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

question 17

Multiple Choice

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

• A)an assessment of fraud risk factors likely to cause material misstatements.
• B)an understanding of the prospective client's industry and business.
• C)the prospective client's signature to a written engagement letter.
• D)the prospective client's consent to make inquiries of the predecessor, if any.

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Definitions:

Maturity Date

The specified date on a financial instrument when the principal amount is due to be paid back or when an investment reaches its full value.

90-Day Note

A short-term debt obligation that matures or is due to be paid 90 days after its issuance.

Accrued Interest

Interest that has been incurred but not yet paid, typically recorded as an expense for the period it relates to.

Year-End

The conclusion of an accounting period, typically the end of the fiscal or calendar year, when companies finalize their financial statements.