1. If management is preoccupied with meeting specific accounting numbers, this is a negative factor that should influence client acceptance and retention and is associated with A. the integrity of management B. competence issues within the audit firm C. independence issues within the audit firm D. special circumstances and unusual risks 2. Henley and Sarah, the owners and partners of StayBright CPA Firm, are planning to meet with a potential new client. At this juncture, little is known about the client except that they recently split with the predecessor auditor citing differences of opinion on 'important accounting policies.' Based on this information, what is Henley and Sarah's best course of action? A. Advise the client that based on the information they have received about the reason for termination of the predecessor auditor, inherent risk is too high, and they will not be able to accept the audit. B. Meet with the client and ask questions pertaining to the reasons for termination of the predecessor auditor, maintaining an appropriate level of professional skepticism throughout. C. Proceed with the client meeting and ask questions about the split with the previous auditor. Advise management that written assurances will have to be provided, assuring that in the instance of a dispute, the auditors' recommendation will always be followed. D. Explain to the client that generally accepted auditing standards require client's management to justify any departures from generally accepted accounting principles, and that the auditor is not liable for any such departures. 3. If an external auditor has tested a client's system of internal control and found it to not be effective or reliable, which of the following statements pertaining to the auditors' subsequent course of action is true? A. The audit firm should disclaim an opinion on the client's system of internal controls, and focus instead only on the client's financial statements. B. The auditor is more likely to adopt a reliance on control strategies, and subsequently will spend less time performing substantive tests. C. The auditor is likely to perform increased substantive testing to account for the identified internal control deficiencies. D. Apprise the internal audit function in writing of the noted internal control deficiencies, and advise that they must be corrected by conclusion of the audit or a qualified opinion will be issued. 4. When the financial statements are materially misstated for a particular client, which of the following will constitute an audit risk? A. An auditor expressing an incorrect audit opinion B. The discontinuance of an internal process from a previous year C. Creditors and investors expressing a favorable opinion D. Some stakeholders not relying on the auditing firm