5. A successor would most likely make specific inquiries of the predecessor auditor regarding a. Specialized accounting principles of the clients industry. b. The competency of the clients internal audit staff. c. The uncertainty inherent in applying sampling procedures. d. Disagreements with management as to auditing procedures.

6. Which of the following circumstances would most likely pose the greatest risk in accepting a new audit engagement? a. Staff will need to be rescheduled to cover this new client. b. There will be a client-imposed scope limitation. c. The firm will have to hire a specialist in one audit area. d. The clients financial reporting system has been in place for 10 years.

7. Which one of the following statements is correct concerning the concept of materiality? a. Materiality is determined by reference to guidelines established by the AICPA. b. Materiality depends only on the dollar amount of an item relative to other items in the financial statements. c. Materiality depends on the nature of an item rather than the dollar amount. d. Materiality is a matter of professional judgment.

8. In considering materiality for planning purposes, an auditor believes that misstatements aggregating $10,000 will have a material effect on an entitys income statement, but that misstatements will have to aggregate $20,000 to materially affect the balance sheet. Ordinarily, it is appropriate to design audit procedures that are expected to detect misstatements that aggregate a. $20,000. b. $15,000. c. $10,000. d. $30,000.

9. A client decides not to record an auditors proposed adjustments that collectively are not material and wants the auditor to issue the report based on the unadjusted numbers. Which of the following statements is correct regarding the financial statement presentation? a. The financial statements are free from material misstatement, and no disclosure is required in the notes to the financial statements. b. The financial statements do not conform with generally accepted accounting principles (GAAP). c. The financial statements contain unadjusted misstatements that should result in a qualified opinion. d. The financial statements are free from material misstatement, but disclosure of the proposed adjustment is required in the notes to the financial statements.

Becker CPA Review

1. In which of the following circumstances would an auditor of an issuer be least likely to reevaluate established materiality levels? a. The materiality level was established based on preliminary financial statement amounts that differ significantly from actual amounts. b. The client disposed of a major portion of the clients business. c. The client released third-quarter results before the SEC-prescribed deadline. d. Significant new contractual arrangements draw attention to a particular aspect of a clients business that is separately disclosed in the financial statements.

2. Which of the following procedures would a CPA least likely perform during the planning stage of the audit? a. Determine the timing of testing. b. Take a tour of the clients facilities. c. Perform inquiries of outside legal counsel regarding pending litigation. d. Determine the effect of information technology on the audit.

3. A successor auditors inquiries of the predecessor auditor should include questions regarding a. The number of engagement personnel the predecessor assigned to the engagement. b. The assessment of the objectivity of the clients internal audit function. c. Communications to management and those charged with governance regarding significant deficiencies in internal control. d. The response rate for confirmations of accounts receivable.