AA-Ch -1 & 2

Which of the following statements is correct in relation to external statutory audits?

• External audits give absolute assurance that the financial statements are free from allmisstatement.

• External audits give limited assurance that the financial statements are free from materialmisstatement.

• External audits give reasonable assurance that the financial statements are free from materialmisstatement.

• External audits can only give limited assurance because of the inherent limitations of an audit.

Consider the following statements regarding stewardship and agency.

(a) Directors are stewards of the investment made by shareholders in a company.

(b) Auditors act as an agent for the shareholders in a company.

Which of these statements is/are true?

• a. only

• b. only

• (a) and (b)

• Neither (a) nor (b)

What level of assurance will be provided by the independent auditor's report?

• Absolute

• Reasonable

• Moderate

• Limited

Which of the following is NOT one of the five elements of an assurance engagement?

• Subject matter

• Suitable criteria

• Assurance file

• Written report

Which of the following is NOT a benefit of an audit?

• Increased credibility of the financial statements

• Deficiencies in controls may be identified during testing

• Fraud may be detected during the audit

• Sampling is used

Which of the following statements is FALSE?

• The auditor will express an opinion as to whether the financial statements give a true and fair view

• The auditor must obtain sufficient and appropriate evidence to be able to form an audit opinion

• If the financial statements are found to contain material misstatements a negative audit opinion will be given

• An audit may not detect all fraud and error in the financial statements

Which of the following are examples of the expectation gap?

(i).The independent auditor's report confirms the financial statements are accurate.

(ii). An unmodified opinion means the company is a going concern.

(iii).The auditor tests all transactions.

(iv).The auditor can be sued for negligence if they issue an inappropriate opinion.

• (i), (ii) and (iii)

• (i), (ii) and (iv)

• (i) and (ii) only

• (ii) and (iii) only

The International Standards on Auditing are issued by which of the following bodies?

• IAESB

• IAASB

• IASB

• FRC

Which two of the following statements are correct with regards to the International Standards on

Auditing (ISA)?

• The ISAs aim to ensure that audits performed on different companies, in different jurisdictions,adhere to common standards.

• Where it is not possible to comply with one or several of the ISAs in an audit, the auditorshould explain the reason for the non-compliance in the auditor's report.

• The ISAs apply to the audit of smaller entities.

• An auditor is legally required to follow ISAs when auditing a public interest entity.

“Based on our review, nothing has come to our attention that causes us to believe that the

accompanying financial statements do not present fairly, in all material respects... in accordance withInternational Financial Reporting Standards."

Which of the following BEST describes the type of assurance provided by this statement?

• Positive assurance expressed negatively

• Negative assurance expressed positively

• High level of assurance expressed negatively

• Limited level of assurance expressed negatively