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Worksheets121-250
Total questions: 125
Worksheet time: 1hrs 3mins
Name
Class
Date
1.
Which THREE of the following are purposes of a letter of engagement?
a)
Setting out the form of any report to be issued
b)
Providing constructive suggestions to management concerning improvements in internal control
c)
Documenting and confirming acceptance of the appointment
d)
Narrowing the expectations gap
e)
Providing evidence on matters where other evidence is not expected to exist
2.
For each of the following statements select whether they are true or false in respect of the audit engagement letter: The engagement letter should be sent after commencement of the audit but before the signing of the auditor’s report
a)
True
b)
False
3.
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)
(1), (2) and (3)
b)
(1) and (2)
c)
(2), (3) and (4)
4.
For each of the following statements selects whether they are true or false in respect of the audit engagement letter: The engagement letter should be sent before acceptance of appointment
a)
True
b)
False
5.
The definition of the risk of material misstatement is “Inherent Risk x Control Risk x Detection Risk”. Is this statement true or false?
a)
True
b)
False
6.
Which TWO of the following are auditors always required to do on being invited to accept an audit engagement?
a)
Ensure they are professionally existing resources to carry out the audit
b)
Ensure they have adequate existing resources to carry out the audit
c)
Obtain references for key personnel within the entity to be audited
d)
Communicate with the existing auditors to discover any reasons they should not accept appointment
7.
Performance materiality levels are higher than the materiality for the financial statements as a whole. Is the statement true or false?
a)
True
b)
False
8.
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)
(1) only
b)
(2) only
c)
(1) and (3)
d)
(2) and (3)
9.
Which THREE of the following procedures should be carried out after the audit firm has decided to accept appointment as auditor?
a)
Ensure that the outgoing auditors’ removal/ resignation has been properly conducted
b)
Ensure that a resolution has been passed at the general meeting to appoint the new auditors
c)
Perform checks to ensure that there are no legal or ethical reasons why. The new audit firm cannot act as auditor
d)
Submit a letter of engagement to the directors
10.
Who is responsible for the prevention and detection of fraud?
a)
Internal auditors
b)
External auditors
c)
Those charged with governance and management
d)
The audit committee
11.
C&C company, an assurance firm, has the following two clients among its client portfolio. For each client, select whether inherent risk is high or low. Tulip Ltd is planning to list on the local stock exchange within the next two years.
a)
High risk
b)
Low risk
12.
Which of the following statements about materiality are correct?
(1) Information is material if its omission of 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)
(1), (2) and (3)
b)
(1), (3) and (4)
c)
(1) and (2)
d)
(2) and (4)
13.
For each of the following statements select whether they are True of false in respect of the audit engagement letter: An engagement letter should be sent to all new clients.
a)
True
b)
False
14.
What are TWO elements of the risk of material misstatement at the assertion level?
a)
Inherent risk and detection risk
b)
Audit risk and detection risk
c)
Inherent risk and control risk
d)
Detection risk and control risk
15.
For each or the following factors at a prospective client select whether that factor indicates that client is high or low risk: Company carries out unusual transactions
a)
High risk
b)
Low risk
16.
For each of the following factors at a prospective client seclect whether that factor indicates that client is high or low risk: Company currently has no finance director
a)
High risk
b)
Low risk
17.
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
18.
Which of following best describes professional scepticism. The assurance provider should:
a)
Not believe anything that management tells him
b)
Not believe anything that management tells him, without obtaining supporting evidence
c)
Apply a questioning mind to the information and evidence he obtains
d)
Always assume the worst out come in cases of uncertainty
19.
For each of the following statements select whether they are True of 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
a)
True
b)
False
20.
Which ONE of the following is NOT a benefit of an engagement letter in respect of assurance services?
a)
Clearly defines the extent of the assurance provider’s responsibilities
b)
Provides written confirmation of the acceptance of the engagement
c)
Certifies the assurance provider’s opinion
21.
For each of the following statements select whether they are true of false in respect of substantive procedures.
The auditor must carry out substantive procedures on all material items
a)
True
b)
False
22.
For each of the following situations select the most appropriate approach which should be used by the assurance firm in the given circumstances:
The auditor of a client where controls have been assessed as deficient.
a)
Test of controls only
b)
Substantive procedures only
c)
A mix of test of controls and substantive procedures
23.
Which ONE of the following is NOT a test that could be used by assurance providers to provide evidence relating to a balance in the financial statement?
a)
Walk-through test
b)
Test of control
c)
Test of detail
d)
Analytical procedure
24.
For each of the following statements select whether they are true of false in respect of substantive procedures.
The auditor only carry out substantive procedures if the results of test of controls are inconclusive
a)
True
b)
False
25.
Two types of procedures used in gathering evidence are test of controls and substantive procedures.
For each of the following examples select the type of procedure illustrated.
Calculation of the gross profit margin and comparison with that of the previous accounting period
a)
Test of controls
b)
Substantive procedure
26.
For each of the following statements select whether they are true of false in respect of substantive procedures.
Substantive procedures include both analytical procedures and test of details
a)
True
b)
False
27.
For each of the following situations select the most appropriate approach which should be used by the assurance firm in the given circumstances:
The auditor of a client where controls have been assessed as strong
a)
Test of controls only
b)
Substantive procedures only
c)
A mix of test of controls and substantive procedures
28.
An effective internal control system provides the auditor with absolute assurance that control objectives have been achieved
a)
True
b)
False
29.
Which THREE of the following are assertions used by the auditor about classes of transactions?
a)
Occurrence
b)
Existence
c)
Completeness
d)
Cut-off
e)
Rights and obligations
30.
Which TWO of the following are assertions used by the auditor about presentation and disclosure?
a)
Allocation
b)
Accuracy
c)
Cut-off
d)
Completeness
31.
Which THREE of the following statements are valid?
a)
Positive assurance will be given on a statutory audit assignment
b)
Positive assurance requires more rigorous work to be undertaken than negative assurance does
c)
Positive assurance will be given on a review assignment
d)
Negative assurance is assurance given in the absence of any indications to the contrary
32.
The level of assurance given by an assurance engagement will depend on the type of engagement.
For each of the following examples, select the level of assurance you would expect to be given:
Statutory audit
a)
Absolute
b)
Reasonable
c)
Limited
33.
The level of assurance given by an assurance engagement will depend on the type of engagement.
For each of the following examples, select the level of assurance you would expect to be given:
Report on prospective financial information
a)
Absolute
b)
Reasonable
c)
Limited
34.
For the following statements, select whether they are true or false in respect of the concept of materiality.
Materiality depends only on the monetary amount of an item?
a)
True
b)
False
35.
Which TWO of the following options are signs of overtrading?
a)
Inventory decreasing
b)
Cash decreasing
c)
Payable decreasing
d)
Receivables increasing
36.
Which of the following would normally be included in the audit plan?
a)
Reporting objectives
b)
Industry-specific financial reporting requirements
c)
Nature, timing, and the extent of planned risk assessment procedures
37.
In each of the following case, select whether inherent risk is higher or lower than normal: The business is of the company is cash - based
a)
Inherent risk higher than normal
b)
Inherent risk lower than normal
38.
Audit risk can be split into three components: inherent risk, control risk and detection risk.
For the following example, select the types of risk illustrated: The organisation operates in a fast - moving, high tech environment
a)
Inherent risk
b)
Control risk
c)
Detection risk
39.
Audit risk can be a split into three components: inherent risk; control risk and detection risk. For each of the following examples, select the types of risk Illustrated: The organisation has a number of estimate in its financial statements.
a)
Inherent
b)
Control
c)
Detection
40.
Select the MOST appropriate approach which should be used by the assurance firm in the given circumstance.
The auditor of a long - standing client with a sophisticated IT system and an internal department?
a)
Test of control only
b)
Substantive procedures only
c)
A mix of tests of control and substantive procedures
41.
In the following case, select whether inherent is higher or lower than normal:
The company operates in a slow - moving, stable industry
a)
Inherent risk higher than normal
b)
Inherent risk lower than normal
42.
Audit risk can be split into three components: inherent risk, control risk and detection risk.
For the following example, select the types of risk illustrated: The organisation has few employees in its accounting department.
a)
Inherent risk
b)
Control risk
c)
Detection risk
43.
ABC Ltd's quick ratio has fallen from 1.8:1 to 1.5:1.
Which ONE of the following might help to explain this decline?
a)
The allowance for receivables has been reduced
b)
Credit control has been poor
c)
The entity has purchased a property for cash
d)
Inventory levels have fallen
44.
Audit risk can be a split into three components: inherent risk; control risk and detection risk. For each of the following examples, select the types of risk Illustrated: The organisation is seeking to raise finance for a new venture
a)
Inherent
b)
Control
c)
Detection
45.
Which of the following statements correctly describes the principal purpose of an external audit of a limited company?
a)
To assist in the preparation of the company's financial statements
b)
To prevent fraud within the company
c)
To examine and express an opinion on the company's financial statements
d)
To assist the directions in improving the company's financial reporting process
46.
Audit risk can be a split into three components: inherent risk; control risk and detection risk. For each of the following examples, select the types of risk Illustrated: Senior management regularly override the system of controls
a)
Inherent
b)
Control
c)
Detection
47.
Audit risk can be a split into three components: inherent risk; control risk and detection risk. For each of the following examples, select the types of risk Illustrated: The organisation has a high turnover of staff in the accounts department
a)
Inherent
b)
Control
c)
Detection
48.
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)
(1), (2), (3) and (4)
b)
(1), (3) and (4)
c)
(1), (2) and (3)
d)
(2) and (3)
49.
Which one of the following is normally designed to detect possible material monetary errors in the figures in financial statements?
a)
Test of control
b)
Walk - through test
c)
Analytical procedure
d)
Observation of a procedures
50.
Select the MOST appropriate approach which should be used by the assurance firm in the given circumstance.
The auditor of a new client, recently started up, with few employees in its accounting department?
a)
Test of control only
b)
Substantive procedures only
c)
A mix of tests of control and substantive procedures
51.
In each of the following case, select whether inherent risk is higher or lower than normal: Financial statements contain balances with straightforward Financial Accounting requirements
a)
Inherent risk higher than normal
b)
Inherent risk lower than normal
52.
For the following statements, select whether they are true or false in respect of the concept of materiality.
Materiality is a matter of professional judgment
a)
True
b)
False
53.
For each of the following statements, select whether they are true or false in respect of the concept of materiality: material should be calculated at the planning stage of all audits
a)
True
b)
False
54.
Which ONE of the following best describes the principal difference between fraud and errors?
a)
Fraud may result in the financial statements being material misstated
b)
Fraud is an intentional act whereas error is unintentional
c)
A misstatement can be material whether it is caused by fraud or by error
d)
Fraud may be the result of negligence whereas error is unintentional
55.
Which three of the following would increase inherent risk
a)
Sample size have been calculated incorrectly by the auditor and are too small
b)
A significant number of balances are based on estimates
c)
The financial statements include complex transactions
d)
Audit staff are inexperienced
e)
A company is seeking to raise Finance
56.
With respect to ISA 315, which three of the following procedures shall be used in understanding the entity and its environment
a)
Inquiries of management and others within the entity
b)
Inquiries the third party
c)
Analytical procedures
d)
Observation and Inspection
57.
Is the following statement regarding audit evidence true or false? Appropriateness is the measure of the quality of audit evidence.
a)
True
b)
False
58.
In the following case, select whether inherent is higher or lower than normal:
Inventory is largest balance on the statement of financial position
a)
Inherent risk higher than normal
b)
Inherent risk lower than normal
59.
For each of the following statements, select whether they are true or false in respect of the concept of materiality: Once established, the materiality level initially set cannot be revised during the course of the audit
a)
True
b)
False
60.
Which three of the following constitutes analytical procedures
a)
Considerations of comparable information for prior periods
b)
Considerations of relationships between elements of financial information that are expected to conform to a predicted pattern
c)
Consideration of whether a balance has been calculated correctly
d)
Consideration of similar industry information
61.
For the following statements, select whether they are true or false in respect of the concept of materiality.
Materiality may depend on either the nature of an item or its monetary amount
a)
True
b)
False
62.
Audit risk can be a split into three components: inherent risk; control risk and detection risk. For each of the following examples, select the types of risk Illustrated: The auditor will be using samples in testing
a)
Inherent
b)
Control
c)
Detection
63.
In the following case, select whether inherent is higher or lower than normal:
The company has recently listed on the local stock exchange with high profit expectations from analysts.
a)
Inherent risk higher than normal
b)
Inherent risk lower than normal
64.
Which three of the following are of the objectives of the audit planning
a)
To determine the scope of the engagement
b)
To ensure appropriate attention it devoted to the important areas of the audit
c)
To identify potential problems and resolve them on the timely basis
d)
To assign work to remembers of the audit team
65.
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)
(1), (2) and (4)
b)
(1), (3) and (4)
c)
(1) and (2)
d)
(2) and (4)
66.
Which TWO of the following are true in respect of related party transactions
a)
Related party transactions tend to be low-risk to the auditor
b)
Disclosure of related party transactions is unlikely to be material to the financial statements
c)
Related party transactions must be completely disclosed in the financial statements
d)
There may be a significant control risk in relation to related party transactions
67.
Which three of the following would normally be included in the overall audit strategy?
a)
Detail of economic factors and industry conditions
b)
The results of initial analytical procedures
c)
Confirmation of management's responsibility for the financial statements
d)
Identification of specific audit risks
68.
Which two of the following would be used in understanding the entity in accordance with ISA 315?
a)
Industry, regulatory and other external factors
b)
A preliminary review of internal controls
c)
The results of tests of details
d)
The results of a review events after the date of the financial statements
69.
Audit risk can be a split into three components: inherent risk; control risk and detection risk. For each of the following examples, select the types of risk Illustrated: Directors' pay is related to company profitability
a)
Inherent
b)
Control
c)
Detection
70.
For of the following statements, select whether they are true or false in respect of the concept of materiality: Materiality should be considered when planning audit procedures and when evaluating discovered misstatement
a)
True
b)
False
71.
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)
(1) and (3)
b)
(2) only
c)
(3) and (4)
d)
(4) only
72.
For of the following statements, select whether they are true or false in respect of the concept of materiality: Materiality is always expressed as a proportion of profit
a)
True
b)
False
73.
Which one of the following does setting a preliminary materiality threshold not help auditors to decide?
a)
What audit staff to assign to the audit
b)
How many items to examine
c)
Whether to use sampling
d)
What level of errors is likely to lead the auditor not being able to give an unqualified opinion
74.
In each of the following case, select whether inherent risk is higher or lower than normal: The company operates a profit related by scheme:
a)
Inherent risk higher than normal
b)
Inherent risk lower than normal
75.
For of the following statements, select whether they are true or false in respect of the concept of materiality: materiality may depend on the size of the error in the context of its omission or misstatement
a)
True
b)
False
76.
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)
(1) and (2) only
b)
(1) and (3) only
c)
(2) and (3) only
d)
(1) and (4) only
77.
Which of the following are valid disadvantages of having an audit committee?
a)
It can undermine the authority of the board of directors
b)
The internal audit function may communicate directly with the audit committee rather than with management.
c)
It may be difficult to find non-executive directors with the relevant experience.
78.
AA audits Blue 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 AA owns shares in Blue Co but is not part of the audit team
(2) The best friend of the engagement partner owns a significant indirect financial interest in Blue Co
(3) The audit manager of Blue Co owns a small number of shares in Blue Co
(4) The husband of the audit partner owns shares in Blue Co
a)
(1) and (2)
b)
(1) and (4)
c)
(2) and (3)
d)
(3) and (4)
79.
Which of the following internal audit assignments aims to monitor management's performance and ensure that company policy is followed?
a)
Value for money
b)
Fraud investigation
c)
Financial
d)
Operational
80.
Which of the following activities should the internal audit function not be involved in?
a)
Monitoring of management's performance
b)
Reviewing adequacy of management information for decision-making purposes
c)
Taking responsibility for the implementation of a new sales ledger system
d)
Assessing compliance with regulation relevant to the business
81.
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)
(1) and (4)
b)
(1) and (2)
c)
(2) and (3)
d)
(1) and (3)
82.
Which of the following statement is not true?
a)
The auditor’s responsibility for detection and prevention of errors and fraud is similar
b)
Internal control system reduces all of employee fraud
c)
Management fraud is more difficult to detect than employee fraud
d)
All statements are correct
83.
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)
Acquisitions or disposals of the client's business activities
b)
Leasing of property, plant or equipment for use in the client's business
c)
Products or services and markets of the client's business
d)
Accounting principles and industry specific practices relevant to the client's business
84.
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)
(1) and (2)
b)
(1) and (3)
c)
(1), (2) and (3)
d)
(2), (3) and (4)
85.
Responsibility for the preparation of the financial statements as per applicable financial statement framework is required to be disclosed under which of the following sections in the auditor’s report?
a)
Under basis for opinion paragraph
b)
Under opinion paragraph since the opinion is to be on the financial statements
c)
Under management’s responsibility paragraph since management is responsible for the preparation of the financial statements as per applicable financial framework
d)
Under auditor’s responsibility paragraph since auditor is responsible for auditing the financial statements
86.
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)
(2) only
b)
(4) only
c)
(1) and (3)
d)
(3) and (4)
87.
The auditor of Z Co has set performance materiality at $150,000. Which of the following could be the materiality level set for the financial statements as a whole for Z Co?
a)
$100,000
b)
$120,000
c)
$150,000
d)
$200,000
88.
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
(4) Reduce risk of material misstatement
a)
(1) and (2)
b)
(1) and (3)
c)
(2) and (4)
d)
(2) and (3)
89.
Which of the following correctly describes the auditors' responsibilities in accordance with ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements?
a)
The auditor is responsible for the prevention and detection of fraud and error
b)
The auditor is not responsible for the prevention of fraud and error but is responsible for detection.
c)
The auditor is responsible for detecting all errors and should attempt to detect fraud where information comes to light as a result of standard audit procedures.
d)
The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material misstatement whether caused by fraud or error
90.
F Co owns a chain of four restaurants, and is subject to national regulation concerning hygiene in the food preparation process. Non-compliance can result in a large fine, or closure of the restaurant concerned. As F Co's external auditor, what is your responsibility regarding the company's compliance with the hygiene regulations?
a)
Obtain sufficient appropriate audit evidence about F Co's compliance with the regulations
b)
Actively prevent and detect non-compliance with the regulations
c)
Perform specific audit procedures to identify possible non-compliance
d)
Nothing – the food hygiene regulations do not have a direct effect on the financial statements
91.
During the planning stages of the final audit, the auditor believes that the probability of giving an inappropriate audit opinion is too high. How should the auditor amend the audit plan to resolve this issue?
a)
Increase the materiality level
b)
Decrease the inherent risk
c)
Decrease the detection risk
d)
Decrease the materiality level
92.
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
a)
(1) and (3)
b)
(1) and (4)
c)
(2) and (3)
d)
(2) and (4)
93.
What terms can be used to express an unmodified opinion on financial statements prepared in accordance with a fair presentation framework?
1. Present fairly, in all material respects
2. With the foregoing explanation
3. Give a true and fair view
4. Subject to
a)
1 và 2
b)
2 và 3
c)
3 và 4
d)
1 và 3
94.
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)
(1) only
b)
(2) only
c)
(1) and (2)
d)
Neither (1) nor (2)
95.
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)
Existence
b)
Completeness
c)
Rights and obligations
d)
Accuracy and valuation
96.
Is the following statement regarding the auditor's responsibilities regarding going concern true or false?
It is the auditor's responsibility to assess an entity's ability to continue as a going concern
a)
True
b)
False
97.
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)
Unmodified opinion without an emphasis of matter paragraph
b)
Unmodified opinion with an emphasis of matter paragraph
c)
Qualified opinion
d)
Adverse opinion
98.
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)
Adverse opinion
b)
Qualified opinion
c)
Unmodified opinion
d)
A disclaimer of opinion
99.
Which of the following factors likely to be identified as a fraud fact by the auditor?
a)
Bank reconciliation statement includes deposits in transit
b)
Plant and machinery is sold at a loss
c)
The company has made political contributions
d)
The company is planning an initial public offer of share to raise additional capital for expansion
100.
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)
Statement of financial position only
b)
Statement of profit or loss only
c)
Statement of financial position and statement of profit or loss
d)
Neither the statement of financial position nor the statement of profit or loss
101.
Which of the following is not a test of control?
a)
Inspection of purchase order documentation to confirm that it has been authorised
b)
Review of monthly bank reconciliations performed by the audit client
c)
Examination of purchase invoices for evidence of mathematical accuracy checks
d)
Agreement of the cost of non-current asset additions to purchase documentation
102.
The following are types of test that might be carried out by an assurance provider. For each example select the financial statement assertion that is being tested:
Review of the financial statements using a Companies Act checklist
a)
Existence
b)
Completeness
c)
Classification
103.
Which THREE of the following statements are valid?
a)
Positive assurance will be given on a statutory audit assignment
b)
Positive assurance requires more rigorous work to be undertaken than negative assurance does
c)
Positive assurance will be given on a review assignment
d)
Negative assurance is assurance given in the absence of any indications to the contrary
104.
Complete the sentence: …………………. Conducts ongoing and/or separate evaluation of the quality of the internal control as well as evaluates and communicates deficiencies to parties responsible for corrective action
a)
Control activities
b)
Control environment
c)
Monitoring activities
d)
Information and communication
105.
The process of understanding of the internal control and assessment of control risk consist of five phases, including:
- Phase 1: Test of control
- Phase 2: Assess control risk
- Phase 3: Obtain an understanding of designing and implementing entity’s internal control
- Phase 4: Decide planned detection risk and substantive procedures
- Phase 5: Report on internal control
Statement is true or false?
a)
True
b)
False
106.
The sufficiency of audit evidence was not influenced by
a)
Level of risk of material misstatements
b)
The quality of audit evidence
c)
A number of auditors in team
d)
All of those above
107.
According to VSA 500, requirements of audit evidence are determined by which
a)
Appropriateness & competence
b)
Sufficiency & appropriateness
c)
Objectivity & independence
d)
Reliability & extensiveness
108.
The primary objective of performing test of controls is to obtain
a)
A reasonable degree of assurance that the client’s internal controls are operating effectively on a consistent basis throughout the year
b)
Assurance that informative disclosure in the financial statement is reasonably adequate
c)
Sufficient, appropriate audit evidence to afford a reasonable basis for the auditor’s opinion, without the need for additional evidence
d)
Knowledge and understanding of the client’s prescribed and methods
109.
Three common types of confirmation used by auditors are (1) negative confirmations, (2) blank form positive confirmations, and (3) positive confirmations with information included. Place confirmations in order of reliability from highest to lowest
a)
3,2,1
b)
1,2,3
c)
3,1,2
d)
2,3,1
110.
In all audit, the auditor use ……… to detect material misstatements on the financial statements.
a)
Test of detail
b)
Walk through test
c)
Sampling method
d)
Test of control
111.
The auditor realized that the internal control is not designed and implemented effectively. Therefore, the auditor relies primarily on
a)
Walk-though test
b)
Test of control
c)
Substantive test
d)
Internal control
112.
A walk-though test is designed to ……
a)
Check that materiality levels are acceptable
b)
As a checklist to see if all substantive tests have been performed
c)
Confirm that the auditor’s understanding of the internal control systems correct
d)
Provide assurance within a letter of representation
113.
Which of the following are inherent limitations of internal control?
1. collusion of two or more people
2. human error
3. management override
4. the nature of audit procedures
5. timeliness of financial reporting
a)
1,4 and 5
b)
1,2 and 3 only
c)
2,3 and 4
d)
1,2,3 and 5
114.
Who is responsible for the prevention and detection of fraud
a)
The audit committee
b)
External auditors
c)
Internal auditors
d)
Directors
115.
Which of the following assertions are NOT relevant to the audit of balance tangible non-current assets?
a)
Existence
b)
Occurrence
c)
Right and Obligation
d)
Classification
e)
Presentation
116.
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)
(1), (3) and (4)
b)
(1) and (2)
c)
(1), (2) and (3)
d)
(2) and (4)
117.
What form should be audit opinion take if the financial statement is materially and pervasively misstated?
a)
Disclaimer
b)
Unmodified
c)
Qualified
d)
Adverse
118.
Which of the following is NOT the element of assurance service
a)
A three party relationship consisting of the responsible party, users, and subject matter
b)
A written report in the appropriate form
c)
Sufficient appropriate audit evidence
d)
Suitable criteria
119.
The following conclusions have been reported on two engagements:
(1) “The insurance claim presents a true and fair estimate of the amount of inventory lost in the warehouse fire”
(2) “The cash flow forecast contains no assumptions that appear unreasonable”
Which of the following describes the level of assurance expressed in these conclusions:
a)
(1) Positive assurance; (2)No assurance
b)
(1) Positive assurance,(2) Negative assurance
c)
(1) Negative assurance, (2) No assurance
d)
(1) Negative assurance,(2) Negative assurance
120.
The level of assurance provided by an assurance engagement will depend on the type of engagement. Which of the following type of engagement will give the level of reasonable assurance?
a)
Review of financial information
b)
Report on profit and cashflow forecast
c)
Internal audit reviews
d)
Statutory audit
121.
Which of the following are the key elements of an assurance engagement: (1) Three-party relationship; (2) A subject matter; (3) Suitable criteria; (4) An assurance file
a)
(1), (2), and (3)
b)
(1), (2), (3), and (4)
c)
(2), (3), and (4)
d)
(2) and (3) only
122.
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)
An unmodified opinion
b)
A qualified 'except for' opinion due to material misstatement
c)
A qualified 'except for' opinion due to insufficient appropriate audit evidence
d)
An adverse opinion
123.
Which of the following statements regarding analytical procedures is correct?
a)
Analytical procedures must be used as part of the overall review of the financial statements.
b)
Analytical procedures may be used as part of the overall review of the financial statements.
c)
Analytical procedures are only used as risk assessment procedures.
124.
Misstatements can arise from error or fraud. Which of the following statements is correct regarding the auditor's accumulation of identified misstatements?
a)
The auditor must accumulate all misstatements identified during the audit.
b)
The auditor must only accumulate individually material misstatements identified during the audit.
c)
The auditor must accumulate misstatements identified during the audit, other than those that are clearly trivial.
125.
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 modified auditor's report?
a)
Management's responsibility for the financial statement
b)
Auditors' responsibilities
c)
Audit opinion
d)
Deficiencies of internal controls
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