The Institute of Chartered Accountants of Bangladesh

Sample Multiple Choice Question (MCQ)

Course Name: Assurance
Chapter 02: Process of Assurance: Obtaining an Engagement

Prepared by: Abdullah Al Mamun, FCA (En # 1142)

1. How can an assurance engagement be obtained?

(a) Participation in Tender

(b) Through different networks
(c) Through expression of interest
(d) All of the above

2. How can a proposed/ upcoming auditor communicate with present/ outgoing

auditor?

(a) Communicate directly

(b) With taking prior permission from client
(c) (a) + (b)
(d) None of the above

3. An assurance engagement can be accepted based on:

(a) Having sufficient resources to carry out the appointment

(b) The appointment is valid and clear to act.
(c) (a) + (b)
(d) None of the above

4. For ‘appointment consideration’ which issues will be taken into consideration?

(a) IESBA Code of Ethics

(b) Schedule C of ICAB Code of Ethics
(c) No significant problems on independence
(d) Appointed in a proper and legal manner
(e) All of the above

5. For ‘acceptance consideration’ which issues will be taken into consideration?

(a) Compliance of ethical requirements

(b) Access to sufficient appropriate evidence
(c) Rational purpose for the engagement
(d) Appropriate subject matter with suitable criteria
(e) All of the above

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6. The new auditor should see a valid notice of the outgoing auditor’s resignation,
or confirm that the outgoing auditors were properly removed.

(a) True
(b) False

7. For ‘acceptance procedures’ which issues will be taken into consideration?

(a) Professionally qualified to act

(b) Having adequate resources
(c) Obtain references of key personnel of the client
(d) Communication with present auditors
(e) All of the above

8. Before a new client is accepted, the auditors must ensure that there are no
independence or other ethical issues likely to cause significant problems with the
ethical code.

(a) True
(b) False

9. Which audit client possessing high risk for an audit firm?

(a) Poor recent or forecast performance

(b) Likely lack of finance
(c) Significant control weaknesses
(d) Evidence of questionable integrity, doubtful accounting policies
(e) All of the above

10. Which audit client possessing low risk for an audit firm?

(a) Good long-term prospects

(b) Well-financed
(c) Strong internal controls
(d) Conservative, prudent accounting policies
(e) All of the above

11. From which sources information about new clients can be obtained:

(a) Bankers, solicitor

(b) Most recent annual accounts, credit rating
(c) Meeting with previous auditors and review of their audit files
(d) All of the above

12. An audit firm must not accept an engagement if the client is not previously
known to them.

(a) True
(b) False

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13. “Prospective auditors should seek the prospective client’s permission to contact
the previous auditors.”

(a) True
(b) False

14. Dynamic Brothers, chartered accountants, has recently accepted appointment as

the auditor of Alpha Ltd. In terms of client due diligence, they should check
which two of the following documents?

(a) Certificate of incorporation

(b) Passport
(c) Utilities bills
(d) Annual return

15. The initial communication (through writing a letter) which is made by upcoming
auditor with previous/ retiring auditor is treated as:

(a) Engagement letter

(b) Management representation letter
(c) Professional clearance
(d) Confirmation letter

16. What are the reasons for which initial communication is made by upcoming
auditor with previous/ retiring auditor:

(a) It’s a matter of courtesy

(b) Any professional reason as to why the appointment should not be
accepted
(c) (a) + (b)
(d) None of the above

17. If a prospective client declines permission to contact the previous auditors, the
audit firm should:

(a) Report the client to the Companies Registrar

(b) Contact the previous auditors anyway
(c) Accept the engagement provisionally and continue to request permission
(d) Normally decline the appointment

18. Procedures are to be carried out after accepting nomination

(a) Ensure that outgoing auditor’s removal or resignation has been properly
conducted in accordance with national legislation.
(b) Ensure that the new auditor’s appointment is valid.
(c) Submit a letter of engagement to the directors of the company.
(d) All of the above

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19. Normally an engagement letter is written by

(a) New Auditor

(b) Outgoing Auditor
(c) Management of the audit client
(d) Any of the above

20. The purpose of an engagement letter is to:

(a) Define clearly the extent of the firm’s responsibilities

(b) Define clearly the extent of the management and those charged with
governance
(c) Minimize the possibility of any misunderstanding between the client and
the firm
(d) Provide written confirmation of the firm’s acceptance of the appointment
(e) Define the scope of the engagement and the form of their report
(f) All of the above

21. Auditing standards require that the auditor and the client should agree on the
terms of the engagement.

(a) True
(b) False

22. The agreed terms of audit engagement must be in writing and the usual form
would be a letter of engagement.

(a) True
(b) False

23. The auditors should send an engagement letter to all new clients soon after their
appointment as auditors, and in any event, before the commencement of the
first audit engagement.

(a) True
(b) False

24. Auditors should consider sending an engagement letter to existing clients to

whom no letter has previously been sent as soon as a suitable opportunity
presents itself.

(a) True
(b) False

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25. Form and content of an engagement letter generally include:

(a) The objective of the audit of financial statements.

(b) Management’s responsibility for the financial statements.
(c) The scope of the audit
(d) Unrestricted access to whatever records, documentation and other
information is requested in connection with the audit.
(e) All of the above

26. Which three of the following may be contained within a letter of engagement?

(a) Responsibilities of the auditors

(b) Responsibilities of the directors
(c) The names of the staff assigned to the engagement
(d) The scope of the audit

27. The auditor may decide to send a new audit engagement letter or other written
agreement each period.

(a) True
(b) False

28. An engagement letter is only ever sent to a client before the first audit.

(a) True
(b) False

29. During acceptance procedure the auditor should make independent enquiries if
directors are not personally known.

(a) True
(b) False

30. Which of the following factors may make it appropriate to send a new letter to
revise the terms of the audit engagement or to remind the entity of existing
terms:

(a) Any revised or special terms of the audit engagement.

(b) A recent change of senior management.
(c) A significant change in ownership.
(d) A significant change in nature or size of the entity’s business.
(e) A change in legal or regulatory requirements.
(f) All of the above

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