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WorksheetsF8 ACCA
Total questions: 71
Worksheet time: 4hrs 33mins
Name
Class
Date
1.
Which of the following is the most appropriate definition of the external audit?
a)
A.The external audit is an exercise carried out by auditors in order to give an opinion on whether the financial statements of A.company are materially misstated.
b)
B.The external audit is an exercise carried out in order to give an opinion on the effectiveness of A.company's internal control system.
c)
C.The external audit is performed by management to identify areas of eficiency within A. company and to make recommendations to mitigate those eficiencies.
d)
D. The external audit provides negative assurance on the truth and fairness of A.company's financial statements
2.
Is the following statement regarding stewardship true or false? Directors are stewards of the investment made by shareholders in a company.
a)
True
b)
False
3.
Which two of the following are elements of an assurance engagement?
(1) A.three-party relationship
(2) Suitable criteriA.
(3) Determination of materiality
(4) An engagement letter
a)
A.(1) and (2) only
b)
B.(1) and (3) only
c)
C.(2) and (3) only
d)
D (1) and (4) only
4.
Who normally appoints the external auditors of A company?
a)
A Directors
b)
B Shareholders
c)
C Audit committee
d)
D Senior management
5.
The level of assurance provided by an external audit is absolute. Is this statement true or false?
a)
True
b)
False
6.
Which of the following could cause ADVOCACY?
a)
‘a. Audit team to be offered a balloon flight entertainment
b)
‘b. Tax fee to be based on a percentage of tax saved
c)
‘c. Firm to represent Stark in a dispute with the tax authorities
7.
You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year, instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.
Which of the following actions should be taken to ensure the firm complies with ACCA’s Code of Ethics and Conduct?
a)
‘a. The gift may be accepted as Stark has taken appropriate measures to reduce the value of the gift compared to previous years.
b)
‘b. The value of the gift should be assessed to determine whether it is of material value to the financial statements.
c)
‘c. The gift should only be accepted if its value is trivial and inconsequential to the recipients. ‘d. Only the audit partner and audit manager should accept the gift.
8.
You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.
Which of the following options best identifies the valid potential threats to independence in the audit of LV Fones and allocates the threat to the most appropriate category?
a)
a) Familiarity
b)
b) self-interest
c)
c) Self-review
d)
d) intimidation
9.
The audit team being offered a 10% discount on mobile phones of the client.
Which of the following statements is true in accordance with ACCA's Code of Ethics and Conduct?
a)
a) The audit team can accept the discount as it is on the same terms as that offered to staff
b)
b) Junior members of the audit team are allowed to accept the discount, but the audit manager and audit partner should not
c)
c) Unless the value of the discount is trivial and inconsequential to the audit team members, the offer should be declined
d)
D) The audit team is only allowed to accept a discount of up to 5%
10.
Which TWO of the following are fundamental principles as stated in the ACCA’s Code of Ethics and Conduct?
1 Objectivity
2 Independence
3 Confidentiality
4 Professional skepticism
a)
A 1 and 4
b)
B 1 and 2
c)
C 2 and 3
d)
D 1 and 3
11.
Which of the following are recognised threats to independence and objectivity as identified in ACCA's Code of Ethics and Conduct?
(1) Familiarity
(2) Self-interest
(3) Integrity
(4) Advocacy
a)
A (1), (2), (3) and (4)
b)
B (1), (2) and (4)
c)
C (2), (3) and (4)
d)
D (2) and (4) only
12.
In which of the following situations would the auditor be able to disclose confidential information about a client?
(1) Disclosure is required by law.
(2) Disclosure is permitted by law but the auditor has not requested the client's permission.
(3) The auditor suspects that the client has committed money-laundering offences.
a)
A (1) and (2) only
b)
B (1) and (3) only
c)
C (2) and (3) only
d)
D (1), (2) and (3)
13.
Andrew Jones has been the key audit partner of X Co, a public interest entity, for seven years. For how long must he be rotated off the audit as a minimum to comply with ACCA's Code of Ethics and Conduct?
a)
A 1 year
b)
B 2 years
c)
C 3 years
d)
D 4 years
14.
Who is ultimately responsible for a company's system of internal controls?
a)
A External auditors
b)
B Board of directors
c)
C Internal auditors
d)
D Audit committee
15.
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
a)
A (1) and (2)
b)
B (1) and (4)
c)
C (2) and (3)
d)
D (3) and (4)
16.
Which two of the following are fundamental principles as stated in the ACCA's Code of Ethics and Conduct?
(1) Objectivity
(2) Independence
(3) Confidentiality
(4) Professional scepticism
a)
A (1) and (4)
b)
B (1) and (2)
c)
C (2) and (3)
d)
D (1) and (3)
17.
When gaining an understanding of the specific business operations of an audit client which of the following matters would an auditor need to consider?
a)
A Accounting principles and industry specific practices relevant to the client's business
b)
B Acquisitions or disposals of the client's business activities
c)
C Leasing of property, plant or equipment for use in the client's business
d)
D Products or services and markets of the client's business
18.
Which of the following procedures must the auditor use to obtain an understanding of the entity and its environment in accordance with ISA 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment?
(1) Analytical procedures
(2) Inquiry
(3) Confirmation
(4) Reperformance
a)
A (1), (2) and (3)
b)
B (1) and (2)
c)
C (2), (3) and (4)
19.
What are the two elements of the risk of material misstatement at the assertion level?
a)
A Inherent risk and detection risk
b)
B Audit risk and detection risk
c)
C Inherent risk and control risk
d)
D Detection risk and control risk
20.
Audit risk' represents the risk that the auditor will give an inappropriate opinion on the financial statements when the financial statements are materially misstated. Which of the following categories of risk can be controlled by the auditor? Category of risk:
(1) Control risk
(2) Detection risk
(3) Sampling risk
a)
A (1) and (2)
b)
B (2) only
c)
C (1) and (3)
d)
D (2) and (3)
21.
The definition of the risk of material misstatement is 'Inherent Risk × Control Risk × Detection Risk'. Is this statement true or false?
a)
true
b)
false
22.
Which of the following statements about materiality are correct?
(1) Information is material if its omission or misstatement could influence the economic decisions of users of the financial statements.
(2) Materiality is based on the auditor's experience and judgement.
(3) Materiality is always based on revenue.
(4) Materiality should only be calculated at the planning stage of the audit
a)
A (1), (2) and (3)
b)
B (1), (3) and (4)
c)
C (1) and (2)
d)
D (2) and (4)
23.
Performance materiality levels are higher than the materiality for the financial statements as a whole. Is this statement true or false?
a)
true
b)
false
24.
Is the following statement regarding the interim audit true or false? The higher the risk of material misstatement the more likely it is that the auditor will decide to perform substantive procedures during the interim audit rather than at the period end.
a)
true
b)
false
25.
Who is responsible for the prevention and detection of fraud?
a)
A Internal auditors
b)
B External auditors
c)
C Those charged with governance and management
d)
D The audit committee
26.
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
a)
A (1) only
b)
B (2) only
c)
C (1) and (3)
d)
D (2) and (3)
27.
Which of the following would normally be included in the audit plan?
a)
A Reporting objectives
b)
B Industry-specific financial reporting requirements
c)
C Nature, timing, and the extent of planned risk assessment procedures
28.
Which of the following statements are correct with regard to the relationship between the audit plan and the audit strategy for an external audit engagement?
(1) The audit plan should be developed before the audit strategy is established.
(2) The audit plan and the audit strategy should be established and developed at the same time.
(3) The overall audit strategy should be more detailed than the audit plan.
(4) The audit strategy should be established before the audit plan is developed.
a)
A (1) and (3)
b)
B (2) only
c)
C (3) and (4)
d)
D (4) only
29.
What are the purposes of planning the audit?
(1) To ensure appropriate attention is devoted to different areas of the audit
(2) To identify potential problem areas
(3) To facilitate delegation of work to audit team members
(4) To ensure the audit is completed within budget and time restraints
a)
A (1), (2), (3) and (4)
b)
B (1), (3) and (4)
c)
C (1), (2) and (3)
d)
D (2) and (3)
30.
Which of the following factors influence the form and content of audit working papers?
(1) Risks of material misstatement
(2) Exceptions identified
(3) Nature of the package used for documentation
(4) Cost to the audit
a)
A (1), (2) and (4)
b)
B (1), (3) and (4)
c)
C (1) and (2)
d)
D (2) and (4)
31.
Is the following statement regarding audit evidence true or false? Appropriateness is the measure of the quality of audit evidence.
a)
true
b)
false
32.
Which of the following is NOT an inherent limitation of internal control systems?
a)
A Insufficient segregation of duties
b)
B Possibility that employees may collude together fraudulently
c)
C Possibility of human error in undertaking tasks
33.
Which of the following controls of a sales system ensure that all goods despatched are completely and accurately invoiced?
a)
a) Good despatched notes are matched to sales invoices
b)
b) Sales invoices are sequentially numbered
c)
c) Sales invoices are matched to customer orders
34.
ISA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment sets out the five components of internal control. Which of the following is NOT set out as a component of internal control within ISA 315?
a)
A Control environment
b)
B The information system relevant to financial reporting
c)
C Human resource policies and practices
35.
Which of the following procedures are TESTS OF CONTROL an auditor should perform in testing the inventory cycle of their client whilst attending the inventory count?
(1) Observe whether the client’s staff are following the inventory count instructions (2) Review inventory present in the warehouse for evidence of damage or obsolescence
(3) Obtain a sample of the last goods received notes and goods despatched notes and follow through to ensure inclusion in the correct accounting period
(4) Inspect and review management’s inventory count instructions
a)
A 2 and 3
b)
B 1 and 4
c)
C 1 and 2
d)
D 3 and 4
36.
Is the following statement regarding the assurance provided by an internal control system true or false? An effective internal control system provides the auditor with absolute assurance that control objectives have been achieved.
a)
true
b)
false
37.
Which of the following methods of recording an accounting and controls system is a series of questions used to determine whether controls exist which meet specific control objectives?
a)
A Internal control questionnaire
b)
B Internal control evaluation questionnaire
c)
C Flowchart
38.
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?
a)
A All sales orders are based on authorised price lists.
b)
B Credit limits are checked before sales orders are accepted.
c)
C Overdue debts are chased each month by the credit controller.
d)
D The aged-debt listing is reviewed by the finance director on a monthly basis
39.
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?
a)
A 139 days
b)
B 175 days
c)
C 758 days
d)
D 958 days
40.
Which of the following controls helps to ensure that payroll payments are only made to bona fide employees?
(1) Personnel records maintained for all employees
(2) Comparison of bank transfer listing with payroll
(3) Segregation of duties between staff involved in human resources and payroll functions
(4) Reperformance of the calculation of a sample of payroll deductions
a)
A (1) and (2)
b)
B (1) and (3)
c)
C (2) and (4)
d)
D (3) and (4)
41.
B Co maintains perpetual inventory records. Which of the following control activities would contribute to the auditor's confidence that inventory recorded in the financial statements exists?
(1) Procedures to identify obsolete and damaged inventory
(2) Physical safeguards to protect inventory from theft
(3) Sequential numbering of goods dispatched notes
(4) Reconciliation of inventory records to results of inventory counts
a)
A (1) and (2)
b)
B (1) and (3)
c)
C (2) and (3)
d)
D (2) and (4)
42.
Which of the following is not a test of control?
a)
A Inspection of purchase order documentation to confirm that it has been authorised
b)
B Review of monthly bank reconciliations performed by the audit client
c)
C Examination of purchase invoices for evidence of mathematical accuracy checks
d)
D Agreement of the cost of non-current asset additions to purchase documentation
43.
Which of the following substantive procedures provides evidence over the EXISTENCE of non-current assets?
a)
A Select a sample of assets included in the non-current asset register and physically verify them at the client premises
b)
B Review the repairs and maintenance expense account to identify any items of a capital nature
c)
C For assets disposed of, agree the sale proceeds to supporting documentation and cash book
44.
Which of the following is a substantive audit procedure for wages and salaries?
a)
A Inspect a sample of clock cards for evidence of authorization by a responsible official
b)
B Recalculate a sample of payroll deductions such as employment taxes to confirm accuracy
c)
C Attempt to access and make changes to the payroll master file using the log on for a junior clerk
45.
Which of the following NOT should be included in an audit engagement letter?
a)
a) Objective and scope of the audit
b)
b) Results of previous audits
c)
c) Management’s responsibilities
46.
Which of the following is NOT a responsibility of the auditor?
a)
A To provide an opinion on the truth and fairness of the financial statements
b)
B To conduct an audit in accordance with International Standards on Auditing
c)
C To express an opinion on the company’s going concern status
47.
Which TWO of the following substantive procedures provide evidence over the EXISTENCE of trade receivables?
(1) Agreeing a sample of goods despatched notes to sales invoices and to the sales ledger (2) Undertaking a receivables circularisation
(3) Review of post year-end cash receipts, if these relate to year-end receivables follow through to the sales ledger
(4) Recalculating the allowance for uncollectible accounts
a)
A 1 and 3
b)
B 2 and 4
c)
C 2 and 3
d)
D 1 and 4
48.
Which of the following statements is/are true with respect to analytical procedures?
(1) Analytical procedures can be used throughout the audit.
(2) Analytical procedures must be used as risk assessment procedures.
a)
A (1) only
b)
B (2) only
c)
C (1) and (2)
d)
D Neither (1) nor (2)
49.
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
a)
A (1) and (2)
b)
B (1) and (4)
c)
C (2) and (3)
d)
D (3) and (4)
50.
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?
a)
A Physical inspection of the motor vehicles
b)
B Inspection of vehicle registration documents
c)
C Checking that the motor vehicles are recorded in the non-current asset register D Review of vehicle insurance documentation
51.
Which of the following audit procedures would provide the auditor with evidence of completeness of inventory?
a)
A Tracing test counts performed at the inventory count to the detailed inventory listing
b)
B Reviewing the physical condition of inventory when attending the inventory count
c)
C Casting the inventory listing
d)
D Vouching the cost of a sample of inventory items to suppliers' invoices
52.
Which of the following statements is/are true regarding direct confirmation of accounts receivable?
(1) Responses from the customer must be returned directly to the client.
(2) Under the positive method the customer only replies if the amount stated is agrees with the customer's records.
a)
A (1) only
b)
B (2) only
c)
C (1) and (2)
d)
D Neither (1) nor (2)
53.
The auditor of M Co has agreed a sample of non-current assets selected by physical inspection back to the non-current asset register. For which of the following assertions does this test provide assurance?
a)
A Completeness
b)
B Existence
c)
C Rights and obligations
d)
D Accuracy and valuation
54.
Which of the following techniques is generally accepted to be the most efficient to obtain evidence regarding the existence of bank balances?
a)
A Reperformance
b)
B Confirmation
c)
C Analytical procedures
d)
D Observation
55.
Which of the following assertions about classes of transactions and events for the period under audit is defined below: 'Amounts and other data relating to recorded transactions and events have been recorded appropriately'.
a)
A Cut-off
b)
B Accuracy
c)
C Occurrence
d)
D Classification
56.
Is the following statement regarding audit evidence true or false? Appropriateness is the measure of the quality of audit evidence.
a)
true
b)
false
57.
As the audit senior on the year-end audit of Z Co, you have instructed the audit junior to obtain and inspect supporting sales contracts for large sales transactions. Which of the following assertions are you seeking to test with this audit procedure?
a)
A Cut-off
b)
B Accuracy
c)
C Occurrence
d)
D Completeness
58.
Is the following statement regarding direct confirmation of accounts receivable true or false? The verification of trade receivables by direct confirmation provides evidence that the debts are recoverable.
a)
true
b)
false
59.
The auditor of S Co has concluded that the use of the going concern assumption is appropriate and that the material uncertainty has been adequately disclosed. What is the impact of this conclusion on the auditor's report?
a)
A Adverse opinion
b)
B Qualified opinion
c)
C Unmodified opinion without an emphasis of matter paragraph
d)
D Unmodified opinion with an emphasis of matter paragraph
60.
The auditor of Y Co has concluded that Y Co is not a going concern. The financial statements have been prepared on a going concern basis and management has refused to change them. What form of audit opinion will be issued by the auditor?
a)
A An unmodified opinion
b)
B A qualified 'except for' opinion due to material misstatement
c)
C A qualified 'except for' opinion due to insufficient appropriate audit evidence
d)
D An adverse opinion
61.
Misstatements can arise from error or fraud. Which of the following statements is correct regarding the auditor's accumulation of identified misstatements?
a)
A The auditor must accumulate all misstatements identified during the audit.
b)
B The auditor must only accumulate individually material misstatements identified during the audit.
c)
C The auditor must accumulate misstatements identified during the audit, other than those that are clearly trivial
62.
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?
a)
A Management's responsibility for the financial statements
b)
B Auditors' responsibilities
c)
C Audit opinion
d)
D Deficiencies of internal controls
63.
The auditor of Q Co has completed the audit and has concluded that sufficient appropriate evidence has been obtained, which confirms that the financial statements are not materially misstated. Which form of audit opinion will the auditor issue?
a)
A Adverse opinion
b)
B Qualified opinion
c)
C Unmodified opinion
d)
D A disclaimer of opinion
64.
ISA 705 Modification to the opinion in the independent auditor's report identifies three possible types of modification. In which of the following circumstances would a disclaimer of opinion be issued?
a)
A The auditor concludes that the financial statements include misstatements which are material but not pervasive to the financial statements.
b)
B The auditor concludes that the financial statements include misstatements which are both material and pervasive to the financial statements.
c)
C The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion but has concluded that the possible effects of any undetected misstatements could be material but not pervasive .
d)
D The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion and has concluded that the possible effects of any undetected misstatements could be both material and pervasive.
65.
The auditor of B Co has concluded that inventory is overstated as a number of lines have not been valued at the lower of cost and net realisable value. The overstatement is material but not pervasive to the financial statements. Management has refused to make an adjustment to the financial statements. What form of modified opinion should the auditor issue?
a)
A Adverse opinion
b)
B Disclaimer of opinion
c)
C Qualified opinion due to a material misstatement
d)
D Qualified opinion due to insufficient appropriate evidence on which to base an opinion
66.
The financial statements of Z Co include a receivables balance of $20,000 which the auditors do not believe will be recovered. Materiality has been set at $100,000. There are no other unadjusted misstatements. What form of audit opinion would be issued by the auditor?
a)
A Statement of financial position only
b)
B Statement of profit or loss only
c)
C Statement of financial position and statement of profit or loss
d)
D Neither the statement of financial position nor the statement of profit or loss
67.
An emphasis of matter paragraph is used in an audit report to draw attention to a matter affecting the financial statements. Which two of the following are correct in relation to an Emphasis of Matter Paragraph in the Auditor's Report?
(1) It is used when there is a material uncertainty.
(2) It constitutes a modified audit opinion.
(3) The auditor's report is referred to as an unmodified report.
(4) The matter is deemed to be fundamental to the users understanding of the financial statements.
a)
A (1) and (2)
b)
B (1) and (4)
c)
C (1) and (3)
d)
D (2) and (4)
68.
P Co is being sued by a customer for the supply of faulty products. At the year end the outcome of the legal case is still uncertain. The directors have fully disclosed the matter as a contingent liability and the auditors are satisfied with the treatment and the level of disclosure. The auditors have concluded that the uncertainty is fundamental to the understanding of the financial statements. What form of audit opinion would the auditor give?
a)
A Disclaimer
b)
B Unmodified opinion with an emphasis of matter paragraph
c)
C Unmodified opinion without an emphasis of matter paragraph
d)
D Qualified opinion
69.
The majority of the books and records of Q Co have been destroyed by a flood and the auditor has no other realistic means of obtaining sufficient, appropriate audit evidence. Which form of opinion will the auditor issue?
a)
A An adverse opinion
b)
B A disclaimer of opinion
c)
C Qualified opinion on the basis that sufficient appropriate evidence is not available
d)
D Unmodified opinion with an emphasis of matter paragraph explaining the circumstances of the flood
70.
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?
a)
A Statement of financial position only
b)
B Statement of profit or loss only
c)
C Statement of financial position and statement of profit or loss
d)
D Neither the statement of financial position nor the statement of profit or loss
71.
The auditor may wish to draw the users' attention to a matter which is not presented or disclosed in the financial statements but which is relevant to the users' understanding of the auditor's report. How would this affect the auditor's report?
a)
A An emphasis of matter paragraph would be included.
b)
B The audit opinion would be qualified.
c)
C An other matters paragraph would be included.
d)
D The auditor's report would not be affected as the auditor's report only refers to matters presented or disclosed in the financial statements.
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