For each item, selectthe appropriate fundamental principle. Some principles will be usedmore than once, but each item has only one principle as itsanswer.

-       a.      b.       c.      d.       e.      f.       g.      h.       i.    Auditors' request toobtain bank statements directly from the financial institutionswith whom the client does business.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    Auditors' assessmentof control risk and inherent risk.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    Audit firms havepolicies with respect to the level of expected continuingprofessional education.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    Auditor reviews theprior year audit workpapers, current industry trends, and client’sunaudited current financial statements to develop the current yearaudit strategy.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    Audit firms havepolicies with respect to employee ownership in audit clients.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    Auditor evaluates themagnitude of an inventory misstatement to determine if themisstatement affects the user’s opinion.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    The auditor physicallyexamines inventory to determine the inventory exists.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    An auditor asks thecontroller questions about the company’s accounting for warrantiesand determines to investigate the controller’s answers further.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    An auditor isconsidering accepting a new audit client; however, the auditor andthe audit firm have no experience with the potential client’sindustry.      -       a.      b.       c.      d.       e.      f.       g.      h.       i.    The senior auditorreviews the work of the assistant auditor to provide feedback andquality control of the workpapers.

a. Competence andcapabilities b. Ethicalrequirements c. Professionalskepticism and professional judgment d. Plan work and properlysupervise assistants e. Determine/applyappropriate materiality levels throughout audit f. Identify/assess risksof material misstatement, including internal control. g. Obtain sufficient andappropriate audit evidence. h. Express an opinion orstate an opinion cannot be expressed i. Opinion is based onfinancial statement conformity with financial reportingframework