WorksheetsF8 Chapter 2
Total questions: 46
Worksheet time: 2hrs 32mins
Which two of the following are auditors always required to do on being invited to accept an audit engagement?
Ensure they are professionally qualified to act
Ensure they have adequate existing resources to carry out the audit
Obtain references for key personnel within the entity to be audited
Communicate with the predecessor auditors to discover any reasons they shouId not accept appointment
Which two of the following might indicate that an assurance client could have higher than normal inherent or control risk?
Poor recent performance
Strong internal controls
Unusual transactions
The existence of an internal audit department
Claret LLP, an assurance firm, has the following one clients among its client portfolio.
For this client, select whether inherent risk is high or low.
Tulip Ltd is planning to listen the local stock exchange within the next two years.
High risk
Low risk
Claret LLP, an assurance firm, has the following one clients among its client portfolio.
For this client, select whether inherent risk is high or low.
Dhalia Ltd is currently facing financial difficulties and is seeking alternative forms of finance.
High risk
Low risk
Which three of the following are benefits of an engagement letter in respect of assurance services?
Clearly defines the extent of the assurance provider's responsibilities
Provides written confirmation of the acceptance of the engagement
Confirms the scope of the engagement
Certifies the assurance provider's opinion
Which three of the following procedures should be carried out after the audit firm has decided to accept appointment as auditor?
Ensure that the outgoing auditors' removal/resignation has been properly conducted
Ensure that a resolution has been passed at the general meeting to appoint the new auditors
Perform checks to ensure that there are no legal or ethical reasons why the new audit firm cannot act as auditor
Submit a letter of engagement to the directors
Select whether they are true or false in respect of the audit engagement letter.
The engagement letter should be sent before acceptance of appointment.
True
False
Select whether they are true or false in respect of the audit engagement letter.
The engagement letter should be sent after the appointment of the auditor but before the commencement of the audit
True
False
Select whether they are true or false in respect of the audit engagement letter.
The engagement letter should be sent after the commencement of the audit but before the signing of the auditor's report.
True
False
Select whether they are true or false in respect of the audit engagement letter.
An engagement letter should be sent to all new clients
True
False
Which ONE of the following correctly describes the period for which client identification documents must be kept under money laundering regulations?
For a minimum of five years and until five years have elapsed since the relationship with the client has ceased
For a minimum of seven years and until seven years have elapsed since the relationship with the client has ceased
For a minimum of five years and until seven years have elapsed since the relationship with the client has ceased
For a minimum of seven years and until five years have elapsed since the relationship with the client has ceased
Which TWO of the following must be included in the engagement letter?
The responsibilities of the auditor
Arrangements regarding the planning and performance of the audit
The form of any reports
Basis on which fees are computed
Which THREE of the following are purposes of a letter of engagement?
Setting out the form of any report to be issued
Providing constructive suggestions to management concerning improvements in internal control
Documenting and confirming acceptance of the appointment
Narrowing the expectations gap
Providing evidence on matters where other evidence is not expected to exist
Which ONE of the following best describes professional scepticism?
The assurance provider should:
not believe anything that management tells him
not believe anything that management tells him, without obtaining supporting evidence
apply a questioning mind to the information and evidence he obtains
always assume the worst outcome in cases of uncertainty
Which TWO of the following must be included in the engagement letter?
The scope of the audit
The reporting framework that is applicable for the financial statements being prepared
Details of client identification procedures to be performed in relation to the Money Laundering Regulations
A statement that, in accordance with the Companies Act 2006, the auditor’s liability cannot be restricted
Identify whether the following are true or false. The audit firm should consider the following factors when determining whether to accept an engagement.
" Whether the firm is ethically barred from acting "
True
False
Identify whether the following are true or false. The audit firm should consider the following factors when determining whether to accept an engagement.
" Whether the firm has sufficient resources to carry out the engagement "
True
False
Identify whether the following are true or false. The audit firm should consider the following factors when determining whether to accept an engagement.
" Whether the firm can make sufficient profit from the engagement "
True
False
Identify whether the following are true or false. The audit firm should consider the following factors when determining whether to accept an engagement.
" Whether the client is new to the firm "
True
False
Identify whether the following are true or false. The audit firm should consider the following factors when determining whether to accept an engagement.
" Whether the client gives permission to contact the outgoing auditors "
True
False
Drew Brothers, chartered accountants, has recently accepted appointment as the auditor of Abysin Ltd. In terms of client due diligence, they should check TWO of the following documents?
Certificate of incorporation
Passport
Utilities bills
Annual return
Indicate if the following statement is true or false.
An audit firm must not accept an engagement if the client is not previously known to them.
True
False
If a prospective client declines permission to contact the previous auditors, the audit firm should:
report the client to the Companies Registrar
contact the previous auditors anyway
accept the engagement provisionally and continue to request permission
normally decline the appointment
In accordance with the money laundering regulations, client identification documents should be kept for:
five years
five years after the cessation of the relationship with the client
seven years
seven years after the cessation of the relationship with the client
Indicate if the following statement is true or false. An engagement letter is only ever sent to a client before the first audit.
True
False
Indicate if the following statement is true or false. An engagement letter defines the scope of the engagement
True
False
ATC LLP, an assurance firm, has the following 4 clients among its client portfolio.
For below clients, select the client which has low inherent risk.
Blue Ltd has lack of finance director
White Ltd has few unusual transactions
Grey Ltd is planning to list on the local stock exchange within the next two years.
Green Ltd is currently facing financial difficulties and is seeking alternative forms of finance.
Which ONE of the following must be included in an audit engagement letter?
Arrangements concerning the use of experts
Basis on which fees are computed
The reporting framework
Obligations to make audit working papers available to other parties
Which ONE of the following might indicate that an assurance client could have lower than normal inherent or control risk?
Lots of transactions with related parties
Significant unusual transactions
Conservative accounting policies
Evidence of questionable integrity, doubtful accounting policies
Which ONE of the following procedures should be carried out before the audit firm has decided to accept appointment as auditor?
Set up and submit a letter of engagement to the directors of the company
Ensure that a resolution has been passed at the general meeting to appoint the new auditors
Ensure that the outgoing auditors’ removal/resignation has been properly conducted
Communicate with the predecessor auditors to discover any reasons they should not accept appointment.
Which THREE of the following statements relating to engagement letter are false?
The engagement letter should be sent before acceptance of appointment
The engagement letter should be sent after the appointment and after the commencement of the audit
The engagement letter should be sent after the appointment but before the commencement of the audit.
The engagement letter should be sent after the commencement of the audit but before the signing of the auditor’s report
Auditor must find the information about new client before accepting the client.
Which THREE of the followings are sources of information about new clients?
Enquiries of other sources
Review of documents
Review of rules and standards
Implement the analytical procedures
Which THREE of the following are not the responsibilities of the external auditor?
To obtain sufficient appropriate evidence regarding compliance with laws and regulations that have a direct effect on the financial statements only.
To obtain sufficient appropriate evidence regarding compliance with laws and regulations that have an indirect effect on the financial statements only
To prevent and detect all non-compliance with laws and regulations which affect the business
To obtain sufficient appropriate evidence regarding compliance with laws and regulations that have both a direct and indirect effect on the financial statements
Which TWO of the following are benefits of an engagement letter in respect of assurance services?
Confirms the scope of the engagement
Ensure that the audit is properly organized and managed
Ensure appropriate attention is devoted to important areas of the audit
Provides written confirmation of the acceptance of the engagement
Which two of the following are auditors do not have to do on being invited to accept an audit engagement?
Ensure they are professionally qualified to act
Ensure they have adequate existing resources to carry out the audit
Obtain references for key personnel within the entity to be audited
Communicate with the predecessor auditors to d is cover any reasons they shouId not accept appointment
Which two of the following might indicate that an assurance client could have lower than normal inherent or control risk?
Poor recent performance
Strong internal controls
Unusual transactions
The existence of an internal audit department
Which one of the following are not benefits of an engagement letter in respect of assurance services?
Clearly defines the extent of the assurance provider's responsibilities
Provides written confirmation of the acceptance of the engagement
Confirms the scope of the engagement
Certifies the assurance provider's opinion
Which one of the following not related to procedures should be carried out after the audit firm has decided to accept appointment as auditor?
Ensure that the outgoing auditors' removal/resignation has been properly conducted
Ensure that a resolution has been passed at the general meeting to appoint the new auditors
Perform checks to ensure that there are no legal or ethical reasons why the new audit firm cannot act as auditor
Submit a letter of engagement to the directors
Select whether they are true or false in respect of the audit engagement letter.
The engagement letter should be sent after acceptance of appointment.
True
False
Select whether they are true or false in respect of the audit engagement letter.
The engagement letter should be sent after the appointment of the auditor and after the commencement of the audit
True
False
Select whether they are true or false in respect of the audit engagement letter.
The engagement letter should be sent before the commencement of the audit and before the signing of the auditor's report.
True
False
Select whether they are true or false in respect of the audit engagement letter.
An engagement letter should not be sent to all new clients
True
False
Which TWO of the following do not have to be included in the engagement letter?
The responsibilities of the auditor
Arrangements regarding the planning and performance of the audit
The form of any reports
Basis on which fees are computed
Which TWO of the following are not purposes of a letter of engagement?
Setting out the form of any report to be issued
Providing constructive suggestions to management concerning improvements in internal control
Documenting and confirming acceptance of the appointment
Narrowing the expectations gap
Providing evidence on matters where other evidence is not expected to exist
Which TWO of the following do not have to be included in the engagement letter?
The scope of the audit
The reporting framework that is applicable for the financial statements being prepared
Details of client identification procedures to be performed in relation to the Money Laundering Regulations
A statement that, in accordance with the Companies Act 2006, the auditor’s liability cannot be restricted
Which one is not a kind of acceptance procedure to accept a new client?
Ensure professionally qualified
Understand the entity and its environment
Ensure existing resources adequate
Obtain references of previous auditor
