AA Chap 7,8,9,10

Consider the following statements:

(1)The audit engagement partner must review all audit documentation before the date of

the auditor's report, in order to ensure that sufficient and appropriate audit evidence has

been obtained to support the audit opinion.

(2) All audit work should be directed, supervised and review by a more senior member of the

audit team.

Which of these statements is/are true?

• (1) only

• (2) only

• (1) and (2)

• Neither (1) nor (2)

Which of the following matters would the overall audit strategy include?

• The applicable financial reporting framework

• The nature, timing and extent of audit procedures at the assertion level

• The timetable of planned audit work

• The level for performance materiality

Consider the following statements:

(1) Existence is an assertion about account balances at the period end.

(2) Cut-off is an assertion about classes of transactions and events and related disclosures.

Which of these statements is/are true?

• (1) only

• (2) only

• (1) and (2)

• Neither (1) nor (2)

The auditor of A Co wishes to reduce audit risk and has identified three potential actions to do this:

(1) Increase sample sizes

(2) Reduce control risk

(3) Assign more experienced staff to the engagement team

Which of the above actions could the auditor take to reduce audit risk?

• (1) only

• (2) only

• (1) and (3)

• (2) and (3)

When gaining an understanding of the specific business operations of an audit client which

of the following matters would an auditor need to consider?

• Accounting principles and industry specific practices relevant to 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

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

The audit team of which you are a member is in the process of documenting the audit client's

system of internal controls. You wish to assess what specific errors or frauds may occur, in

order to identify the direct controls that the team will then need to test during control testing.

Which of the following methods for recording control systems should you use?

• ICQ

• ICEQ

• Narrative notes

• Flowcharts

Information processing controls relate to procedures used to initiate, record, process and

report transactions and other financial data.

Which two of the following are information processing controls?

• Records of program changes

• Virus checks

• Batch reconciliations

• Document counts

One of the control objectives of the sales system of B Co is to ensure that goods and services

are sold to credit-worthy customers.

Which of the following control activities would assist B Co in achieving this objective?

• All sales orders are based on authorised price lists.

• Credit limits are checked before sales orders are accepted.

• Overdue debts are chased each month by the credit controller.

• The aged-debt listing is reviewed by the finance director on a monthly basis.

The auditor of Q Co has identified that Q Co does not match dispatch notes to sales invoices

as part of the controls in the sales system.

What is the potential consequence of this deficiency?

• Customer orders may not be fulfilled accurately

• Sales and trade receivables may be overstated

• Sales and trade receivables may be understated

• Sales invoices may be posted inaccurately in the receivables control account

The external auditor has identified a deficiency in the internal controls of S Co.

Which TWO of the following factors would indicate that the deficiency is a significant

deficiency in accordance with ISA 265 Communicating Deficiencies in Internal Control to

Those Charged with Governance and Management?

• The likelihood of the deficiency leading to material misstatement is low

• There is a risk of fraud

• The number of transactions affected by the deficiency is low

• The deficiency interacts with other deficiencies identified