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Business Studies

Modern Techniques of Managerial Control

The least imp...

Question

The least important element in the evaluation of an audit firm's system of quality control would relate to _________.

A

Assignment of audit assistants

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B

System of determining audit fees

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C

Consultation with experts

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D

Confidentiality of client's information

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Solution

The correct option is A System of determining audit fees
Determination of audit fees is secondary in evaluation of a firm's system of quality control since that is discussed and communicated before the start of audit in majority of the cases or it may be in trend with what has been charged in previous years.
In fact, other aspects require auditor's attention like assignment to audit assistants, consultation with experts and confidentiality of client information.

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Q. The most comprehensive of audit is the system audit, which examines suitability and the effectiveness of the system as a whole. This audit is shall ensure __________ of the system.

Q. Auditing firms should establish quality control policies and procedures for personnel management in order to provide reasonable assurance that _________.

Q. In pursuing its quality control objectives with respect to independence, an auditing firm may use policies and procedures such as ______________.

Q. An audit firm is appointed for 10 years. After 10 years a new audit firms is being appointed having partners common to the previous retiring audit firm. Is the appointment legitimate?

Q. Tick mark the correct answer.
In evaluating internal control, the first step is to prepare an internal control questionnaire or a flow chart of the system. The subsequent steps should be followed:

1

. Determine the extent of audit work necessary to form an opinion

2

. Gather enough evidence to determine as to whether the internal control system is functioning as described

3

. Write a letter to the management describing the weaknesses in the internal control system

4

. Form a final judgement on the effectiveness of the internal control system
The correct sequence of these steps would be.

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