuing in business for the foreseeable future with neither the intention nor the need for liquidation.

Accepted Answer

The answer of Under the _______, an entity is viewed...

Question 10

Generally, a written representation _______.
A)is sufficient evidence to issue an unmodified audit report
B)complements other audit procedures that were performed and generally does not provide sufficient appropriate audit evidence on its own
C)replaces other audit procedures that were performed and generally does provide sufficient appropriate audit evidence on its own
D)should be drafted by the client's legal counsel and signed with the auditor

Accepted Answer

A written representation is just one part of the audit process and cannot be relied upon as the sole source of evidence. It should be used in conjunction with other procedures and evidence to form the basis of the auditor's opinion.

Question 11

A _______ is a letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements and details of any verbal representations made by management during the course of the audit.

Accepted Answer

The answer of A _______ is a letter from management...

Question 12

The outcome of litigation _______.
A)is usually decided relatively quickly
B)does not affect the auditor
C)may be highly uncertain, and the circumstances may change over the course of a long court battle that spans several years
D)may be highly certain, and the circumstances may change over the course of a long court battle that spans several years

Accepted Answer

Litigation can be a long and unpredictable process, with many factors potentially affecting the outcome. The circumstances of the case may change over time, and new evidence may come to light. Additionally, the opinions and attitudes of judges, juries, and other parties involved may fluctuate. Therefore, it is difficult to accurately predict the outcome of litigation, and it can be a risky and uncertain process.

Question 13

The responses to the inquiries that auditors have made of management throughout the course of the audit _______.
A)are recorded in the client's permanent file
B)are confidential and not shared with senior management
C)are documented in the auditor's working papers
D)are sent to the prior auditor to be checked for prior year consistency

Accepted Answer

The inquiries and responses made between auditors and management are documented in the auditor's working papers as part of the audit process. This documentation serves as evidence of the auditor's due diligence in gathering information and assessing the risk of material misstatement. The client's permanent file may contain some of this information, but it is not the primary location for documenting audit communications. The information is not confidential and may be shared with senior management, but typically the auditor will communicate any significant findings or issues in a separate management letter or report. The prior auditor does not need to review the inquiries and responses, as they are specific to the current year's audit.

Question 14

AS 1301 specifies that _______.
A)critical accounting policies and practices and critical accounting estimates must be communicated to the audit committee
B)significant and immaterial accounting policies and practices and critical accounting estimates must be communicated to the audit committee
C)the auditor should bill audit clients at distinct phases of the audit process
D)auditors should always consult with their own legal counsel before issuing an unmodified opinion

Accepted Answer

AS 1301 specifies that critical accounting policies and practices and critical accounting estimates must be communicated to the audit committee. Therefore, option A is the correct choice. Option B is incorrect because immaterial accounting policies and practices need not be communicated to the audit committee. Option C is incorrect because there is no such requirement for billing audits clients at distinct phases of the audit process under AS 1301. Option D is incorrect because AS 1301 does not require auditors to always consult with their legal counsel before issuing an unmodified opinion.

Question 15

An example of a _______ would be the bankruptcy of a client's customer after year-end as a result of poor financial condition that existed as of the balance sheet date.

Accepted Answer

The answer of An example of a _______ would be...

Question 16

A written representation is _______.
A)a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence
B)a written statement drafted by the internal audit function, and provided to the auditor to confirm certain matters or to support other audit evidence
C)should be filed as part of court filings by the client, to confirm the details of the representing attorney
D)a statement from the prior auditor, confirming there were no material misstatements found in prior audits

Accepted Answer

A written representation is a statement by management provided to the auditor to confirm certain matters or to support other audit evidence. It is an important part of the audit evidence the auditor gathers during an audit.

Question 17

Auditors communicate significant findings or issues from the audit to those charged with governance _______.
A)typically at the beginning of the audit
B)typically during the audit
C)typically towards the end of the audit
D)via the client's legal counsel

Accepted Answer

Significant findings or issues are typically communicated towards the end of the audit, after the auditor has completed their substantive testing and analysis. This allows the auditor to gather all necessary information before communicating any potential issues to those charged with governance.

Question 18

Governance structures will _______.
A)typically be the same for each client
B)typically be the same within an industry
C)typically vary by client
D)be determined by auditor recommendations

Accepted Answer

Governance structures are designed to meet the unique needs and requirements of each client, so they typically vary by client. There is no one-size-fits-all solution for governance structures, as they are influenced by factors such as industry, company culture, and risk appetite. While auditor recommendations may be a factor, ultimately the governance structure should be tailored to the specific needs and objectives of the client.

Question 19

A management representation letter is a letter _______.
A)that is sent from the auditor to management, and then signed off on by the client's legal counsel
B)that is sent from management to the auditor, and then signed off on by the client's legal counsel
C)from management to the auditor acknowledging management's responsibility for the preparation of the financial statements
D)from the auditor to management acknowledging management's responsibility for the preparation of the financial statements

Accepted Answer

A management representation letter is a letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements. It is not sent from the auditor to management and is not signed off on by the client's legal counsel.

Question 20

The management representation letter _______.
A)can sometimes be used as a substitute for the gathering of audit evidence
B)is not a substitute for obtaining sufficient, appropriate evidence regarding the financial statements through other audit procedures
C)can replace analytical procedures conducted as part of the audit, but cannot replace the audit of internal control
D)can replace the audit of internal control conducted as part of the audit, but cannot replace the analytical procedures

Accepted Answer

The management representation letter is a document signed by management stating that they have provided all necessary information to the auditor and that the financial statements are complete and accurate. It is not a substitute for obtaining sufficient, appropriate evidence regarding the financial statements through other audit procedures. It is an additional source of evidence and provides corroborative support for other audit evidence gathered. Therefore, option B is the correct choice. Option A is incorrect because the representation letter cannot be used as a substitute for the gathering of audit evidence. Option C and D are also incorrect because the representation letter cannot replace analytical procedures or the audit of internal control.

Quiz 14: Completing the Audit

A/an _______ is responsible for the audit engagement, its performance, and for the auditor's report that is issued on behalf of the firm.

Which of the following characteristics exist in critical accounting communications?

Type _______ subsequent events are those that provide evidence about conditions that developed subsequent to year-end.

Define a management representation letter.

What is a written representation?

A _______ is an existing condition or situation involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.

A/an _______ is an audit inquiry sent to a firm's in-house legal counsel to obtain information about litigation, assessments, and claims.

Which of the following refer(s) to accounting policies and practices that are most important to the portrayal of the company's financial condition and results and that require management's most difficult, subjective, or complex judgments?

Under the _______, an entity is viewed as continuing in business for the foreseeable future with neither the intention nor the need for liquidation.

Generally, a written representation _______.

A _______ is a letter from management to the auditor acknowledging management's responsibility for the preparation of the financial statements and details of any verbal representations made by management during the course of the audit.

The outcome of litigation _______.

The responses to the inquiries that auditors have made of management throughout the course of the audit _______.

AS 1301 specifies that _______.

An example of a _______ would be the bankruptcy of a client's customer after year-end as a result of poor financial condition that existed as of the balance sheet date.

A written representation is _______.

Auditors communicate significant findings or issues from the audit to those charged with governance _______.

Governance structures will _______.

A management representation letter is a letter _______.

The management representation letter _______.