Question

1. The term confirmation in auditing referrers to

a)The notation in the auditor’s work papers that states all of the account balances have been verified by the client for accuracy

b)The notations on the primary auditor’s work papers that correspond to those of the managing auditor

c)The receipt of a written or oral response from an independent third party verifying the accuracy of information requested by the auditor

d)The written verification by the client to the auditor stating that all of the work they agreed upon has been completed

2. Auditors communicate with clients in a number of ways. The initial communication is through a(n)

a)assessment report

b)audit letter

c)audit risk report

d)engagement letter

3. A client calls you and says he refuses to pay for the audit because after thinking over the fees he has decided they are high. He wants you to provide your work papers so he can take them to another, less expensive, auditor. The work papers property of the

a)Auditor and do not have to be given to the client

b)Client since the auditor works for the client, however a civil law suit must be filed

c)State authorities that regulate the audit profession in the state where the audit was performed so the client needs to contact the state to obtain the work papers

d)SEC and AICPA so the client would need to contact either of these agencies

4. _____ has established a Code of Professional Conduct containing rules of conduct for accountants

a)Accounting Ethics Review Committee

b)American Ethics Committee

c)American Institute of Certified Public Accountants

d)Governmental Accounting Standards Board

Answer 1

1. Answer is Option C) In Audit confirmation refers to the receipt of written or oral response from an independent third party verifying the accuracy of information requested by the auditor

Since it is obtained from independent third party it is called confirmation in auditing

Other answer is not right. Option a) and d) involves client hence no confirmation involved in this from third party. Option b) is not the right answer.

2. Answer is Option D)

Engagement letter is the letter which is exchanged between auditor and client. It is prepared by auditor and sent to the client. It confirms the auditor’s acceptance of the appointment, the objective and scope of audit and extent of auditor responsibilities and the form of any reports to be issued

Other options are not the answers since they are not the initial communication but subsequent communication once when audit begins.

3. Answer is Option A)

Audit working paper is the documents which are obtained by auditor during the course of audit. It contains the audit evidence obtained during audit based on which audit opinion is given. Audit working papers belongs exclusively to auditor and he is the owner of the same

Audit working paper does not belong to client or the state authorities hence other options are not the answer

4. Answer is Option C)

The Code of ethics is established by American Institute of Certified Public Accountants. It develops the code of ethics which auditors need to follow in performance of their duties. All Certified Public Accountants are bound to follow the rules of conduct established by AICPA.

Other answers are not the right answers