Correct Answer: C

Explanation: AU 319 states that the auditor may make a preliminary assessment of control risk at less than a high level only when the auditor:

• Is able to identify policies and procedures of the accounting and internal control systems relevant to specific assertions which are likely to prevent or detect material misstatements in the financial statement.
• Plans to perform tests of control to support the assessment.

Analytical procedures or tests of reasonableness test amounts of financial data.

Tests of details are performed as a substantive test to determine material mistakes in the financial statements.

If the audit effort of performing tests of controls exceeds the potential reduction in substantive testing, tests of controls will not be performed because doing so would reduce audit efficiency.

Today’s question: BEC

In general, which of the following statements is correct with respect to a limited partnership?

A)   A limited partner has the right to obtain from the general partner(s) financial information and tax returns of the limited partnership.

B)   A limited partnership can be formed with limited liability for all partners.

C)   A limited partner may not also be a general partner at the same time.

D)   A limited partner may hire employees on behalf of the partnership.

Correct Answer: A

Explanation: The law gives to all investors the right to inspect books and records at reasonable times. Stockholders, general partners and limited partners all have this right. Thus, a limited partner may obtain financial information to include tax returns. A limited partnership must have at least one general partner and general partners are personally liable for all partnership debts. A limited partner may also be a general partner in the same partnership at the same time. A limited partner may not take part in the control of the partnership.

Today’s question: AUD

The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the:

A)   Evidence to be gathered to provide a sufficient basis for the auditor's opinion

B)   Procedures to be undertaken to discover litigation, claims, and assessments

C)   Pending legal matters to be included in the inquiry of the client's attorney

D)   Timing of inventory observation procedures to be performed