ExpertMedium1 markMultiple Choice
CPA · Question 54 · Area I: Ethics & General Principles
Which of the following is a 'Precondition for an Audit' that the auditor must establish with management before accepting the engagement?
Which of the following is a 'Precondition for an Audit' that the auditor must establish with management before accepting the engagement?
Answer options:
A.
Management agrees to provide a written representation letter at the end of the audit.
B.
Management acknowledges its responsibility for the design, implementation, and maintenance of internal control.
C.
Management guarantees that there are no material misstatements.
D.
The auditor assesses the integrity of management as high.
How to approach this question
Preconditions = What management must agree to. 1. Framework. 2. Responsibilities (FS, IC, Access).
Full Answer
B.Management acknowledges its responsibility for the design, implementation, and maintenance of internal control.✓ Correct
The preconditions for an audit include obtaining the agreement of management that it acknowledges and understands its responsibility for the preparation of the financial statements and for internal control.
Common mistakes
Confusing preconditions with audit procedures.
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