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WorksheetsAUD_QUIZ
Total questions: 50
Worksheet time: 1hrs 27mins
Audit procedures may be performed:
throughout the period being audited with emphasis on the transactions near the end.
shortly after the close of the period being audited.
early in the accounting period being audited.
during all three of the above periods.
Is the following statement regarding key audit matters true or false?
Where the auditor disclaims an opinion on the financial statements, the auditor's report must not include a key audit matters section.
True
False
C Co has a substantial bank loan which is due to mature in 20X7, and the company plans to negotiate for a new loan in March 20X7. The auditors concluded that the company's use of the going concern assumption in the financial statements for the year ended 31 December 20X6 is appropriate. However, they believe there is a material uncertainty related to going concern, which has been appropriately disclosed in the financial statements.
What action should the auditor take with regards to going concern in the auditor's report?
Express an unmodified opinion and describe the material uncertainty in the other matter paragraph
Express an unmodified opinion and describe the material uncertainty in the material uncertainty related to going concern paragraph
Express a modified opinion and describe the material uncertainty in the emphasis of matter paragraph
Express a qualified opinion and describe the material uncertainty in the basis for qualified opinion paragraph
Which of the following is likely to be carried out as part of an engagement quality control review for a listed entity?
(1) Review of audit working paper files to ensure that the audit has been performed in accordance with professional standards and regulatory and legal requirements
(2) Review of selected audit documentation relating to significant audit judgements
(3) Review of the engagement team's evaluation of the firm's independence towards the audit
(4) Consideration of whether appropriate consultations have taken place on differences of opinion/contentious matters
(1) and (3)
(2) and (4)
(1), (2) and (4)
(2), (3) and (4)
Due to disruptions caused by the recent transition to a new accounting system, one month of H Co's inventory records have been lost. The auditors performing the statutory audit for the twelve- month period have determined that the possible effects of undetected misstatements could be material, but not pervasive.
What form of audit opinion would the auditor give?
Unmodified opinion with an emphasis of matter paragraph
Qualified opinion
Adverse opinion
Disclaimer of opinion
The statement of financial position of R Co includes a material amount of $200,000 in respect of costs capitalised in the year as development expenditure. The auditor has concluded that these costs are research expenditure.
If the auditor is to issue an unmodified opinion which financial statements will require adjustment?
Statement of financial position only
Statement of profit or loss only
Statement of financial position and statement of profit or loss
Neither the statement of financial position nor the statement of profit or loss
ISA 700 Forming an Opinion and Reporting on Financial Statements sets out the basic elements of an auditor's report.
Which of the following is not included in an unmodified auditor's report?
Management's responsibility for the financial statements
Auditors' responsibilities
Audit opinion
Deficiencies of internal controls
Misstatements can arise from error or fraud.
Which of the following statements is correct regarding the auditor's accumulation of identified misstatements?
The auditor must accumulate all misstatements identified during the audit.
The auditor must only accumulate individually material misstatements identified during the audit.
The auditor must accumulate misstatements identified during the audit, other than those that are clearly trivial
1 Is the following statement regarding written representations true or false?
Written representations by management regarding specific assertions in the financial statements provide sufficient appropriate audit evidence in their own right.
True
False
M Co has a year end of 31 December 20X4. The auditor has identified that management's assessment of M Co's ability to continue as a going concern covers the period to 30 June 20X5.
What action should the auditor take?
Request that management extends the assessment period to 30 September 20X5
Request that management extends the assessment period to 31 December 20X5
Request that management extends the assessment period to 31 December 20X6
No action is required provided the auditor is satisfied with management's assessment to 30 June 20X5
'Auditors have no obligations to perform procedures or make enquiries regarding the financial statements after they have been issued.'
Is this statement true or false?
True
False
The auditor of Q Co has performed purchases cut-off procedures and has identified that in two material instances goods received prior to the inventory count have not been included on the schedule of 'goods received not invoiced'. At the period end purchase invoices have not been received. What is the auditor's conclusion based on this evidence?
Inventory is overstated and liabilities are understated.
Inventory is understated and liabilities are understated.
Inventory is overstated and liabilities are overstated.
Inventory is understated and liabilities are overstated
The auditor of G Co is performing audit procedures to confirm the company's ownership of motor vehicles.
Which of the following would provide the most persuasive evidence of this?
Physical inspection of the motor vehicles
Inspection of vehicle registration documents
Checking that the motor vehicles are recorded in the non-current asset register
Review of vehicle insurance documentation
X Co has an internal audit function. The external auditor has concluded that the internal audit function does not apply a systematic and disciplined approach to its work.
How does this affect the extent to which the external auditor can rely on the work of the internal audit function?
The external auditor must not use the work of the internal audit function.
The external auditor can use the work of the internal audit function provided the individuals have been assessed as competent.
The external auditor can use the work of the internal audit function provided the organizational status of the function supports its objectivity.
The external auditor can use work performed by the internal audit function which relates to low risk areas of the external audit only.
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
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 draft financial statements of T Co show the following information: $'000
Revenue 420
Cost of sales 270
Gross profit 150
Trade receivables 160
Trade payables 130
What is the receivables collection period?
139 days
175 days
758 days
958 days
As the external auditor of G Co, you have performed analytical procedures which have highlighted a 40% increase in revenue compared to the previous period.
Which further audit procedures would you perform in response to this?
(1) For a sample of sales invoices around the period end, inspect the dates and compare with the dates of goods despatch and the dates recorded in the sales and receivables ledger to confirm the application of correct cut-off.
(2) Trace a sample of shipping documentation to sales invoices and into the sales and receivables ledger.
(3) For a sample of sales transactions recorded in the ledger, vouch the sales invoice back to customer orders and shipping documentation.
(4) For a sample of sales invoices, examine for proper classification into revenue accounts.
(1) and (2)
(1) and (3)
(2) and (4)
(3) and (4)
To ensure that the recorded sales transactions represent goods that have actually been despatched, D Co's sales system only records sales if there is matching despatch documentation.
Which of the following would be an appropriate test of control to confirm that the control is operating effectively?
For a sample of sales invoices, verify that there are matching goods despatched notes.
For a sample of goods despatched notes, verify that there are matching sales invoices.
Verify that the numerical sequence of sales invoices is complete.
Inspect the open-order file for unfulfilled orders
The sales invoices of Z Co are matched to dispatch notes with any mismatched items investigated before they are recorded in the sales day book.
Which of the following control objectives does this help to achieve?
It ensures that sales and receivables are valid and accurate.
It ensures that all goods dispatched are recognised as sales and receivables.
It ensures that all goods ordered by customers are dispatched.
It ensures that customers do not exceed their credit limits.
What is the "Auditor Opinion" if the auditor believes that the company's financial statements are sound and free from material misstatements?
Qualified
Unqualified
Adverse
Emphasis of Matter
This Auditor Opinion means that the auditor believes that in general the financial statements can be relied upon with certain exceptions
Qualified
Unqualified
Adverse
Emphasis of Matter
Hierarchy for Auditor Opinion is:
Qualified
Unqualified
Emphasis of Matter
True
False
If the auditor of the company is KPMG LLP, the answer for "Auditor Name" should be:
KPMG LLP
KPMG Inc
KPMG
KPMG LLC
When auditors use documents to support recorded transactions, the process is often called:
physical examination.
confirmation
vouching.
inquiry.
An example of an external document is:
purchase order for company purchases
employees' time reports
carbon copies of checks
bank statements
Which of the following statements is not correct?
It is possible to vary the sample size from one unit to 100% of the items in the population.
The decision of how many items to test will not be influenced by the increased costs of performing the additional tests.
The sample size for any given procedure is likely to vary from audit to audit.
The decision of how many items to test must be made by the auditor for each audit procedure.
What is the overall objective of audit documentation?
Provide a basis for reviewing the work of subordinates.
Defend against claims of a deficient audit.
Provide reasonable assurance that the audit was conducted in accordance with standards.
None of the above.
The permanent files included as part of audit documentation do not normally include:
a copy of the current and prior years' audit programs.
copies of articles of incorporation, bylaws and contracts.
results of analytical procedures from prior years.
information related to the understanding of internal control.
The external auditor has identified a deficiency in the internal controls of S Co.
Which of the following factors would indicate that the deficiency is a significant deficiency in accordance with ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management?
(1) The likelihood of the deficiency leading to material misstatement is low
(2) There is a risk of fraud
(3) The number of transactions affected by the deficiency is low
(4) The deficiency interacts with other deficiencies identified
(1) and (2)
(1) and (3)
(2) and (4)
(3) and (4)
The auditor of Q Co has identified that Q Co does not match dispatch notes to sales invoices as part of the controls in the sales system.
What is the potential consequence of this deficiency?
Customer orders may not be fulfilled accurately.
Sales and trade receivables may be overstated.
Sales and trade receivables may be understated.
Sales invoices may be posted inaccurately in the receivables control account
One of the control objectives of the sales system of B Co is to ensure that goods and services are sold to credit-worthy customers.
Which of the following control activities would assist B Co in achieving this objective?
All sales orders are based on authorised price lists.
Credit limits are checked before sales orders are accepted.
Overdue debts are chased each month by the credit controller.
The aged-debt listing is reviewed by the finance director on a monthly basis.
Application controls relate to procedures used to initiate, record, process and report transactions and other financial data.
Which two of the following are application controls?
(1) Records of program changes
(2) Virus checks
(3) Batch reconciliations
(4) Document counts
(1) and (2)
(1) and (4)
(2) and (3)
(3) and (4)
The audit team of which you are a member is in the process of documenting the audit client's system of internal controls. You wish to assess what specific errors or frauds may occur, in order to identify the key controls that the team will then need to test during control testing.
Which of the following methods for recording control systems should you use?
ICQ
ICEQ
Narrative notes
Flowcharts
Is the following statement true or false regarding the retention of working papers?
ACCA recommends that working papers should be retained for a minimum period of five years.
True
False
When gaining an understanding of the specific business operations of an audit client which of the following matters would an auditor need to consider?
Accounting principles and industry specific practices relevant to the client's business
Acquisitions or disposals of the client's business activities
Leasing of property, plant or equipment for use in the client's business
Products or services and markets of the client's business
The auditor of A Co wishes to reduce audit risk. Which of the following actions could the auditor take to achieve this?
(1) Increase sample sizes
(2) Reduce control risk
(3) Assign more experienced staff to the engagement team
(1) only
(2) only
(1) and (3)
(2) and (3)
'Existence is an assertion about account balances at the period end.' Is this statement true or false?
True
False
Which of the following matters would the overall audit strategy include?
The timetable of planned audit work
The applicable financial reporting framework
The nature, timing and extent of audit procedures at the assertion level
F Co is an oil and gas company mining for crude oil reserves in sub-Saharan Africa. In the external audit of F Co, to which of the following might specific performance materiality levels apply?
(1) Directors' remuneration
(2) Exploration and development costs
(3) The financial statements as a whole – to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole
(4) The financial statements as a whole – to determine whether misstatements identified during the audit should be accumulated and communicated to management
(1), (2) and (3)
(1), (2) and (4)
(1) and (2)
(2) and (4)
Is the following statement true or false?
The audit engagement partner must review all audit documentation before the date of the auditor's report, in order to ensure that sufficient and appropriate audit evidence has been obtained to support the audit opinion.
True
False
What are the two elements of the risk of material misstatement at the assertion level?
Inherent risk and detection risk
Audit risk and detection risk
Inherent risk and control risk
Detection risk and control risk
Which of the following internal audit assignments is described below?
The examination of the economy, efficiency and effectiveness of activities and processes.
Regulatory compliance audit
Value for money audit
Financial audit
IT audit
AAB & Co is the statutory auditor of Y Co, a public interest entity.
Which of the following services is AAB & Co prohibited from providing to Y Co under any circumstances?
Provision of bookkeeping services
Assistance in the resolution of tax disputes
Internal audit services
Valuation services
AB & Co audits DEF Co. In accordance with ACCA Code of Ethics and Conduct which two of the following circumstances would constitute a threat to objectivity?
(1) An employee of AB & Co owns shares in DEF Co but is not part of the audit team
(2) The best friend of the engagement partner owns a significant indirect financial interest in DEF Co
(3) The audit manager of DEF Co owns a small number of shares in DEF Co
(4) The husband of the audit partner owns shares in DEF Co
(1) and (2)
(1) and (4)
(2) and (3)
(3) and (4)
Is the following statement true or false?
In an effective system of corporate governance the directors take responsibility for risk management strategies within the business.
True
False
To ensure transparency, the internal audit team should report to:
The company's directors
The audit committee
Both the directors and the audit committee
The shareholders
Which two of the following statements are correct with regards to the International Standards on Auditing (ISA)?
(1) The ISAs aim to ensure that audits performed on different companies, in different jurisdictions, adhere to common standards.
(2) Where it is not possible to comply with one or several of the ISAs in an audit, the auditor should explain the reason for the non-compliance in the auditor's report.
(3) The ISAs apply to the audit of smaller entities.
(1) and (2)
(1) and (3)
(2) and (3)
The International Standards on Auditing are issued by which of the following bodies?
IAESB
IAASB
IASB
FRC
Is the following statement regarding stewardship true or false?
Directors are stewards of the investment made by shareholders in a company.
True
False
