Chapter 2 : Assurance

Which two of the following are auditors always required to do on being invited to accept an audit 1engagement?

• Ensure they are professionally qualified to act

• Ensure they have adequate existing resources to carry out the audit

• Obtain references for key personnel within the entity to be audited

• Communicate with the predecessor auditors to discover any reasons they should not accept
  appointment

• Providing evidence on matters where other evidence is not expected to exist

Which two of the following might indicate that an assurance client could have higher than normal 2inherent or control risk?

• Poor recent performance

• Strong internal controls

• Unusual transactions

• The existence of an internal audit department

Claret LLP, an assurance firm, has the following two clients among its client portfolio.

Tulip Ltd is planning to list on the local stock exchange within the next two years.

• High risk

• Low risk

Dhalia Ltd is currently facing financial difficulties and is seeking alternative forms of finance.

• High risk

• Low risk

Which three of the following are benefits of an engagement letter in respect of assurance services?

• Clearly defines the extent of the assurance provider’s responsibilities

• Provides written confirmation of the acceptance of the engagement

• Confirms the scope of the engagement

• Certifies the assurance provider’s opinion

Which three of the following procedures should be carried out after the audit firm has decided to 5accept appointment as auditor?

• Ensure that the outgoing auditors’ removal/resignation has been properly conducted
  

• Ensure that a resolution has been passed at the general meeting to appoint the new auditors

• Perform checks to ensure that there are no legal or ethical reasons why the new audit firm cannot
  act as auditor

• Submit a letter of engagement to the directors

The engagement letter should be sent before acceptance of appointment.

• True

• False
  

The engagement letter should be sent after the appointment of the auditor but before the commencement of the audit.

• True

• False

The engagement letter should be sent after the commencement of the audit but before the signing of the auditor’s report.

• True

• False

An engagement letter should be sent to all new clients.

• True

• False