ACCA Q3

Audit expectation gap is the difference between what the public think auditors do and what the public would like the auditors do to

• True

• False

Answer explanation

The audit expectation gap:

The difference between the levels of expected performance

As envisioned by the independent accountant and by the user of fin. S.

Companies with extensive revenue recognition complexities usually pay higher audit fees as these processes are more complex and challenging to audit.

• True

• False

The main reason to exempt SMEs from ordinary audits is to reduce the regulatory burden and costs, not because there is no risk of fraud with these companies.

• True

• False

All the Swiss Market Index (SMI) firms pay the same amount of audit fees.

• True

• False

Answer explanation

Expenses are generally related to a percentage of some metric, es. 0.5% of revenues

Substantive tests of transactions focus on the monetary correctness of all ending balances of balance sheet and income statement accounts

• True

• False

Which of the following is NOT a responsibility of the auditor?

• Assess whether the fin. S. Are presented fairly in line with an accounting standard

• Assess the going-concern of a company

• Assess with reasonable assurance whether the fin. S. Are materially misstated.

• Assess whether the profitability of the client is in line with its competitors.

Small firms in Switzerland with less than 10 employees are required to undergo an ordinary audit.

• True

• False

Which of the following may not be an issue for the auditor’s independence?

• The auditor also provided strategic consulting services to the client

• The auditor already conducted last year audit

• The lead auditor holds 20% of the client’s equity

• The lead auditor’s sister is a member of the client’s BoD

Key audit matters are….

• Complex issue that required particular attention during a specific audit

• Guidelines for the proper execution of the audit

• Decided at the beginning of the engagement in agreement with the client

• Issues that are generally particulary complex and to which auditors have to pay attention in every engagement

Auditors typically use a combinations of tests of controls and substantive tests to obtain sufficient and appropriate audit evidence, rather then relying exclusively on one or the other

• True

• False