exercised by those assisting in the audit. Choice "a" is incorrect. The third general standard of
due care does not require a thorough review of the existing safeguards over access to assets
and records. Choice "b" is incorrect. The standard of due care does not specifically require a
limited review of the indications of employee fraud and illegal acts. Choice "c" is incorrect. The
standard of due care does not require a review of audit staff training and proficiency.
QUESTION: 8
The concept of materiality would be least important to an auditor when considering the:

A. Adequacy of disclosure of a client's il egal act.
B. Discovery of weaknesses in a client's internal control.
C. Effects of a direct financial interest in the client on the CPA's independence.
D. Decision whether to use positive or negative confirmations of accounts receivable.

Answer(s): C
Explanation:
Choice "c" is correct. Any direct financial interest in a client impairs independence, even if it is
immaterial. Choice "a" is incorrect. A material il egal act may require disclosure in or adjustment
to the financial statements, whereas an immaterial il egal act may not require disclosure. Choice
"b" is incorrect. A material weakness in internal control wil affect the nature, timing, and extent
of audit procedures, whereas an immaterial weakness in internal control may have little impact
on the audit. Choice "d" is incorrect. An auditor is likely to use positive confirmations for material
accounts receivable, but may consider negative confirmations for immaterial receivable
balances.
QUESTION: 9
An auditor of a nonpublic company must conduct the audit in accordance with:

I). ASB standards.
II). PCAOB standards.

A. I.
B. Both I and II.
C. Either I or II, but not both.
D. II.

Answer(s): A
Explanation:
Choice "a" is correct. An auditor of a nonpublic company must conduct the audit in accordance
with ASB standards.
Choice "b" is incorrect. An auditor of a nonpublic company is not required to conduct the audit in
accordance with PCAOB standards.
Choice "c" is incorrect. While an auditor is only required to conduct the audit in accordance with
ASB standards, the auditor may choose to follow PCAOB standards as well. Choice "d" is
incorrect. An auditor of a nonpublic company is not required to conduct the audit in accordance
with PCAOB standards.
QUESTION: 10

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