Prior to accepting an audit engagement the auditor should ask the previous

auditor for:
Facts obtained by the previous auditor that may impact on the
assessment of the integrity of management.
ABCs Major block of asset is a large block of land which it intends to subdivide
and develop. However, recent tests indicate land is contaminated by excessive
amounts of asbestos which have to be cleaned, this will be very expensive and
delay project by 2 years. Which account and audit assertion is most likely
misstated? Valuation & Allocation of Provision to Clean-Up Expenses.
Analytical procedures include: Developing an expectation for sales based
on non-financial information and comparing it to the amount recorded
in the sales account.
Based on the above information which accounts should the auditor focus audit
work (highest risk)? Inventory (need to refer to table).
Negative form of assurance- Nothing has come to our attention in the
course of our work.
Positive form of assurance- obtained reasonable assurance that the f/s are free
from material misstatements (more definite in opinion).

Customers are more likely to complain to the client if which of the following
assertions for cash receipts is violated?
A) Existence.
B) Completeness.
C) Authorization.
D) Rights and obligations.
Which of the following would not be considered a test in the area of accounts receivable that
relates to the existence assertion?
A) Evaluate proper segregation of duties.
B) Confirm accounts receivable directly with customers.
C) Trace the record of shipping to inclusion in the accounts receivable
subsidiary ledger.
D) Review receipt of cash from customers in the period subsequent to the balance sheet date.

An auditor's purpose in reviewing credit ratings of customers with delinquent

accounts receivable is most likely to obtain evidence concerning management's
assertions relating to
A) Valuation or allocation.
B) Presentation and disclosure.
C) Existence or occurrence.
D) Rights and obligations.

Which of the following procedures would an auditor most likely perform related to year-end
accounts receivable confirmations when the auditor does not receive replies even after
second requests?
A) Review the cash receipts journal for the month prior to year-end.
B) Inspect related shipping records and sales invoices documenting the
merchandise sold to customers.
C) Intensify the study of internal control concerning the revenue and collection cycle.
D) Increase assessed detection risk related to existence assertion in this area.
Which of the following is the population the auditor is most likely to draw from in order to
test the cutoff assertion for revenue?
A) Shipping documents.
B) Customer sales orders.
C) Customer account receivable balances.
D) The record of sales returns.
Auditors perform a test to verify that all merchandise received has been recorded, in part, to
satisfy the completeness assertion with regard to accounts payable. Which of the following
would represent the population of documents for this test?
A) Purchase requisitions.
B) Payment vouchers.
C) Vendor invoices.
D) Receiving reports.