Day 3 Assessment

Which of the following circumstances may give rise to a SELF-REVIEW threat to compliance with the fundamental principles of ACCA’s Code of Ethics and Conduct?

• An auditor acting on behalf of an audit client company to resolve a dispute with supplier

• An auditor assisting the finance department of a client in preparation of financial statements

• An auditor being pressured to reduce the audit work to reduce audit fees

• An auditor owns a significant shareholding in the client company

Which of the following financial statement assertions is NOT appropriate for classes of transactions?

• Completeness

• Occurrence

• Cut-off

• Rights and obligations

Which of the following would be the most appropriate test for testing the EXISTENCE of a tangible non-current asset?

• Inspect evidence of ownership

• Inspect date on the invoice

• Physical inspection of the actual asset

• Review payment made to supplier

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

(1)    Familiarity

(2)    Self-interest

(3)    Independence

(4)    Advocacy

• (1), (2), (3) and (4)

• (1), (2) and (4) only

• (2) and (3) only

• (1) and (2) only

Which of the following situation would result in an ADVERSE opinion?

• When there are misstatements, the effect is material but not pervasive

• When auditor is unable to obtain sufficient appropriate audit evidence, the possible effect is both material and pervasive

• When there are misstatements, the effect is both material and pervasive

• None of the above

Which of the following statements is FALSE regarding audit risk?

• High inherent risk means that the risk of material errors arising is high

• High control risk means that the client’s internal controls system is likely to fail to prevent/detect and correct material errors

• High detection risk means that there is a high risk that substantive procedures will not detect a material misstatement

• The auditor can reduce audit risk by controlling the inherent and control risks

What is the full title of the auditor’s report for an external audit engagement?

• The auditor’s report

• Internal auditor’s report

• External auditor’s report

• Independent auditor’s report

Which of the following is/are TRUE regarding audit sampling?

(1)  Audit testing must cover 100% of transactions

(2)  Increased risk in an area will result in an increase in size of sample tested

• (1) only

• (2) only

• Both

• Neither

Which of the following of the audit procedures for obtaining audit evidence is CORRECTLY described?

• Inspection consists of looking at a procedure or a process being performed by others

• Reperformance consists of checking the mathematical accuracy of documents or records

• Inquiry consists of seeking information of knowledgeable persons, within the entity or outside the entity

• Recalculation involves the auditor’s independent execution of procedures or controls which were originally performed as part of entity’s internal control

Which of the following explains the purpose of the ADDRESSEE element in the external auditor’s report?

• It refers to the location where the auditor practices

• It clarifies who may rely on the opinion

• It is to distinguish this report from other reports

• It confirms the auditor’s responsibilities on the audit