AA ACC4201 Quiz 1

The level of assurance provided by an external audit is absolute.

Is this statement true or false?

• True

• False

Which of the following is an element of an assurance engagement?

• An appropriate subject matter

• Positive assurance

• Analytical review

Is the following statement regarding stewardship true or false?

Directors are stewards of the investment made by shareholders in a company

• True

• False

Which two of the following are elements of an assurance engagement?

(1) A three-party relationship

(2) Suitable criteria

(3) Determination of materiality

(4) An engagement letter

• 1 & 3

• 1 & 2

• 2 & 3

• 1, 2 & 3

• 2 & 4

What is the correct order of the following stages involved in the development of an ISA?

(1) Distribution of exposure draft for public comment

(2) Consideration of comments received as a result of the exposure draft

(3) Approval by IAASB members

(4) Establishment of task force to develop draft standard

(5) Discussion of proposed standard at a public meeting

• (1), (5), (4), (3), (2)

• (3), (4), (1), (2), (5)

• (4), (5), (1), (2), (3)

• (5), (4), (2), (1), (3)

Who normally appoints the external auditors of a company?

• Directors

• Shareholders

• Audit committee

• Senior management

Which of the following is the most appropriate definition of the external audit?

• The external audit is an exercise carried out by auditors in order to give an opinion on whether the financial statements of a company are materially misstated.

• The external audit is an exercise carried out in order to give an opinion on the effectiveness of a company's internal control system.

• The external audit is performed by management to identify areas of deficiency within a company and to make recommendations to mitigate those deficiencies.

• The external audit provides negative assurance on the truth and fairness of a company's financial statements.

Which two (2) of the following makes one eligible to act as auditor?

1. Need membership of an appropriate body eg ACCA

2. Must be intelligent and well spoken

3. Audit work must not be conducted properly and with professional integrity

4. There must be monitoring and enforcement mechanisms in place

• 1 & 3

• 2 & 3

• 1 & 4

• 1 & 2

The Board of BJM Co has asked your audit firm (YHT & Co) to conduct a review of BJM's compliance with hygiene regulations.

The partner responsible for the review engagement has asked you to tell him what level of assurance you believe YHT & Co should provide, and also what type of opinion the firm should give.

What is the level of assurance and type of opinion that can be provided on this review engagement?

• Reasonable assurance, positive wording

• Reasonable assurance, negative wording

• Limited assurance, positive wording

• Limited assurance, negative wording

Which of the following are the benefits of a statutory audit?

1. Impartial view of financial statements provided by the auditor

2. Review of accounting and control systems, including recommendations in relation to systems

3. Only auditors truly understand accounting standards

4. There is a possibility that the auditor might detect fraud and error

• All of the above

• 1, 2 & 3

• 1, 2 & 4

• 2, 3 & 4