business questions

TRUE OR FALSE 

1. In assessing client's integrity, prior year audit experience is not beneficial to an auditor in assessing management integrity because management may have different attitudes in subsequent periods. 

2. The auditor may decide not to accept an engagement if management disregards its responsibility to maintain an adequate internal control environment. 

3. For prospective clients that have previously been audited by another CPA firm, the predecessor auditor is required to communicate with the successor auditor. 

4. The auditor should accept an audit engagement even when the criteria or GAAP to be used in the audit is not suitable as long as management and where appropriate, those charged with governance have agreed on its responsibility. 

5. In an audit engagement, management has the primary responsibility for the financial statements and its internal control, but not to provide the auditor with the information the auditor may need to obtain audit evidence. 

6. An engagement letter establishes a clear understanding of the terms of the engagement between the client and the auditor.

7. Audit fees charged to the client cannot be lower than that of normally quoted by another auditor as it is deemed unethical. 

8. The auditor should always send separate engagement letters to the parent company and its subsidiaries (the Group) when appointed to perform and of the group. 

9. The auditor shall not accept subsequent changes to the terms of audit engagement having already agreed in the past. 

10. An auditor will typically evaluate their clients annually to determine whether to retain them or not.

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