AA (Mock 1) - 2023

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of fundamentals papers for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year, instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

In relation to the audit team being offered a balloon ride:

Which of the following actions should be taken to ensure the firm complies with ACCA's Code of Ethics and Conduct?

• The gift may be accepted as Stark has taken appropriate measures to reduce the value of the gift compared to previous years.

• The value of the gift should be assessed to determine whether it is of material value to the financial statements.

• The gift should only be accepted if its value is trivial and inconsequential to the recipients.

• Only the audit partner and audit manager should accept the gift.

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of fundamentals papers for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year, instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

In relation to the audit engagement partner holding the role for nine years:

Which of the following safeguards should be implemented in order to comply with ACCA's Code of Ethics and Conduct?

• An independent review partner should be appointed to the audit.

• The audit engagement partner should be removed from the audit team but may serve as a quality control reviewer.

• Ali & Co should not audit Stark for a two year period.

• The audit engagement partner should be removed from the audit team.

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of fundamentals papers for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year, instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

Mr Day's daughter, Zoe, is currently learning about International Standards on Auditing (ISAs) in her studies. She has asked you for clarification of the following.

Which 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 from the public

(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

• 2, 4, 1, 3, 5

• 4, 5, 1, 2,3

• 5, 4, 2, 1, 3

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of fundamentals papers for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year, instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

Zoe is also concerned that Ali & Co might breach confidentiality were the audit firm to represent Stark in its dispute with the tax authorities.

Which of the following statements best reflects the auditor's duty of confidentiality?

• Auditors must never, under any circumstances, disclose any matters of which they become aware during the course of the audit to third parties, without the permission of the client.

• Auditors may disclose any matters in relation to criminal activities to the police or taxation authorities, if requested to do so by the police or a tax inspector.

• Auditors may disclose matters to third parties without their client's consent if it is in the public interest, and they must do so if there is a statutory duty to do so.

• Auditors may only disclose matters to third parties without their client's consent if the public interest or national security is involved.

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), who specialise in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken, for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

As part of your planning work you have identified a number of potential risks to independence:

(1) The engagement partner has been asked to attend meetings with potential investors

(2) Currant & Co has been offered the opportunity to provide other services to Orange Financials

(3) Currant & Co have been asked to produce the financial statements of Orange Financials

(4) There is a suggestion that a partner who previously worked for Orange Financials should be the review partner

Which of these issues could give rise to an advocacy threat?

• 1 only

• 2 and 3

• 4 only

• 2 and 4

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), who specialise in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken, for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

Orange Financials has been offered work by Orange Financials. This is dependent on the audit being completed with minimal issues.

Which TWO of the following threats does this situation create?

1. Intimidation

2. Self-interest

3. Familiarity

4. Advocacy

• 1 & 2

• 2 & 3

• 1 & 4

• 2 & 4

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), who specialise in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken, for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

The finance director has made two offers to members of the audit team:

(1) Weekend away

(2) Loan at reduced rates

Which of the following correctly summarises which of the offers, if any can be accepted?

• (1) Accepted (2) Accepted

• (1) Accepted (2) Not accepted

• (1) Not accepted (2) Accepted

• (1) Not accepted (2) Not accepted

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), who specialise in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken, for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

In accordance with ACCA's Code of Ethics and Conduct you have concluded that if you win the additional work you will need to disclose the proportion of fees obtained from Orange Financials to those charged with governance and conduct a post-issuance review.

Which of the following explains the basis for your conclusion?

• Total fees from Orange Financials will make up more than 10% of Currant Co's total fees for the first time since your appointment

• Total non-audit fees from all Currant Co's clients make up more than 5% of the total fees of the firm

• Total fees from Orange Financials make up more than 15% of Currant Co's total fees for the second consecutive year

• The disclosure and review are required in all circumstances where services other than audit are offered, irrespective of the level of fee

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), who specialise in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken, for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

The board has noted down a number of statements relating to the audit committee and have asked you to confirm whether their understanding is correct. Indicate whether the following statements are true or false.

True False

1. The audit committee should be made up of independent non-executive directors

2. The audit committee normally appoints the external auditors at the AGM

3. The audit committee monitors and reviews the internal audit function

4. The audit committee sets out the scope of the external auditor's work

• True, True, False, False

• True, False, False, True

• True, False, True, False,

• False, False, True, False

You are an audit senior of TEY & Co and are responsible for planning the audit of EuKaRe for the year ended 30 September 20X8.

EuKaRe is a charity which was established over five years ago. The charity's aim is to provide support to children from disadvantaged backgrounds who wish to take part in sports such as tennis, badminton and football.

EuKaRe has a detailed constitution which explains how the charity's income can be spent. The constitution also notes that expenditure relating to the administration of the charity cannot exceed 10% of the charity's income in any year. EuKaRe currently employs three permanent members of staff. At present, 100 volunteers work for EuKaRe: some commit up to three days a week and others help out on an ad hoc basis. The organisation, including its finance department, is primarily run by volunteers.

The charity's income is derived wholly from voluntary donations. Sources of donations include the public in the form of cash collected in buckets by volunteers in shopping areas, and from generous individuals.

Based on your understanding of the nature of EuKaRe you have identified that income is primarily in the form of cash.

Which element of audit risk is increased by this fact?

• Detection risk

• Inherent risk

• Control risk

• Business risk