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During the Client Acceptance and Continuance Procedures, Auditors Strive to Gather

Question 65

Matching

During the client acceptance and continuance procedures, auditors strive to gather evidence regarding the numbered topics listed below. Match each of the following Caution Indicators with the type of information to which it most closely pertains. Each caution indicator should be used for only one topic

Premises:
Financial Difficulty and Going Concern
Management Integrity
Audit Committee and Board of Directors Involvement
Performance Information
Accounting Practices and Financial Disclosures
Accounting Systems
Business Locations
Company Leadership
Organizational Structure
Responses:
marginal ability to meet debt repayment requirements
unusual legal entities or managerial lines of authority
significant bank accounts in jurisdictions for which there appears to be no clear business justification
domination of management by a single person without compensating controls
ineffective oversight over ICFR
significant related party transactions not in the ordinary course of business
inadequate internal control over assets that may increase the client’s susceptibility of misappropriation of those assets
ineffective support of the company’s ethical standards
significant declines in customer demand accompanied by increasing business failures in the industry

Correct Answer:

Financial Difficulty and Going Concern
Management Integrity
Audit Committee and Board of Directors Involvement
Performance Information
Accounting Practices and Financial Disclosures
Accounting Systems
Business Locations
Company Leadership
Organizational Structure
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