Before Accepting an Engagement to Audit a New Client, a CPA

question 32

Multiple Choice

Before accepting an engagement to audit a new client, a CPA is required to obtain:

• A)an understanding of the prospective client's industry and business.
• B)the prospective client's signature on the engagement letter.
• C)a preliminary understanding of the prospective client's control environment.
• D)the prospective client's consent to make inquiries of the predecessor auditor.

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Definitions:

Current Account

A part of the balance of payments of a country, accounting for trade balance, net primary income, and net secondary income transactions with foreign entities.

Surplus

A situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price, often leading to price reductions.

Deficit

A financial situation where expenditures exceed revenue, leading to a shortfall that must be financed through borrowing or existing reserves.

Foreign Assets

Investments or properties owned by individuals or entities in countries other than their home country.