Audit Procedures Quiz

Fellaini Co operates a large department store and has a large internal audit department in place. The  management of Fellaini Co are keen to increase the range of assignments that internal audit undertake.  

Which of the following assignments could the internal audit department of Fellaini Co be asked to perform by management?

• Internal audit department members could undertake 'mystery shopper' reviews, where they enter the store as a customer, purchase goods and rate the overall shopping experience

• Internal audit could be asked to assist the external auditors by requesting bank confirmation letters

• Internal audit could be asked to implement a new payroll package for the payroll department

• Internal audit could be asked to assist the finance department with the preparation of the year end financial statements

Application controls are manual or automated procedures that operate over accounting applications to  ensure that all transactions are complete and accurate.  

Which two of the following are application controls?

Which two of the following are application controls?  

(1) Password protection of programs  

(2) Batch controls  

(3) One for one checking  

(4) Regular back up of programs  

• (1) and (4)  

• (3) and (4)  

• (1) and (2)  

• (2) and (3)

Which of the following is not set out as a component of internal control within ISA 315?

• Control environment

• The information system relevant to financial reporting

• Human resource policies and practices

Which two of the following would be classified as substantive procedures?

(1) Tests of control  

(2) Walk-through tests  

(3) Analytical procedures  

(4) Tests of details  

• (1) and (2)  

• (1) and (4)  

• (2) and (3)  

• (3) and (4)

Is the following statement true or false regarding directional testing? An audit procedure which tests for the understatement of a class of expenditure will simultaneously test for the overstatement of the related liability.

• True

• False

What is the receivables collection period?

 $'000 

Revenue 420  

Cost of sales 270  

Gross profit 150  

Trade receivables 160  

Trade payables 130  

• 139 days

• 175 days

• 758 days

• 958 days

Is the following statement regarding audit sampling true or false? Audit sampling is the application of audit procedures to less than 100% of items within a population of audit relevance such that all sampling units have a chance of selection.

• True

• False

The auditor of L Co has identified an unexpectedly high deviation rate when carrying out tests of control on a  sample of sales invoices.  

Which two of the following would be a satisfactory course of action?  

(1) Extend the sample size  

(2) Replace the sample  

(3) Ignore the deviations as they only affect some of the items tested  

(4) Perform alternative substantive procedures  

• (1) and (3)  

• (1) and (4)  

• (2) and (3)  

• (2) and (4)

The auditor of P Co is planning the audit work on trade receivables. 

Which of the following procedures could not be performed by using computer-assisted audit techniques?

• Selection of a sample of receivables for confirmation

• Calculation of receivables days

• Production of receivables' confirmation letters

• Evaluation of the adequacy of the allowance for irrecoverable receivables

Computer assisted audit techniques include test data and audit software.  

In respect of which of the following activities would the use of audit software be most relevant?

• Tests of online passwords

• Testing of computerised in-put controls on sales invoices

• Totalling of the purchase ledger

• Testing controls over computerised credit-limits