Audit and Assurance 4

Which of the following is NOT an inherent limitation of internal control systems?

• Insufficient segregation of duties
• Possibility that employees may collude together fraudulently
• Possibility of human error in undertaking tasks

For each of the following statements select whether they are true of false in respect of substanctive procedures. The auditor only carry out substantive procedures if the results of test of controls are inconclusive 

• True
• False

Two types of procedures used in gathering evidence are test of controls and substantive procedures.For each of the following examples select the type of procedure illustrated.

• Reviewing invoices paid for evidence of authorisation
• Test of control
• Substantive procedure

For each of the following situations select the most appropriate approach which should be used by the assurance firm in the given circumstances:

• The auditor of a client where controls have been assesed as strong
• Test of controls only
• Substantive procedures only
• A mix of test of controls and substantive procedures

The level of assurance given by an assurance engagement will depend on the type of engagement. For each of the following examples, select the level of assurance you would expect to be given:

• Statutory audit
• Absolute
• Reasonable
• Limited

Which THREE of the following statements are valid?

• Positive assurance will be given on a statutory audit assignment
• Positive assurance requires more rigorous work to be undertaken than negative assurance does
• Positive assurance will be given on a review assignment
• Negative assurance is assurance given in the absence of any indications to the contrary

The draft financial statements of ABC Co show the following information: Revenue                   840 Cost of sales            540 Gross profit              300 Trade receivables    360 Trade payables        260. What is the receivables collection period?  

• 156 days
• 175 days
• 758 days
• 958 days

One of the control objectives of the sales system of ABC Co is to ensure that goods and services are sold to credit-worthy customers. Which of the following control activities would assist ABC Co in achieving this objective?

• All sales orders are based on authorised price lists.
• Credit limits are checked before sales orders are accepted.
• Overdue debts are chased each month by the credit controller.
• The aged-debt listing is reviewed by the finance director on a monthly basis

For each of the following statements select whether they are true of false in respect of substanctive procedures. Substantive procedures include both analytical procedures and test of details

• True
• False

Two types of procedures used in gathering evidence are test of controls and substantive procedures. For each of the following examples select the type of procedure illustrated. Calculation of the gross profit margin and comparison with that of the previous accounting period

• Test of controls
• Substantive procedure