Question 3: (25 marks)
A. Assume that you have been assigned to the audit of Wonder Manufacturing Company. You have completed the procedures for gathering information about the company and its environment, including internal control.
a. Describe the next stage of the audit process. (5 marks)
b. Explain how the auditors may respond to high-risk audit engagements and high-risk audit assertions. (5 marks)
c. Describe the nature of further audit procedures, including when the procedures should include tests of controls. (5 marks)
B. Morgan, CPA, is approached by a prospective audit client who wants to engage Morgan to perform an audit for the current year. In prior years, this prospective client was audited by another CPA. Identify the specific procedures that Morgan should follow in deciding whether to accept this client. (10 marks)
