Assurance 1.3

Which ONE of the following best describes the concept of assurance? Assurance refers to:

• An assurance firm’s high level of satisfaction as to the reliability of an assertion being made by one party for the use of another party

• A user’s satisfaction as to the reliability of an assertion being made by another party

• An assurance firm’s satisfaction as to the reliability of an assertion being made by one party for the use of another party

• An assurance firm’s limited level of satisfaction as to the reliability of an assertion being made by one party for the use of another party

Which THREE of the following are purposes of a letter of engagement?

• Setting out the form of any report to be issued

• Narrowing the expectations gap

• Providing constructive suggestions to management concerning improvements in internal control

• Documenting and confirming acceptance of the appointment

For each of the following statements about materiality, Which ONE of the following statement is true?

• Materiality only depends on the size of the error in the context of its omission or misstatement

• Materiality should be considered when planning audit procedures and when evaluating discovered misstatements

• Materiality must be expressed as a proportion of asset

• Materiality will not influence the audit opinion given

When gaining an understanding of the investment operations of an audit client which ONE of the following matters would an auditor need to consider?

• Products or services and markets of the client's business

• Acquisitions or disposals of the client's business activities

• Leasing of property, plant or equipment for use in the client's business

• Accounting principles and industry specific practices relevant to the client's business

White Ltd’s quick ratio has fallen from 1.7:1 to 1.5:1. Which TWO of the following might help to explain this decline?

• Credit control has been poor

• Current liabilities have increased

• The allowance for receivables has been reduced

• The entity has purchased a inventory for cas

Which THREE of the following statements correctly describe the auditors' responsibilities in accordance with ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements?

• The auditor is not responsible for detecting all errors and should attempt to detect fraud where information comes to light as a result of standard audit procedures

• The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material misstatement whether caused by fraud or error

• The auditor is not responsible for the prevention and detection of fraud and error

• The auditor is not responsible for the prevention of fraud and error but is responsible for detection

The following are items that might be included in an auditor's report. Which TWO of the following are reported on by exception only?

• Whether the financial statements are in agreement with the accounting records and returns

• Whether details of directors' emoluments and other benefits have been correctly disclosed in the financial statements

• Whether the financial statements give a true and fair view of the state of the company’s affairs at the end of the financial year

• Information in the strategic report and the directors' report is consistent with the financial statements

The following are examples of computer controls which operate at Blue Ltd. Which THREE of the following examples are the types of computer control which illustrate for general control?

• Password protection limiting access to data

• Manual checks to ensure that timesheets are authorized before details are processed

• Virus checks on software on employees’computers

• Training of staff using programs

Which TWO of the following statements are true respect of business risk?

• Business risk is of no relevance to the auditor. The auditor is only concerned with audit risk

• Business risk is the risk inherent to the company in its operations

• Auditor can impact on business risk to reduce the audit risk to acceptable level

• Management are responsible for identifying and controlling business risks

Which of the following is not a benefit of establishing an audit committee?

• Reduced external audit fees, as the presence of the audit committee reduces audit risk and consequently, the amount of audit procedures required

• Greater external audit independence, as the audit committee can be responsible for appointing the external auditors

• Reduced opportunity of fraud, as the audit committee can advise the executive directors on managing the risks in the financial reporting process

• Monitor and review the effectiveness the effectiveness of the company’s internal audit function.