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WorksheetsAudit Revision # 2
Total questions: 75
Worksheet time: 40mins
The following which is not fraud-related Audit Procedures :
Test of detail of cash balances
Proof of cash
Test of kiting
Test of lapping
What assertion of "To ensure that there is no unrecorded cash"
Existence
Cut-off
Detail tie-in
Completeness
Cash is more susceptible to theft; therefore, there is high inherent risk for the (), (), and () objectives except:
Existence
Completeness
Cut-off
Accuracy
The following which is internal controls:
Inherent risks
Cash receipts and payments
Test of details of cash balances
Test of lapping
What assertion for “Examine a sample of cash receipts and payments transactions for proper classification.”
Classification
Existence
Valuation
Completeness
Companies may purchase marketable securities as a way to temporarily invest excess cash
True
False
Examples of cash equivalents include time deposits, certificates of deposit, and marketable securities
True
False
__________by the client subsequent to the balance sheet date, but recorded as cash receipts in the current year
Deposit
Payments
Cash received
Bank balance
Evaluations of financial information made through analysis of plausible relationships among both financial and non financial data is the meaning of:
Analytical procedures
Assertions
Cash equivalents
Confirmation
Purpose Of Auditing The Cash And Bank Balances
To determine all cash received is properly recorded
To ensure all disbursements are properly authorized and documented
To recorded cash balances matches cash on hand or on deposit
All above
_____ is the transferring of money from one bank to another and incorrectly recording the transaction
Transfer
Flipping
Frauding
Kiting
Which of the following procedures may uncover fraud in the cash receipts area?
None of the above
Deleting the receipts
Aging of receipts
Tests to detect lapping
Select the correct match:
Occurance- Select samples of cash receipts from cash book and trace to remittance advices, pay-in slips and bank statement
Completeness- Trace a sample of remittance advices and pay-in slip to cash receipt journal
Valuation- Agree the adjusted book balance on the cash account lead scheudule
Accuracy- Agree the total of cash receipts and payments to general ledger
Which account is included in each business cycle except inventory and warehousing?
Accounts receivable
Cash
Accounts payable
Common stock
To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would easy examine all of the following except the:
Bank confirmation
Cutoff bank statement
General ledger
Year-end bank statement
Which of the following errors would be least likely to be discovered during the audit of the medium acquisitions and payments cycle?
Payment of interest to a related party for an amount in excess of the going rate
Duplicate payment of a vendor’s invoice
Improper payments of officers’ personal expenditures
Payment for raw materials that were not received
__________ are used to confirm information with the bank where the client has dealings
Third parties
Accounts bank
Liquid assets
Standards letters
Examine a sample of cash receipts and payments transactions for proper classifications
Classifications
Occurrence
Valuation
Existence
Fraud-related audit procedures for cash
Proof of cash
Test of kiting
Extended bank reconciliations procedures
All above
On receiving the cutoff bank statement, the auditor should vouch
Deposits in transit on the year-end bank reconciliation to deposits in the cash receipts journal
Checks dated before year-end listed as outstanding on the year-end bank reconciliation to the cutoff statement
Deposits listed on the cutoff statement to deposits in the cash receipts journal
Checks dated after year-end to outstanding checks listed on the year-end bank reconciliation and to the cutoff statement
Which of the following describes detection risk
The risk of misstatement due to a failure of controls
The risk that the auditor fails to detect a misstatement in the f/s
The risk inherent in that particular business
What levels of materiality are appropriate when applying the revenue benchmark to a trading entity
5% -10%
0.5% - 3%
2% - 5%
10% - 20%
Which of the following matters would the overall audit strategy include?
The applicable financial reporting framework
The nature, timing and extent of audit procedures at assertion level
The timetable of the planned audit work
The names of the staff performing each audit procedure
Which of the following is control risk
The risk that a misstatement could occur and not be detected by controls
Risk that the auditor will not detect a misstatement that exists
The susceptibility of a transaction, account balance or disclosure to error
The risk that the audit opinion is incorrect
An appropriate threshold for materiality according to ISA 320 in relation to total assets is
0.5% - 1%
5% - 10%
10% - 20%
1% - 2%
Risk that auditor may unknowingly fail to issue a qualified audit report on f/s that are materially misstated is
Detection risk
Control risk
Inherent risk
Audit risk
What are the two elements of risk of material misstatement at the assertion level
Inherent risk and detection risk
Inherent risk and control risk
Audit risk and detection risk
Control risk and detection risk
Which of the following would normally be included in the audit plan
Reporting objectives
Industry-specific financial reporting requirements
Nature. timing and extent of planned risk assessment procedures
The type of audit report to be issued
Who is responsible for the prevention and detection of fraud
External auditor
Internal auditor
Those charged with governance and management
Audit committee
Which of the following is not an objective of audit planning
To determine the scope of the engagement
Ensure appropriate attention is devoted to the important areas of the audit
To identify potential problems and resolve them on a timely bias
To assign work to members of the audit team
Audit risk is composed of 3 factors. Which of the following is NOT one of those factors?
Inherent risk
Detection risk
Compliance risk
Control risk
Audit procedures by auditors will reduce which of the following risks?
Control risk
Inherent risk
Sampling risk
Detection risk
What is one consequence of the expectation gap?
Misunderstanding of auditor responsibilities
More accurate financial statements
Higher audit fees
Increased trust in auditors
What is the primary focus of external audits?
To prepare tax returns
To detect fraud
To provide assurance on financial statements
To improve internal controls
What is a key feature of internal audits?
Required by law
Only for large companies
Conducted by external auditors
Focus on compliance and risk management
What is one right of auditors?
To hire external consultants
To access all company records
To prepare financial statements
To manage company assets
What is materiality in auditing?
The legal requirements for audits
The accuracy of financial statements
The significance of an error or omission
The independence of auditors
What is the main duty of external auditors?
To prepare financial statements
To detect all fraud
To provide an independent opinion
To manage company operations
What is the expectation gap in auditing?
The difference between auditor and client expectations
The gap between financial statements and reality
The gap in auditor qualifications
The difference in auditor fees
Who is primarily responsible for detecting fraud in a company?
External auditors
Internal auditors
Directors
Shareholders
What does 'true and fair view' mean in auditing?
Accounts are exactly correct
Accounts are free from material misstatement
Accounts are prepared by external auditors
Accounts must be audited every year
What is the role of the IAASB?
To regulate auditors in Malaysia
To manage financial statements
To set International Standards on Auditing
To provide tax guidelines
What is a limitation of statutory audits?
They are conducted by internal auditors
They may not detect all fraud
They are not required by law
They guarantee accuracy
Who is primarily responsible for detecting fraud in a company?
External auditors
Internal auditors
Directors
Shareholders
What is the expectation gap in auditing?
The difference between auditor and client expectations
The gap between financial statements and reality
The gap in auditor qualifications
The difference in auditor fees
What is the main duty of external auditors?
To prepare financial statements
To detect all fraud
To provide an independent opinion
To manage company operations
What is materiality in auditing?
The legal requirements for audits
The accuracy of financial statements
The significance of an error or omission
The independence of auditors
What is one right of auditors?
To hire external consultants
To access all company records
To prepare financial statements
To manage company assets
What is a key feature of internal audits?
Required by law
Only for large companies
Conducted by external auditors
Focus on compliance and risk management
What is the primary purpose of auditing?
To examine and form an opinion
To manage company assets
To provide tax advice
To prepare financial statements
What is the primary purpose of auditing?
To examine and form an opinion
To manage company assets
To provide tax advice
To prepare financial statements
Which case established that a company is a separate legal entity?
Salomon v Salomon
Smith v Jones
Brown v Board
Johnson v United States
What is the key difference between external and internal audits?
External audits are voluntary
Internal audits are conducted by external auditors
External audits are required by law
Internal audits are not regulated
What does 'true and fair view' mean in auditing?
Accounts are exactly correct
Accounts are free from material misstatement
Accounts are prepared by external auditors
Accounts must be audited every year
What is the role of the IAASB?
To regulate auditors in Malaysia
To manage financial statements
To set International Standards on Auditing
To provide tax guidelines
What is a limitation of statutory audits?
They are conducted by internal auditors
They may not detect all fraud
They are not required by law
They guarantee accuracy
Who is primarily responsible for detecting fraud in a company?
External auditors
Internal auditors
Directors
Shareholders
What is the expectation gap in auditing?
The difference between auditor and client expectations
The gap between financial statements and reality
The gap in auditor qualifications
The difference in auditor fees
What is the main duty of external auditors?
To prepare financial statements
To detect all fraud
To provide an independent opinion
To manage company operations
What is materiality in auditing?
The legal requirements for audits
The accuracy of financial statements
The significance of an error or omission
The independence of auditors
What is one right of auditors?
To hire external consultants
To access all company records
To prepare financial statements
To manage company assets
What is a key feature of internal audits?
Required by law
Only for large companies
Conducted by external auditors
Focus on compliance and risk management
What is the role of the AASB in Malaysia?
To set international auditing standards
To regulate auditors
To provide tax advice
To manage company finances
What is the primary focus of external audits?
To prepare tax returns
To detect fraud
To provide assurance on financial statements
To improve internal controls
What is one consequence of the expectation gap?
Misunderstanding of auditor responsibilities
More accurate financial statements
Higher audit fees
Increased trust in auditors
Which ONE of the following best describes the concept of assurance? Assurance refers to:
An assurance firm’s high level of satisfaction as to the reliability of an assertion being made by one party for the use of another party
A user’s satisfaction as to the reliability of an assertion being made by another party
An assurance firm’s satisfaction as to the reliability of an assertion being made by one party for the use of another party
An assurance firm’s limited level of satisfaction as to the reliability of an assertion being made by one party for the use of another party
Which THREE of the following are purposes of a letter of engagement?
Setting out the form of any report to be issued
Narrowing the expectations gap
Providing constructive suggestions to management concerning improvements in internal control
Documenting and confirming acceptance of the appointment
For each of the following statements about materiality, Which ONE of the following statement is true?
Materiality only depends on the size of the error in the context of its omission or misstatement
Materiality should be considered when planning audit procedures and when evaluating discovered misstatements
Materiality must be expressed as a proportion of asset
Materiality will not influence the audit opinion given
When gaining an understanding of the investment operations of an audit client which ONE of the following matters would an auditor need to consider?
Products or services and markets of 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
Accounting principles and industry specific practices relevant to the client's business
White Ltd’s quick ratio has fallen from 1.7:1 to 1.5:1. Which TWO of the following might help to explain this decline?
Credit control has been poor
Current liabilities have increased
The allowance for receivables has been reduced
The entity has purchased a inventory for cas
Which THREE of the following statements correctly describe the auditors' responsibilities in accordance with ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements?
The auditor is not responsible for detecting all errors and should attempt to detect fraud where information comes to light as a result of standard audit procedures
The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material misstatement whether caused by fraud or error
The auditor is not responsible for the prevention and detection of fraud and error
The auditor is not responsible for the prevention of fraud and error but is responsible for detection
The following are items that might be included in an auditor's report. Which TWO of the following are reported on by exception only?
Whether the financial statements are in agreement with the accounting records and returns
Whether details of directors' emoluments and other benefits have been correctly disclosed in the financial statements
Whether the financial statements give a true and fair view of the state of the company’s affairs at the end of the financial year
Information in the strategic report and the directors' report is consistent with the financial statements
The following are examples of computer controls which operate at Blue Ltd. Which THREE of the following examples are the types of computer control which illustrate for general control?
Password protection limiting access to data
Manual checks to ensure that timesheets are authorized before details are processed
Virus checks on software on employees’computers
Training of staff using programs
Which TWO of the following statements are true respect of business risk?
Business risk is of no relevance to the auditor. The auditor is only concerned with audit risk
Business risk is the risk inherent to the company in its operations
Auditor can impact on business risk to reduce the audit risk to acceptable level
Management are responsible for identifying and controlling business risks
Which of the following is not a benefit of establishing an audit committee?
Reduced external audit fees, as the presence of the audit committee reduces audit risk and consequently, the amount of audit procedures required
Greater external audit independence, as the audit committee can be responsible for appointing the external auditors
Reduced opportunity of fraud, as the audit committee can advise the executive directors on managing the risks in the financial reporting process
Monitor and review the effectiveness the effectiveness of the company’s internal audit function.
