AUDITING

Which of the following best describes the primary objective of a financial audit?

• To detect all frauds and errors

• To assess tax liabilities

• To express an opinion on financial statement

• To ensure the business is profitable

Which type of audit evidence is generally considered the most reliable?

• Oral representation from management

• External confirmation from a third party

• Internally generated reports

• Observation by the auditor

The concept of professional scepticism refers to:

• Trusting the client’s financial records

• An attitude that includes a questioning mind

• Performing the audit with speed

• Avoiding communication with management

Which of the following is not part of the audit risk model?

• Inherent Risk

• Control Risk

• Detection Risk

• Management Risk

An unqualified audit opinion indicates that:

• The financial statements are free from material misstatement

• The auditor found material misstatements

• The audit could not be completed

• The company failed to maintain records

Which of the following would increase detection risk?

• Use of experienced audit staff

• Adequate planning and supervision

• Inadequate audit procedures

• Strong internal controls

Which of the following is not a type of audit opinion?

• Adverse opinion

• Disclaimer of opinion

• Qualified opinion

• Reviewed Opinion

The engagement letter is issued:

• At the beginning to outline the scope and terms

• At the end of the audit

• Only for public companies

• To replace the audit report

A substantive procedure is primarily used to:

• Test internal controls

• Assess risk of material misstatement

• Detect material misstatements in account balances

• Prepare financial statements

Which of the following best describes audit materiality?

• The total value of all assets

• The threshold above which misstatements individually or in aggregate are likely to influence the decisions of users

• The degree of risk the auditor is willing to accept

• The number of transactions selected for audit testing