Foundations in Audit Quiz 1

Which of the following statements relate to review engagements?

1. 1. Subject matter is plausible.

2. 2. Reasonable assurance.

3. 3. Nothing has come to our attention which would indicate that the subject matter contains material misstatements.

4. 4. Positive assurance.

• 1 and 3

• 2 and 4

• 2 and 3

• 1 and 4

Which of the following statements, relating to International Standards on Auditing (ISAs), if any, is/are correct?

1. 1. International Standards on Auditing (ISAs) are issued by the International Accounting Standards Board (IASB) and provide guidance on the performance and conduct of an audit.

2. 2. In the event that ISAs differ from local legislation in a specific country, auditors must comply with the requirements of the ISAs

• 1 only

• 2 only

• Neither 1 nor 2

• Both 1 and 2

Which of the following is NOT a principle of the UK Corporate Governance Code?

• There should be a rigorous and transparent procedure for the appointment of new directors to the board

• The board should use the annual general meeting (AGM) to communicate with investors

• The non-executive chairman should decide on the remuneration of all directors

• All directors should receive induction training on joining the board

Which TWO of the following are fundamental principles as stated in the ACCA's Code of Ethics and Conduct?

1. 1. Objectivity

2. 2. Independence

3. 3. Confidentiality

   1. 4. Professional skepticism

• 1 and 4

• 1 and 2

• 2 and 3

• 1 and 3

A significant change in the ownership of an existing audit client is a factor which makes it appropriate for the auditor to review the terms of engagement.

• True

• False

Which TWO of the following should be included in an audit engagement letter?

1. 1. Objective and scope of the audit.

2. 2. Results of previous audits

3. 3. Management's responsibilities

4. 4. Need to maintain professional skepticism

• 1 and 2

• 1 and 3

• 2 and 4

• 3 and 4

During the planning stages of the final audit, the auditor believes that the probability of giving an inappropriate audit opinion is too high. How should the auditor amend the audit plan to resolve this issue?

• Increase the materiality level

• Decrease the inherent risk

• Decrease the detection risk

Audit risk is a function of two components, inherent risk and control risk.

• True

• False

Which TWO of the following statements regarding the use of analytical procedures during the PLANNING stage of the audit are correct?

1. 1. Analytical procedures are useful when forming an overall conclusion as to whether the financial statements are consistent with the auditor's understanding of the company.

2. 2. Analytical procedures can be used to obtain relevant and reliable audit evidence.

3. 3. Analytical procedures can assist in identifying the risks of material misstatement.

4. 4. Analytical procedures can assist in identifying unusual transactions and events.

• 1 and 2

• 2 and 3

• 3 and 4

• 2 and 4

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

• To provide an opinion on the truth and fairness of the financial statements

• To conduct an audit in accordance with International Standards on Auditing

• To express an opinion on the company's going concern status