1.The main purpose of an engagement letter is to _______.

-present the conclusion of the audit

-avoid any misunderstandings between the auditor and the client

-request any and all information that the CPA firm might need to complete the audit

-advertise the additional services that the CPA firm provides

2.The risk assessment process is a(an) _______.

-infrequent process

-concluding process

-iterative process

-one-time process

3.Audit risk is best defined as the _______.

-application of risk assessment procedures

-element that helps form risk assessment

-risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated

-risk of noncompliance with laws and regulations

4.Which of the following is an amount set by the auditor that is used to make decisions about the extent of audit procedures for a particular class of transaction, account balance, or disclosure?

-Performance materiality

-Overall materiality

-Qualitative materiality

-Planning materiality

5.From a definitional perspective, information is considered material if it _______.

-impacts the decision-making process of users of the financial statements

-includes income statement benchmarks

-only includes qualitative evidence

-is diverse in nature

6.MNE and Associates used the benchmark of 5% of income (earnings) before income tax and came up with $9.5 million as their planning materiality for Garden, Inc. MNE also determined that planning materiality using a benchmark of 1% total assets resulted in $23 million. How should MNE decide which planning materiality amount to use?

-The auditors would use the smaller amount in order to keep with the principle of conservatism.

-Ultimately, the auditors must use their professional judgment to decide on the planning materiality amount, along with qualitative factors in the final assessment.

-The auditors would average the two amounts because the use of two benchmarks provides greater precision.

-The auditors would use the largest amount in order to detect larger material misstatements.

7.The auditor can set detection risk as high if _________.

-inherent risk is low and control risk is high

-inherent risk is high and control risk is low

-inherent risk and control risk are high

-inherent risk and control risk are low