Auditing Specialized Industry - Quiz # 1

This regulatory body sets high-quality international standards for auditing, assurance, and quality control that strengthen public confidence in the global profession

• International Federation of Accountants (IFAC)

• International Auditing and Assurance Standards Board (IAASB)

• International Financial Reporting Standards (IFRS)

• International Accounting Standards Board (IASB)

Answer explanation

IAASB develops auditing and assurance standards

IASB is committed to developing, in the public interest, a single set of high quality global accounting standards

IFAC is dedicated to strengthening the profession and the development of strong international economies.

Which is not a characteristic of a specialized industry?

• Complex accounting

• Strict compliance requirements

• High Risk

• Unusual or rare in nature

Answer explanation

Specialized industries are not necessarily rare or unusual.

Which is not an audit consideration when it comes to auditing specialized industries?

• Engagement Budget

• Reliance on Experts

• Competence

• Audit Planning

Answer explanation

Under ACCA Global, there are 3 audit considerations when auditing specialized industries (competence, audit planning considerations, and reliance on experts)

Which is considered a specialized industry?

• Merchandising

• Manufacturing

• Insurance

• Retail

Answer explanation

Insurance companies adhere to a specific financial reporting standard (i.e. IFRS 17 Insurance Contracts). It covers the principles for the recognition, measurement, presentation, and disclosure of insurance contracts.

ISA 620 Using the Work of an Auditor’s Expert deals with:

• Identification of the risk of material misstatement in a specialised industry

• Relevant auditing standards which the audit firm needs to pay close attention

• appropriate consideration of the normal balances and transactions

• Matters including the evaluation of the objectivity, competence and capabilities of the auditor’s expert

Answer explanation

The standard focuses on the auditor's evalutation of the work of an expert.

IFRS 9 : Financial Instruments

IFRS 16 : Leases

IFRS 17 : Insurance Contracts

IFRS 41 : ?

• Revenues

• Agriculture

• Investment Property

• None of the choices

Answer explanation

There is no such thing as IFRS 41. The deliberate confusion here is the accounting standard reference which should be IAS 41 Agriculture.

Which of the following statement is true in an audit of a specialized industry?

• The auditor is not required to fully evaluate the findings of an expert.

• Identification of risk of material misstatement should be approached the same way as any other audit

• Specialized industries do not always entail complex accounting

• Audit conclusion is one of the audit considerations when auditing a specialized industry

Answer explanation

All other choices are the opposite of its definition and requirement per ACCA.

Which is not a publicly listed company in the Philippines?

• BDO Unibank, Inc.

• Ayala Corporation

• Walmart Inc.

• Insular Life Assurance Company, Ltd

Answer explanation

Walmart is a publicly listed company in the United States.

Prior to accepting an audit engagement involving a specialist industry, there are a number of relevant auditing standards which the audit firm needs to pay close attention. Which among the options is considered relevant?

• ISA 620, Using the Work of an Auditor’s Expert

• ISA 230: Audit Documentation

• IESBA International Code of Ethics for Professional Accountants (the Code)

• ISA 610: Using the Work of Internal Auditors

Answer explanation

This is an audit consideration which requires, amongst any acceptance of a new client being in line with ethical principles, that the auditor should have an appropriate understanding of the nature and complexity of the client’s business, as well as knowledge of relevant industrial regulatory or reporting requirements.

Which of the following statements is true?

• An auditor’s expert may be an auditor’s internal expert

• Small firms are prohibited to audit specialized industries

• Larger audit firms are required to audit specialized industries

• Industry-specific balances and transactions are the main priority of risk assessment