When an Auditor Agrees to Perform an Audit Because the Preconditions

question 111

Multiple Choice

When an auditor agrees to perform an audit because the preconditions for an audit have been met and the auditor believes that he can gather sufficient appropriate audit evidence to reduce audit risk to an acceptably low level,an engagement letter is prepared.The engagement letter includes:

• A)the purpose of the audit (to express an opinion on particular financial statements).
• B)management's responsibilities (to prepare the financial statements,select accounting policies,establish effective internal controls,design programs to prevent and detect fraud,provide written representation,inform the auditor of subsequent events that may affect the financial statements,and make all financial records and information available to the auditor).
• C)the auditor's performance (to conduct the audit in accordance with generally accepted auditing standards and obtain an understanding of the client's internal control).
• D)the internal control limitations of an audit engagement (material misstatements may not be detected).

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Definitions:

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