Understanding the Firm's Environment

Understanding the Firm's Environment

University

20 Qs

quiz-placeholder

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Understanding the Firm's Environment

Understanding the Firm's Environment

Assessment

Quiz

Other

University

Medium

Created by

Henly Pahilagao

Used 6+ times

FREE Resource

20 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

One of the considerations in audit planning is obtaining a knowledge of the client’s business. An auditor obtains knowledge about a new client’s business and its industry to

Make constructive suggestions concerning improvements to the client’s internal control.

Develop an attitude of professional skepticism concerning management’s financial statement assertions.

Evaluate whether the aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated.

Understand the events and transactions that may have an effect on the client’s financial statements.

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When the continuing auditor intends to use information about the entity and its environment obtained in prior periods, the auditor should

Seek permission with the client in using the prior period information obtained by the auditor.

Determine whether to equitably reduce the audit fee due to lower audit effort expended during the engagement.

Determine whether changes have occurred that may affect the relevance of such information in the current audit.

Assess control risk as “high” for the assertions affected by the prior-period information.

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following mattes is not included under “regulatory environment”?

Accounting principles and industry specific practices.

Legislation and regulation that significantly affect the entity’s operations.

Government policies currently affecting the conduct of the entity’s business

General level of economic activity (for example, recession, growth)

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

These are the operational approaches by which management intends to achieve its objectives

Strategies

Planning methods

Business risk approaches

Operational plans

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

S1 Business risk is broader in scope than the risk of material misstatement

S2 Most business risks have financial consequences and they may have an effect on the financial statements of an entity.

True, False

False, True

True, True

False, False

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Examples of matters an auditor may consider under measurement and review of the entity’s financial performance include the following (select the exception)

Key ratios and operating statistics

Use of information technology

Competitor analysis

Employee performance measures and incentive compensation policies

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following is most correct concerning the understanding of internal control needed by auditors to plan the audit?

The auditors must understand the control environment, but not the accounting system or the control procedures

The auditors must understand the control environment, the accounting system and not the control procedures.

The auditors must understand the control environment, the accounting system and must use judgment as to the control procedures which must be considered.

The auditor must understand the control environment, the accounting system, and all control procedures

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