Day 1 Assessment

Which of the following most appropriately define an external audit?

• an exercise carried out in order to give an opinion on the effectiveness of a company’s system of internal control

• an exercise carried out by auditors in order to give an opinion on whether the financial statements of a company is true and fair

• an exercise performed by management to identify areas of deficiency within a company and to make recommendations to mitigate those deficiencies

• an exercise carried out by auditors in order to give a guaranteed that the financial statements are 100% accurate

What level of assurance is provided by an external audit?

• No assurance

• Limited assurance

• Reasonable assurance

• Negative assurance

Which of the following are threats to independence and objectivity in accordance to ACCA’s Code of Ethics and Conduct?

(1)    Familiarity

(2)    Integrity

(3)    Self-review

(4)    Objectivity

• (1) and (3)

• (2) and (4)

• (1), (2) and (3)

• All of the above

Which of the following statements describe the PRIMARY purpose of an external auditor evaluating and testing the internal controls of a limited liability company?

• To advise management of any deficiencies in internal control

• To perform appropriate risk assessment and determine appropriate further audit procedures

• To be able to confirm in the auditor’s report that management have maintained adequate system of internal control during the period

• To demonstrate that they have a proper understanding of their audit client

Which of the following statements most appropriately describes substantive audit procedures?

• Substantive audit procedures consist of analytical procedures and tests of controls

• Substantive audit procedures are tests to obtain audit evidence about the design and operation of an entity’s system of internal control

• Substantive audit procedures are tests to obtain audit evidence to detect material misstatements in the financial statements

• Substantive audit procedures are only carried out when the system of internal control is assessed as being strong

Which of the following is NOT a financial statement assertion relating to transactions and events and related disclosure?

• Completeness

• Occurrence

• Existence

• Presentation

A proof in total of the depreciation charge for the year is an example of which of the following types of audit procedures?

• Reperformance

• Recalculation

• Analytical procedures

• Confirmation

Which of the following statements correctly describes a way in which the auditor can reduce sampling risk?

• Increase the sample size

• Decrease the sample size

• Reduce the number of items to be tested

• Assigning more experienced audit staff

The independent auditor’s report is usually be addressed to who of the following?

• The directors of the company

• The shareholders of the company

• The audit committee

• Those charged with governance

The auditor has identified an adjusting event which is material but not pervasive. If the directors refuse to amend the financial statements to reflect this event in the financial statements, what of the following audit opinion should the auditor express?

• Disclaimer of opinion

• Unmodified opinion

• Qualified opinion

• Adverse opinion