Advance 2025_Batch 1

What is the main purpose of client acceptance and continuance procedures in an audit?

• To determine audit fees
• To assess the profitability of the client
• To evaluate whether the audit firm can accept or continue the engagement without compromising independence or quality
• To determine the audit team size

Before accepting a new client, the auditor should consider all the following EXCEPT:

• Integrity of management
• The auditor’s independence
• The client’s accounting software version
• Competence to perform the audit

Dalam PMPJ, istilah Beneficial Owner mengacu pada:

• Pemilik saham terbesar
• Pihak yang mengendalikan entitas meskipun tidak terdaftar secara resmi
• Auditor utama
• Akuntan internal

Answer explanation

Beneficial owner adalah individu yang memiliki kontrol sesungguhnya atas entitas, meskipun tidak secara legal terdaftar sebagai pemilik.

Why would revenue recognition from multiple-element contracts often be classified as a significant risk

• It always involves fraud
• It usually lacks sufficient audit evidence
• It requires complex judgments in allocation and timing of revenue
• It is controlled entirely by the client’s IT system

Answer explanation

Multiple-element arrangements involve complex judgments (e.g., performance obligations, allocation of transaction price), making them prone to misstatement and often significant risk.

A company is under significant pressure to meet loan covenants. Which inherent risk factor is most relevant?

• Uncertainty
• Complexity
• Susceptibility to misstatement due to management bias or fraud
• Change

Answer explanation

Pressure to meet covenants increases management bias/fraud risk, particularly in revenue recognition or classification of liabilities

Why must the auditor reassess risks of material misstatement throughout the audit?

• Because detection risk changes with sample sizes
• Because audit evidence may reveal new information or changes in risk profile
• Because inherent risk is eliminated once controls are tested
• Because ISA requires quarterly reassessments

Answer explanation

Risk assessment is iterative—as evidence is gathered, auditors may adjust the risk assessment and audit procedures

The extent of test of controls is most directly affected when:

• The timing of the test of controls.
• The control addresses an area of significant risk.
• The client requests fewer audit procedures.
• The auditor relies primarily on substantive procedures.

Which of the following procedures provides the least persuasive evidence about control operating effectiveness?

• Re-performance of the control by the auditor.
• Inspection of supporting documentation.
• Inquiry of the control owner.
• Observation of the control being performed.

When selecting a sample to test the control of “The system generates pre-numbered sales invoices. The billing supervisor reviews a monthly sequence report.,” the most appropriate population is:

• All pre-numbered sales invoices.
• All monthly invoice sequence report.
• All sales transactions for the year
• All monthly invoices.

Under PSAK 115, variable consideration is included in the transaction price only when:

• The amount is contractually stated
• It can be reasonably allocated to a performance obligation
• It is highly probable that a significant reversal of revenue will not occur
• It relates to performance bonuses only

Answer explanation

PSAK 115 requires that variable consideration is only included when it is highly probable that there will be no significant revenue reversal.