F8 chapter 3

Which of the following example illustrates Inherent Risk?

• Senior management regurlarly override the internal control system

• The FS of the company contains a significant balance of intangible assets

• Audit staff are inexperienced

• The company has a high turnover staff in the accouting department

Which of following could be use as benchmarking for calculating Materiality?

• Profit before tax

• Revenue

• Total asset

• All of the options are correct

Which of the following example illustrates Inherent Risk?

• The company has a high turnover staff in the accouting department

• Inventory mostly contain fashionable clothing and inventory balance is the largest balance on the statement of financial position

• Senior management regularly override the internal control system

• Sample sizes have been calculated incorrectly by the auditor and are too small

The auditor of A Co wishes to reduce audit risk. Which of the following actions could the auditor take to acheive this?

(1) Increase sample sizes; (2) Reduce control risk; (3) Assign more experienced staff to the engagement team

• (2) only

• (2) and (3)

• (1) and (3)

• (1) only

The following statement is true or false in accordance with ISA 240 The auditor's responsibilities? "The auditor is responsible for the prevention and detection of fraud and error".

• False

• True

Which of the following example illustrates Inherrent Risk?

• Senior management regularly override the internal control system

• Audit staff are inexperience

• The company has recently listed on the local stock exchange with high profit expectations from analysis

• The company has a high turnover staff in the accounting departmant

Which of the following example illustrates Inherent Risk?

• The FSs include complex transactions

• The company has a high turnover staff in the accounting department

• Sample sizes have been calculated incorrectly by the auditor and are too small

• Audit staff are inexperience

Who is responsible for the prevention and detection of fraud?

• External auditors

• Internal auditors

• Those charged with governance and management

• The audit commitee

Which of the following case could lead to the assessment that inherent risk is lower than normal

• FSs contain balances with straight forward financial accounting requirements

• The business of the company is cash-based

• The company operates in a profit-related pay scheme

Which of the following is true regarding Performance Materiality?

• Performance materiality levels are lower than the materiality for the FSs as a whole to ensure that auditors can find other smaller errors in the FSs

• Performance materiality levels are higher than the materiality for the FSs as a whole

• Performance materiality levels are calculated by 5% Profit before tax