ICAEW Assurance Mock Exam

Your client has a pending lawsuit, but management refuses to disclose it in the financial statements. What should you do?

• Accept management's decision

• Assess whether disclosure is required under IAS 37

• Ignore the lawsuit since it is not a financial transaction

• Issue an unqualified audit report

The audit team finds that revenue is being recognized before goods are delivered. What should you do?

• Accept management's claim

• Verify whether it complies with IFRS 15

• Adjust the financial statements yourself

• Ignore it, as revenue will be earned eventually

A senior accountant has unrestricted access to both recording and approving payments. What is the key audit risk?

• The accountant may delay payments

• The company may face cash flow issues

• Fraud due to lack of segregation of duties

• The company may have higher bank fees

Your client values inventory at cost, even when the net realizable value is lower. What should you do?

• Accept management's valuation

• Adjust the inventory valuation per IAS 2

• Ignore the issue since cost is historically accurate

• Increase the carrying value to match selling prices

A company is experiencing significant cash flow difficulties. What should you do?

• Issue a standard unqualified audit opinion

• Include a going concern uncertainty paragraph in the audit report

• Ignore cash flow issues unless management raises them

• Adjust the financial statements to show a healthier position

During payroll testing, you find employees receiving salaries who do not exist. What should be your first action?

• Report it to regulators immediately

• Perform additional audit procedures to confirm fraud risk

• Ignore it, as this is an HR issue

• Discuss it with the CEO and take their word for it

Your client's CEO offers you free tickets to an exclusive business event in exchange for a favorable audit report. What is your response?

• Accept the offer as it does not affect the audit opinion

• Politely decline and document the offer

• Accept but disclose it in the audit report

• Accept and ensure a favorable audit report

A client has not disclosed a related party transaction in its financial statements. What should you do?

• Ignore the omission

• Discuss it with management and determine if disclosure is required

• Immediately modify your audit opinion

• Remove the client from your audit list

The CFO suggests you overlook a minor misstatement to speed up the audit. What should you do?

• Overlook the misstatement if it is below materiality

• Perform additional procedures to assess materiality

• Accept the CFO's request

• Change your audit opinion immediately

An audit team member owns shares in the client's company. What is the main concern?

• No concern since the team member is junior

• A breach of auditor independence rules

• Only a problem if the shares are over £10,000

• The audit partner must own shares for independence to be an issue