1.What are the principle responsibilities for auditors?

2.Why is engagement planning so critical?

3.What are the steps for engagement planning?

4.Describe Materiality for an audit.

5.Post, CPA, accepted an engagement to audit the financial statements of General Co., a new client. General is a publicly held retailing entity that recently replaced its operating management. In the course of applying audit procedures, Post discovered that General's financial statements might be materially misstated due to the existence of fraud.

• A. Describe post's responsibilities in the circumstances described above.
• B. Describe post's responsibilities for reporting on general's financial statements and other communications if post is precluded from applying necessary procedures in searching for frauds.
• C. Describe post's responsibilities for reporting on general's financial statements and other communications if post concludes that general's financial statements are materially affected by frauds. (AICPA adapted)

6. Audit risks for particular accounts can be expressed in the model: Audit risk (AR) = Inherent risk (IR) x Internal control risk (CR) x Detection risk (DR).

• A. If an audit risk is set at 5 percent, the inherent risk at 80 percent, and the internal control risk at 25 percent, what would be the detection risk?
• B. If the audit team wanted to reduce the audit risk to 1 percent, what would be the detection risk?
• C. What would the audit team have to do to reduce the audit risk?

6.D. Jackson, CPA, audited Washington Company's financial statements for the year ended December 31, 2015. On November 1, 2016, Washington notified Jackson that it was changing auditors and that Jackson's services were being terminated. On November 5, 2016, Washington invited Lincoln, CPA, to make a proposal for an engagement to audit its financial statements for the year ended December 31, 2016.

• What procedures concerning Jackson should Lincoln perform before accepting the engagement?

7.In each of the circumstances listed below, indicate, by appropriate letter,

Which of the following types of opinions should be rendered on the entity's financial statements?

• A. Unmodified
• B. Qualified
• C. Adverse
• D. Disclaimer

___ 1. Departure from generally accepted accounting principles that is material but not pervasive.

___ 2. Going-concern uncertainties that may have a material (but not pervasive) effect on the financial statements.

___ 3. Emphasis of a matter, no GAAP departure.

___ 4. Material, but not pervasive, scope limitation.

___ 5. Material and pervasive departure from GAAP.