ExpertMedium1 markMultiple Choice
CPA · Question 29 · Area I: Ethics & General Principles
Which of the following is a PRECONDITION for an audit of a nonissuer?
Which of the following is a PRECONDITION for an audit of a nonissuer?
Answer options:
A.
The auditor must have prior experience in the client's industry.
B.
Management acknowledges its responsibility for the design, implementation, and maintenance of internal control.
C.
The client must have an internal audit function.
D.
Management must provide a written representation letter before the engagement is accepted.
How to approach this question
Recall AU-C 210 Preconditions. Management must agree to the 'Big 3': 1. Fair Presentation. 2. Internal Control. 3. Access to Evidence.
Full Answer
B.Management acknowledges its responsibility for the design, implementation, and maintenance of internal control.✓ Correct
Management acknowledges its responsibility for the design, implementation, and maintenance of internal control.
AU-C 210 states that the auditor should establish whether the preconditions for an audit are present. This includes obtaining the agreement of management that it acknowledges and understands its responsibility for internal control.
Common mistakes
Confusing engagement acceptance with end-of-audit procedures (rep letter).
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