Question

35) Which is usually included in an engagement letter? A) The objectives of the engagement Identification...

35) Which is usually included in an engagement letter?

A)

The objectives of the engagement

Identification of the financial reporting framework used by management

Yes

Yes

B)

The objectives of the engagement

Identification of the financial reporting framework used by management

No

No

C)

The objectives of the engagement

Identification of the financial reporting framework used by management

No

Yes

D)

The objectives of the engagement

Identification of the financial reporting framework used by management

Yes

No

36) Which is a liquidity activity ratio?

A) return on assets          B) profit margin

C) inventory turnover    D) times interest earned

37) Inherent risk and control risk

A) are directly related to detection risk.                 B) are inversely related to each other.

C) are inversely related to detection risk.                D) are directly related to audit risk.

38) Auditors frequently refer to the terms audit assurance, overall assurance, and level of assurance instead of      
A) detection risk.                             B) inherent risk.

C) acceptable audit risk.                D) audit report risk.

39) Which of the following is an accurate statement regarding assets and fraud risk?

A) Since fixed assets are often large, there is little theft of fixed assets.

B) Companies will often capitalize repairs as fixed assets.

C) Since companies have few fixed assets, there is no need for them to be periodically inventoried.

D) Intangible assets are recorded at cost and valuation issues therefore are not a fraud risk.

Homework Answers

Answer #1

35) engagement letters is a letter prepared by auditor consists of

- obejective of engagement letter

- identification of financial reporting framework used by the management

correct option - (A)

36) liquidity activity ratio are accounts receivable turnover, day to collect receivable, inventory turnover, days to sell inventory

correct option - (C) inventory turnover

37) correct option - (C) inversly related to detection risk

38) correct option - (C) acceptable audit risk

39) correct option - (B) companies will often capitalise repairs as fixed assets

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