1. Which portion of the audit is least likely to be completed before the balance sheet date?

Tests of controls.

Issuance of the engagement letter.

Substantive procedures.

Assessment of control risk.

2. Successor auditors should make inquiries to the predecessor auditors regarding:

The integrity of management.

Disagreements with management over accounting, auditing, or similarly significant matters.

The predecessor auditors' understanding about the reasons for the change of auditors.

All of the above.

3. Individuals who commit fraud are ordinarily able to rationalize the act and also have an:

Incentive and opportunity.

Incentive but no opportunity.

Opportunity but no incentive.

Neither opportunity nor incentive

4. If the economy is experiencing a recession, an auditor should focus increased attention on which of the following accounts?

Purchase returns and allowances.

Allowance for doubtful accounts.

Common stock.

Noncontrolling interest of a subsidiary purchased during the year.

5. Which one of the following risk factors is best described as opportunities:

	High vulnerability to rapid changes, such as changes in technology, product obsolescence, or interest rates.
	Operating losses making the threat of bankruptcy, foreclosure, or hostile takeover imminent.
	Significant related party transactions not in the ordinary course of business or with related entities not audited or audited by another firm.
	Rapid growth or unusual profitability especially compared to that of other companies in the same industry.

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