al 8, The engagement letter will do one, some, or all of the following: PR 1. State whether the CPA will perform audit, review or R . . compilation services. es Yes (es jes 2. State whether the CPA will perform tax or management advisory or other services. Yes Yes NoYes, 3. State any restriction to be imposed on the CPA's No Yes Yes Yes work. 4. Identify deadlines for completing the work. Yes Yes No Yes 5. State the amount and type of work to be done by Client's personnel in generating auditor's workpapers. No No Yes Yes 6. State the CPA's fees for the engagement. Yes Yes NoYes: 7. Inform the client that the CPA does not have responsibility for detecting fraud. No No Yes Yes 9. The primary purpose of the engagement letter is to: ‘A. Remind management that the primary responsibility for the FS rests with management. 8. Provide a written record of the agreement with the client as to the services to be provided. C. Provide a starting point for the auditor's preparation of the preliminary audit program. D. Satisfy the requirements of the CPA’s liability insurance policy. 10. Which of the following is least likely to be included ‘in an audit engagement letter? _K. Identification of specific audit procedures that the auditor needs to undertake. 8. Description of any letters or reports that the auditor expects to submit to the client. C. A reference to the inherent limitations of an audit that there is an unavoidable risk that some material misstatements may remain undiscovered. D. Basis on which fees are computed and any billing arrangements. 11. Which of the following factors need to be considered in deciding whether to send a separate ‘engagement letter to a component (in the case of group audits)? ‘A. Who appoints the auditor of the component. B. Legal requirements. ©. Whether a separate audit report is to be issued on the component. D. All of the above are considered 12. In which of the following situations will there be a need to send a new letter for recurring ‘engagements? wer penlievk B witch Gudiiee A. Revisions or special terms of the engagement. B. Significant change in nature or size of the client’s business. C._ Indications of misunderstanding of the objective and scope of the audit. BD. Recent change of middle management and rank and file organizational structure 13. The following may lead the client to request for a change in engagement: A. Restrictions on the scope of the engagement. < B.- Misunderstanding as to the nature of an audit or related service originally requested. C. Change in circumstances affecting the need for the service. All of the answers. * 14. If a change in the type of engagement from higher to lower level of assurance is reasonably justified, the report based on the revised engagement: 4 ‘A. Should qualify the opinion due to a scope limitation. B. Omits reference to the original engagement. 7 CC. Should always refer to any procedures that may have been performed in the original — engagement. ae D. Should refer to the original engagement in a separate paragraph preceding the paragraph. _ 15. If a change in the type of engagement from higher to lower level of assurance is not auditor should: ‘A. Qualify the report on the original engagement. B. Continue with the revised engagement but make explicit reference ‘engagement. an le _G. Refuse to agree to management's request on the change of the criginal engagement. 0. Withdraw from the engagement,Which of the following presents the audit phases in proper order? 2. Pre-engagement, evaluation of controls, planning, evidence gathering, reporting & completion b. Pre-engagement, evaluation of controls, evidence gathering, planning, reporting & completion © Pre-engagement, planning, evaluation of controls, evidence gathering, reporting & completion 4. Planning, pre-engagement, evaluations of controls, evidence gathering, reporting & completion Which of the following is/are not considered in deciding whether to accept a new client or not? 1 Firm's competency to perform the engagement and ability to comply with relevant ethical requirements 1. Chrent’s integrity inciuding its standing in the business community and financial ability IIT. Integrity of predecessor auditor IV. Probability of achieving an unqualified opinion A. Loaly C. Monty 8. Land I only B. Il and IV only Determine whether the following statements are true or false: I. A successor auditor should make specific inquiries of the predecessor auditor regarding disagreements which the predecessor had with the client concerning auditing procedures: and accounting principles IL Ifa dient refuses to permit the predecessor to respond to the successor’s inquiry, then the successor auditor should inquire as to the reasons for such refusal and consider the” implications of this in deciding whether to accept the engagement or not. A. Both I and II are true. C. Lis true while IT js false. B. Both 1 and Il are faise. ©. [1s false while II is true. Determine whether the statements ere true of false: caseor 1. In deciding whether to accept a new client or not, the predecessor auditor should initiate: communication to the successor. TI. Relevant ethical and professional requirements guide the current auditor's communications with the predecessor auditor A. Both I and II are true. C. Lis true while is false B. Both I and II are false -8. Lis false while His true Which of the mechanisms below will enhance the auditor's independence? I. Appointing a partner of the CPA firm conducting the audit to the corporation's committee. Il. Have the external financial statements auditor report to the audit committee ee Be A, Lonly © Both and it B. Uonly BD. Neither 1 nor Yt S1 Independence must be considered in deciding whether to accept dient S2 Only partners and managers are required by the Code of Ethics assurance clients. La A. True, false B. False, true em , After client acceptance, the terms of the en The objective and scope of the audit and the best documented in: : A. Independent auditor's report ?