Test Assurance 1.2

The auditor of Mondays Ltd is performing a test to ensure that there are no omissions from the non- current asset register. In respect of which ONE of the following assertions will this procedure provide audit evidence? 

• Existence 

• Accuracy, valuation and allocation

• Completeness

• Classification

The auditor of Green Co has concluded that Green Co is not a going concern. The financial statements have been prepared on a going concern basis and management has refused to change them. What form of audit opinion will be issued by the auditor?

• A qualified 'except for' opinion due to material misstatement

• A qualified 'except for' opinion due to insufficient appropriate audit evidence

• An adverse opinion

• A disclaimer

Which THREE of the following statement are valid?

• Negative (limited) assurance will be given on a review assignment

• Positive (reasonable) assurance will be given on a statutory audit assignment

• Negative assurance is assurance given in the absence of any indications to the contrary

• Negative (limited) assurance requires more rigorous work to be undertaken than positive assurance does

The auditor of White Co has set overall materiality level at $100,000. Which ONE of the following could be the performance materiality set for the financial statements for White Co?

• $30,000

• $70,000

• $120,000

• $150,000

Which THREE of the following are true in respect of related party transactions?

• There may be a significant control risk in relation to related party transactions

• Related party transactions must be completely disclosed in the financial statements

• Related party transactions tend to be high-risk to the auditor

• Disclosure of related party transactions is unlikely to be material to the financial statements.

During the planning stages of the final audit, the auditor believes that the probability of giving an inappropriate audit opinion is too high. Which ONE of the following should the auditor amend the audit plan to resolve this issue?

• Decrease the inherent risk

• Decrease the control risk

• Increase the sample size

• Increase the materiality level

Which THREE of the following statements are true with respect to analytical procedures?

• Analytical procedures must be used as risk assessment procedures

• Analytical procedures can be used throughout the audit

• Analytical procedures can be used at the review stage of the audit.

• Analytical procedure is a kind of substantive procedures.

Which TWO of the following are true of the auditor’s objectives in relation to fraud?

• The auditor must identify and assess the risks of material misstatement due to fraud

• The auditor performs the audit with the aim of deterring fraud

• The auditor must only obtain evidence regarding the risks of material misstatement due to error

• The auditor must obtain evidence regarding the risks of material misstatement due to fraud.

Audit risk can be split into three components: Inherent risk, control risk and detection risk. For each of the following examples, select one example which illustrated for inherent risk

• Management fails to meet up regularly for board meetings

• Directors’ pay is related to company profitability

• Senior management regularly override the system of controls

• The organization has a high turnover of staff in the accounts department

Which ONE of the following statements is false?

• A positive assurance conclusions givens a reasonable level of assurance

• Reasonable assurance is a high level of assurance, which allows a conclusion to be expressed positively and negatively

• A statutory audit gives reasonable assurance that the financial statements give a true and fair view in all material respects

• A negative assurance conclusions givens a limited level of assurance