Items 1 through 5 represent a series of unrelated statements, questions, excerpt
ID: 2599025 • Letter: I
Question
Items 1 through 5 represent a series of unrelated statements, questions, excerpts, and comments taken from various parts of an auditor’s working paper file. Below the items is a list of the likely sources of the statements, questions, excerpts, and comments. Select, as the best answer for each item, the most likely source. Select only one source for each item. A source may be selected once, more than once, or not at all.
1-All transactions have been recorded in the accounting records and are reflected in the financial statements
2-In connection with an audit of our financial statements, management has prepared, and furnished to our auditors, a description and evaluation of certain contingencies
3-Provision has been made for any material loss to be sustained in the fulfillment of, o from the inability to fulfill, any sales commitments.
4-Fees for our services are based on our regular per diem rates, plus travel and other out-of-pocket expenses.
5-The objective of our audit is to express an unmodified opinion on the financial statements, although it is possible that facts or circumstances encountered may preclude us from expressing an unqualified opinion
Sources
a-Partner’s engagement review program
b-Communication with predecessor auditor
c-Auditor’s engagement letter
d-Management representation letter
e-Standard financial institution confirmation request
f-Auditor’s communication with the audit committee
g-Auditor’s report
h-Letter for underwriters
i-Audit inquiry letter to legal counsel
j-Accounts receivable confirmation
Explanation / Answer
1-All transactions have been recorded in the accounting records and are reflected in the financial statements
Answer: d-Management representation letter
Management representation letter is a letter in which signed written representation is taken from management whose entity auditor is auditing that they have provided access to all records and transaction for the period covered to the auditor and for confirming for other areas regarding financial statements, information provided.
2-In connection with an audit of our financial statements, management has prepared, and furnished to our auditors, a description and evaluation of certain contingencies
Answer: I Audit inquiry letter to Legal counsel.
Audit inquiry letter is a letter to inquire from the legal counsel of the entity whether any material uncertainty exist which is signed by the management and prepared on the letterhead of the company.
3-Provision has been made for any material loss to be sustained in the fulfillment of, o from the inability to fulfill, any sales commitments.
Answer: d-Management representation letter
Management representation letter is a letter in which signed written representation is taken from management whose entity auditor is auditing that they have provided access to all records and transaction for the period covered to the auditor and for confirming for other areas regarding financial statements, information provided.
4-Fees for our services are based on our regular per diem rates, plus travel and other out-of-pocket expenses.
Answer C Auditors engagement letter
Audit engagement letter is an agreement signed between client and auditor and it specify the nature and timing of activities and responsibilities of auditor and management and expected fees charged for services being provided by auditor to client.
5-The objective of our audit is to express an unmodified opinion on the financial statements, although it is possible that facts or circumstances encountered may preclude us from expressing an unqualified opinion
Answer C Auditors engagement letter
Audit engagement letter is an agreement signed between client and auditor and it specify the nature and timing of activities and responsibilities of auditor and management and expected fees charged for services being provided by auditor to client.
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