ACCA F8 Audit Specific Procedure

Much of the work in the audit involves assertions. Which

of the following statements is correct relating to assertions:

• The auditor makes the assertion and then tests it during the course of the audit.

• Management make the assertions by inclusion of items in the financial statements and the auditor tests those assertions.

• Management make formal assertions to the auditor in the form of a letter and those assertions are given to the shareholders.

• The auditor may assume that the assertions made by management are correct if the Finance Director is a qualified accountant.

Which of the following are areas of the financial statements for which the assertions differ?

i) Transactions and events.

ii) Nominal codes.

iii) Ledger

iv) Accounts Disclosures

v) Account Balance

• All of the above.

• ii) & iii) only.

• i) ii) &v) only.

• i) iv) & v) only.

In order to test the assertions of management, the auditor must carry out procedures as specified in ISA 500. Which of the following are examples of such procedures:

i) Re-performance.

ii) Evaluation.

iii) Confirmation.

iv) Analytical procedures.

v) Observation.

• A. All of the above.

• B. i) ii) iii) & iv) only.

• C. i) iii) & v) only.

• D. i) iii) iv) & v) only.

All evidence gathered by the auditor in order to test an assertion or support their opinion must be:

• A. Specific and proportionate.

• B. Sufficient and appropriate.

• C. Salient and approved.

An audit junior has been assigned to the audit of bank and cash balances of Howard Co. He has obtained the following audit evidence:

1 Bank reconciliation carried out by the cashier

2 Bank confirmation report from Howard’s bankers

3 Verbal confirmation from the directors that the overdraft limit is to be increased

4 Cash count carried out by the audit junior

What is the order of reliability of the audit evidence starting with the most reliable first

• 4, 2, 1 and 3

• 2, 1, 4 and 3

• 4, 3, 2 and 1

• 2, 4, 1 and 3

Analytical procedures can be described as:

• A. A review of expectations based on ratio analysis, trends and industry information.

• B.Ratio analysis to predict what next year’s figures may look like.

• C.Industry analysis to evaluate technological advances. <br />

According to ISA 540 analytical procedures must be carried out at the following stages of the audit:

i) On every balance on the Statement of Financial Position during the audit.

ii) At the review stage of the audit.

iii) At the planning stage of the audit.

iv) Only during the interim audit.

• A.All of the above.

• B.ii) iii) & iv) only.

• C.i) iii) & iv) only.

• D.ii) & iii) only.

The auditor will make use of analytical review to identify any strange movements in balances indicating risk areas and to identify anomalous figures indicating potential misstatements.

This Statement is.....

• A.TRUE

• B.FALSE

Which of the following is a procedure that the auditor could use to verify existence of receivables?

• A.Add up the aged receivable listing.

• B.Undertake a receivables circularisation.

• C.Re-calculate the bad debt write-off amount.

• D.Check with companies house that each debtor is a legitimate company.

How can the auditor verify that the bad-debt write-off is correct?

• A.Compare it to last year as it should be the same.

• B.Discuss with management and recalculate based on the information available.

• C.Carry out a receivable circularisation.