Link 1

Câu 1: 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.

(1) and (2) only

(1) and (3) only

(2) and (3) only

(1), (2) and (3)

Câu 2: There are two types of assurance engagement: reasonable assurance engagements and
limited assurance engagements. There are two types of assurance conclusion: Positive and
Negative. For limited assurance engagement, select the appropriate conclusion given?

Positive

Negative

Câu 3: Who normally appoints the external auditors of a company?

Directors

Shareholders

Audit committee

Senior management

Câu 4: The statement: "Relevant criteria for assurance engagements relating to FSs are likely
to be accounting standards" is true or false?

True

False
Câu 5: You are the audit manager of an audit firm and you are planning the audit of ABC Co,
a listed company, which has been an audit client for five years and specialises in
manufacturing luxury laptop. The employees of ABC Co are entitled to purchase laptop at a
discount of 20%. The audit team has in previous years been offered the same level of staff
discount. Which of the following statements is true in accordance with Code of Ethics and
Conduct?

A. The audit team can accept the discount as it is on the same terms as that offered to staff
B. Junior members of the audit team are allowed to accept the discount, but the audit
manager and audit partner should not
C. Unless the value of the discount is trivial and inconsequential to the audit team
members, the offer should be declined
D. The audit team is only allowed to accept a discount of up to 5%

Câu 6: In any assurance engagement there are three parties involved: the responsible party,
the practitioner and user. In respect of given subject matter state which party provides an
opinion on whether the subject matter complies with the criteria?

User

Practitioner

Responsible party

Câu 7: Which one of the following is NOT a benefit of an assurance report on Financial
information? An assurance report

Enhances the credibility of the information being reported upon

Reduces the risk of management bias in the information being reported upon

Attests to the correctness of the information being reported upon

Draws the attention of the user to deficiencies in the information being reported upon

Câu 8: For each of the following statements select whether they are true or false.

A statutory audit gives reasonable assurance that the FSs give a true and fair view?

True

False
Câu 9: The level of assurance given by an assurance engagement will depend on the type of
engagement. For Report on profit and cash flow forecasts, select what level of assurance
you would expect to be given:

Reasonable

Limited

Câu 10: You are an audit manager of an audit firm and have just been assigned the audit of
ABC company. In an initial meeting with the finance director of ABC, you learn that the
audit team will not be entertained on ABC'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 Code of Ethics and Conduct?

The gift may be accepted as Stark has taken appropriate measures to reduce the value of the
gift compared to previous years.

The value of the gift should be assessed to determine whether it is of material value to the
financial statements.

The gift should only be accepted if its value is trivial and inconsequential to the recipients.

Only the audit partner and audit manager should accept the gift.

Câu 11: You are the audit manager of an audit firm and you are planning the audit of ABC
Co, a listed company, which has been an audit client for five years and specialises in
manufacturing luxury laptop. The employees of ABC Co are entitled to purchase laptop at a
discount of 20%. 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 ABC Co and allocates the threat to the most appropriate
category?

Familiarity

self-interest

Self-review

intimidation

Câu 12: Which one of the following best describes the concept of assuarance?
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

An assurance firm's 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 limited level of satisfaction as to the reliability of an assertion being made
by one party for the use of another party

Câu 13: Which of the following is the most appropriate definition of the external audit?

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.

The external audit is an exercise carried out in order to give an opinion on the effectiveness of a
company's internal control system.

The external audit is performed by management to identify areas of deficiency within a

company and to make recommendations to mitigate those deficiencies.

The external audit provides negative assurance on the truth and fairness of a company's
financial statements

Câu 14: In any assurance engagement there are three parties involved: The responsible party,
the practitioner and the user. In respect of given subject matter state which party gathers
evidence on the subject matter?

Responsible party

Practitioner

User

Câu 15: Which three of the following are key elements of a general assurance engagement?

A user

A subject matter

Suitable criteria

An assurance file

Câu 16: In any assurance engagement there are three parties involved: the responsible party,
the practitioner and user. In respect of given subject matter state which party determines the
suitable criteria?
User

Practitioner

Responsible party

Câu 17: Which two of the following are fundamental principles as stated in the Code of
Ethics and Conduct?

(1) Objectivity

(2) Independence

(3) Confidentiality

(4) Professional scepticism

(1) and (4)

(1) and (2)

(2) and (3)

(1) and (3)

Câu 18: The level of assurance given by an assurance engagement will depend on the type of
engagement. For statutory audit, select what level of assurance you would expect to be
given:

Absolute

Reasonable

Câu 19: There are two types of assurance engagement: reasonable assurance engagements
and limited assurance engagements. There are two types of assurance conclusion: Positive
and Negative. For reasonable assurance engagement, select the appropriate conclusion
given?

Positive

Negative
Câu 20: ABC audit firm audits XYZ Co. In accordance with Code of Ethics and Conduct
which two of the following circumstances would constitute a threat to objectivity?

(1) An employee of ABC owns shares in XYZ Co but is not part of the audit team

(2) The best friend of the engagement partner owns a significant indirect financial interest in
XYZ Co

(3) The audit manager of an audit owns a small number of shares in XYZ Co

(4) The husband of the audit partner owns shares in XYZ Co

(1) and (2)

(1) and (4)

(2) and (3)

(3) and (4)

The statement: "Suitable criteria can only be identified for assurance engagements relating to
financial statements" is true or false?

True

False

For each of the following statements select whether they are true or false.

A negative assurance conclusion gives a limited level of assurance

True

False

The statement: "The criteria for all assurance engagements will be the same" is true or false?

True

False

Which three of the following describe aspects of the expectations gap with respect to the
external audit

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Users do not understand the meaning of the audit opinion

Users do not aware of the limitations of the audit process

Users do not appreciate that reasonable assurance is a low level of assurance

Users do not understand what the audit process involves

Which two of the following are limitations of the provision of assurance?

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Assrurance work is carried out by people independent of the entity

Sampling is used in assurance work

Client system have inherent limitations

Unqualified staff may be used on assurance engagements

Which ONE of the following statements best describes the evidence obtained and the opinion
given in a resonable assurance engagement?

2 điểm

Sufficient appropriate evidence and a negative opinion

Sufficient appropriate evidence and a positive opinion

A lower level of evidence and a negative opinion

A lower level of evidence and a positive opinion

Which of the following could cause advocacy

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Audit team to be offered a balloon flight entertainment

Tax fee to be based on a percentage of tax saved

Firm to represent client in a dispute with the tax authorities

The level of assurance given by an assurance engagement will depend on the type of
engagement. For Review of financial information, select what level of assurance you would
expect to be given:

Reasonable
Limited

For each of the following statements select whether they are true or false.

Reasonable assurance is absolute assurance of the correctness of the subject matter

True

False

In any assurance engagement there are three parties involved: The responsible party, the
practitioner and the user. In respect of given subject matter state which party prepares the
subject matter

1 điểm

responsible party

practitioner

User

The following is an extract from an independent accountant's unmodified report on a profit

forecast: "Base on our examination of the evidence supporting the assumptios, nothing has
come to our attention which causes us to believe that these assumptions do not provide a
reasonable basis for the forecast". Which ONE of the following BEST describes the type of
assurance provided by this statement?

Positive assurance expressed negatively

Negative assurance expressed positively

High level of assurance expressed negatively

Limited level of assurance expressed negatively

Link 2

Who is responsible for the prevention and detection of fraud?

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Internal auditors
External auditors

Those charged with governance and management

The audit committee

The definition of the risk of material misstatement is 'Inherent Risk × Control Risk ×
Detection Risk'. Is this statement true or false?

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True

False

Which ONE of the following is NOT a benefit of an engagement letter in respect of assurance
services?

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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

What are the two elements of the risk of material misstatement at the assertion level?

1 điểm

Inherent risk and detection risk

Audit risk and detection risk

Inherent risk and control risk

Detection risk and control risk

Performance materiality levels are higher than the materiality for the financial statements as a
whole. Is this statement true or false?

1 điểm

True

False
For each of the following factors at a prospective client select whether that factor indicates
that client is high risk or low risk: Company has prudent accounting policies

1 điểm

High risk

Low risk

C&C company, an assurance firm, has the following two clients among its client portfolio.
For each client, seclect whether inherent risk is high or low.

Tulip Ltd is planning to list on the local stock exchange within the next two years.

1 điểm

High risk

Low risk

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?

1 điểm

True

False

'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

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(1) and (2)

(2) only
(1) and (3)

(2) and (3)

For each of the following statements seclect 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

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True

False

Which THREE of the following are purposes of a letter of engagement?

1 điểm

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 appoitment

Narrowing the expectations gap

Providing evidence on matters where other evidence is not expected to exist

For each of the following factors at a prospective client seclect whether that factor indicates
that client is high risk or low risk: Company currently has no finance director

1 điểm

High risk

Low risk

C&C company, an assurance firm, has the following two clients among its client portfolio.
For each client, seclect whether inherent risk is high or low.

Hana Ltd is currently facing financial difficulties and is seeking alternative forms of finance.

1 điểm

High risk

Low risk
Which THREE of the following procedures should be carried out after the audit firm has
decided to accept appointment as auditor?

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Ensure that the outgoing auditors' removal/resgination has been properly conclucted

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

Which TWO of the following might indicate that an assurance client could be higher than
normal inherent or control risk?

1 điểm

Poor recent performance

Strong internal controls

Unusual transactions

The existence of an internal audit department

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 before acceptance of
appointment

1 điểm

True

False

Which of the following best describes professional scepticims. The assurance provider shoud:

1 điểm

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 are auditors always required to do on being invited to accept an
audit engagement?

1 điểm

Ensure they are professionally existing resources to carry out the audit

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 existing auditors to discover any reasons they should not accept
appointement

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

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(1), (2) and (3)

(1) and (2)

(2), (3) and (4)

When gaining an understanding of the specific business operations of an audit client which of
the following matters would an auditor need to consider?

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Accounting principles and industry specific practices relevant to the client's business

Acquisitions or disposals of the client's business activities

Leasing of property, plant or equipment for use in the client's business

Products or services and markets of the client's business

The auditor of A Co wishes to reduce audit risk. Which of the following actions could the
auditor take to achieve this?

(1) Increase sample sizes

(2) Reduce control risk

(3) Assign more experienced staff to the engagement team

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(1) only

(2) only

(1) and (3)

(2) and (3)

For each of the following statements seclect 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

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True

False

For each of the following statements seclect whether they are True or false in respect of the
audit engagement letter: An engagement letter should be sent to all new clients

1 điểm

True

False

For each of the following factors at a prospective client select whether that factor indicates
that client is high risk or low risk: Company carries out unusual transactions

1 điểm

High risk
Low risk

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.

1 điểm

(1), (2) and (3)

(1), (3) and (4)

(1) and (2)

(2) and (4)

Link 3

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

1 điểm

True

False

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

1 điểm

True

False

In each of the following case, select whether inherent riskn is higher or lower than normal:
The business is of the company is cash - based

1 điểm

Inherent risk higher than normal

Inherent risk lower than normal

With respect to ISA 315, which three of the following procedures shall be used in
understanding the entity and its environment

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Inquiries of management and others within the entity

Inquiries the third party

Analytical procedures

Observation and Inspection

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

1 điểm

Inherent

Control

Detection

Which three of the following would normally be included in the overall audit strategy?

1 điểm

Details of economic factors and industry conditions

The results of initial analytical procedures

Confirmation of management's responsibility for the financial statements

Identification of specific audit risks

Which two of the following would be used in understanding the entity in accordance with
ISA 315?

1 điểm

Industry, regulatory and other external factors

A preliminary review of internal controls

The results of tests of details

The results of a review events after the date of the financial statements

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

1 điểm

True

False

Which three of the following are of the objectives of the audit planning
1 điểm

To determine the scope of the engagement

To ensure appropriate attention it devoted to the important areas of the audit

To identify potential problems and resolve them on the timely basis

To assign work to remembers of the audit team

In each of the following case, select whether inherent riskn is higher or lower than normal:
The company operates a profit related by scheme:

1 điểm

Inherent risk higher than normal

Inherent risk lower than normal

Cost of sales: ( DÂY LÀ CÂU HỎI)

1 điểm

Warrents futhur testing

No futher testing required

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.

1 điểm

Inherent risk higher than normal

Inherent risk lower than normal

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

1 điểm

True

False
Advertising( ĐÂY LÀ CÂU HỎI)

1 điểm

Warrents futhur testing

No futher testing required

Which ONE of the following best describes the principal difference between fraud and
errors?

1 điểm

Fraud may result in the financial statements being material misstated

Fraud is an intentional act whereas error is unintentional

A misstatement can be material whether it is caused by fraud or by error

Fraud may be the result of negligence whereas error is unintentional

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?

1 điểm

Test of control only

Substantive proceduress only

A mix of tests of control and substantive procedures

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?

1 điểm

True

False
In the following case, select whether inherent is higher or lower than normal:

Inventory is largest balance on the statement of financial position

1 điểm

Inherent risk higher than normal

Inherent risk lower than normal

Audit risk can be split into three components: inherent risk, control risk and detection risk.

For the following example, seclect the types of risk illustrated: The organisation operates in a
fast - moving, high tech environment

1 điểm

Inherent risk

Control risk

Detection risk

Which one of the following is normally designed to detect possible material monetary errors
in the figures in financial statements?

1 điểm

Test of control

Walk - through test

Analytical procedure

Observation of a procedures

Which three of the following constitutes analytical procedures

1 điểm

Considerations of comparable comparable information for prior periods

Considerations of relationships between elements of financial information that are expected to

conform to a predicted pattern

Consideration of whether a balance has been calculated correctly

Consideration of similar industry information

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

1 điểm

Inherent

Control

Detection

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.

1 điểm

Inherent

Control

Detection

Repairs and renewals( ĐÂY LÀ CÂU HỎI)

1 điểm

Warrents futhur testing

No futher testing required

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?

1 điểm

The allowance for receivalbes has been reduced

Credit control has been poor

The entity has purchased a property for cash

Inventory levels have fallen

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.

1 điểm

(1) and (3)

(2) only

(3) and (4)

(4) only

Which three of the following would increase inherent risk

1 điểm

Sample size have been calulated incorrectly by the auditor and are too small

A significant number of balances are based on estimates

The financial statements include complex transactions

Audit staff are inexperienced

A company is seeking to raise Finance

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

1 điểm

Inherent

Control
Detection

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

1 điểm

(1), (2) and (4)

(1), (3) and (4)

(1) and (2)

(2) and (4)

Which one of the following does setting a preliminary materiality threshold not help auditors
to decide?

1 điểm

What audit staff to assign to the audit

How many items to examine

Whether to use sampling

What level of errors is likely to lead the auditor not being able to give an unqualified opinion

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

1 điểm

Inherent

Control

Detection
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

1 điểm

True

False

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

1 điểm

True

False

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

1 điểm

(1), (2), (3) and (4)

(1), (3) and (4)

(1), (2) and (3)

(2) and (3)

Audit risk can be split into three components: inherent risk, control risk and detection risk.

For the following example, seclect the types of risk illustrated: The organisation has few
employees in its accounting department.
1 điểm

Inherent risk

Control risk

Detection risk

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

1 điểm

True

False

In the following case, select whether inherent is higher or lower than normal:

The company operates in a slow - moving, stable industry

1 điểm

Inherent risk higher than normal

Inherent risk lower than normal

In each of the following case, select whether inherent riskn is higher or lower than normal:
Financial statements contain balances with straighfoward Financial Accounting requirements

1 điểm

Inherent risk higher than normal

Inherent risk lower than normal

Which of the following statements correctly describes the principal purpose of an external
audit of a limited company?

1 điểm

To assist in the preparation of the company's financial statements

To prevent fraud within the company

To examine and express an opinion on the company's financial statements

To assist the directions in improving the company's financial reporting process

Which TWO of the following are true in respect of related party transactions?

1 điểm

Related party transactions tend to be low-risk to the auditor

Disclosure of related party transactions is unlikely to be material to the financial statements

Related party transactions must be competely disclosed in the financial statements

There may be a significant control risk in relation to related party transactions

Is the following statement regarding audit evidence true or false? Appropriateness is the
measure of the quality of audit evidence.

1 điểm

True

False

Which of the following would normally be included in the audit plan?

1 điểm

Reporting objectives

Industry-specific financial reporting requirements

Nature, timing, and the extent of planned risk assessment procedures

Which TWO of the following options are signs of overtrading?

1 điểm

Inventory decreasing

Cash decreasing

Payalbe decreasing

Receivalbes increasing

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?

1 điểm

Test of control only

Substantive proceduress only

A mix of tests of control and substantive procedures

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

1 điểm

Inherent

Control

Detection
Link 4

One of the control objectives of the sales system of ABC Co is to ensure that goods and
services are sold to credit-worthy customers. Which of the following control activities would
assist ABC Co in achieving this objective?

1 điểm

All sales orders are based on authorised price lists.

Credit limits are checked before sales orders are accepted.

Overdue debts are chased each month by the credit controller.

The aged-debt listing is reviewed by the finance director on a monthly basis

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?

1 điểm

Control environment

The information system relevant to financial reporting

Human resource policies and practices

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

1 điểm

(1) and (2)

(1) and (3)

(2) and (4)

(3) and (4)

Which of the following controls of a sales system ensure that all goods despatched are
completely and accurately invoiced?

1 điểm

Good despatched notes are matched to sales invoices

Sales invoices are sequentially numbered

Sales invoices are matched to customer orders

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 assesed as deficient.

1 điểm

Test of controls only

Substantive procedures only

A mix of test of controls and substantive procedures

Which THREE of the following are assertions used by the auditor about classes of
transactions?

Occurence

Existence

Completeness

Cut - off

Rights and obligations

The draft financial statements of ABC Co show the following information:

Revenue 840

Cost of sales 540

Gross profit 300

Trade receivables 360

Trade payables 260

What is the receivables collection period?

156 days

175 days

758 days

958 days

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

Existence

Completeness

Classification

An effective internal control system provides the auditor with absolute assurance that control
objectives have been achieved

1 điểm

True

False

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

1 điểm
Absolute

Reasonable

Limited

For each of the following statements select whether they are true of false in respect of
substanctive procedures.

The auditor must carry out substantive procedures on all material items

1 điểm

True

False

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?

1 điểm

Walk-through test

Test of control

Test of detail

Analytical procedure

Which TWO of the following are assertions used by the auditor about account balances at the
period end?

1 điểm

Existence

Accuracy

Cut-off

Completeness

Which TWO of the following descirbe manifestations of the expectations gap

1 điểm

Users blaming the auditors for a fraud discovered in a company subsequent to an audit
Users discovering that the directors refuse to cooperate in providing the auditor with the
evidence he requests

Shareholders approving the appointment of the auditor at an annual general meeting

Users relying on the audited financial statements as a fair valuation of the company

Which THREE of the following statements are valid?

1 điểm

Positive assurance will be given on a statutory audit assignment

Positive assurance requires more rigorous work to be undertaken than negative assurance does

Positive assurance will be given on a review assignment

Negative assurance is assurance given in the absence of any indications to the contrary

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

1 điểm

2 and 3

1 and 4

1 and 2

3 and 4

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.
Reviewing invoices paid for evidence of authorisation

1 điểm

Test of control

Substantive procedure

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?

1 điểm

Internal control questionnaire

Narrative

Flowchart

For each of the following statements select whether they are true of false in respect of
substanctive procedures.

The auditor only carry out substantive procedures if the results of test of controls are
inconclusive

1 điểm

True

False

Which TWO of the following are assertions used by the audito about presentation and
disclosure?

1 điểm

Allocation

Accuracy

Cut-off

Completeness
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 review of interim financial information

Absolute

Reasonable

Limited

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

1 điểm

Absolute

Reasonable

Limited

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 assesed as strong

1 điểm

Test of controls only

Substantive procedures only

A mix of test of controls and substantive procedures

Which of the following is NOT an inherent limitation of internal control systems?

1 điểm
Insufficient segregation of duties

Possibility that employees may collude together fraudulently

Possibility of human error in undertaking tasks

Which of the following is not a test of control?

1 điểm

Inspection of purchase order documentation to confirm that it has been authorised

Review of monthly bank reconciliations performed by the audit client

Examination of purchase invoices for evidence of mathematical accuracy checks

Agreement of the cost of non-current asset additions to purchase documentation

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.

Observation of opening the post

1 điểm

Test of control

Substantive procedure

For each of the following statements select whether they are true of false in respect of
substanctive procedures.

Substantive procedures include both analytical procedures and test of details

1 điểm

True

False

Which TWO of the following are valid comments about the quality of assurance evidence?

1 điểm
Evidence from external sources is more reliable than evidence obtained from the entity's
records

Evidence from internal sources is more reliable when related internal controls operate
effectively

Evidence from internal sources is more reliable than evidence created by the assurance provider

Photocopies are more reliable than facsimiles

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

Test of controls

Substantive procedure

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:

Tracing non- current assets which have been observed in use back to the non-current asset
register:

Existence

Completeness

Classification
Link 5

ISA 315 states that an internal control system in an organisation consists of five components:
the control enviroment, the entity's risk assessment process, the information system, control
activities and monitoring of controls.

For each of the following examples, select the component which it illustrates:

The process of preparing the financial statements.

1 điểm

Control enviroment

Information system

Control activities

For each of the following statements, select whether they are true or false in respect of the
information system in a company. The information system includes the process of preparing
the financial statements, such as the production of journals

1 điểm

True

False

For each of the following statements select whether they are true or false in respect of
business risk:

Business risk is the risk inherent to the company in its operations.

True

False

Which THREE of the following statements about audit committees are correct?

1 điểm

At least 50% of the members of an audit committee must be non-executive directors

Listed companies are required to have an audit committee

Audit committees are considered to be good practice for all large companies

If a company has an internal audit function, the chief internal auditor should sit on the audit
committee

Audit committees are an important aspect of a company's control enviroment

For each of the following statements select whether they are true or false in respect of
business risk: Management are responsible for identifying and controlling business risks

True

False

An effective system of internal control requires segregation of basic functions.

Which THREE of the following functions should ideally be segregated?

1 điểm

Authorisation of transactions

Preparation of financial statements

Custody or handling of assets

Recording of transactions

Budgetary control

Which ONE of the following is not part of an entity's risk assessment process?

Identify relevant business risks

Estimate the impact of risks

Assess the likelihood of occurrence

Decide upon actions to manage the risks

Report the process to the auditors

In each of the following three cases, select whether control risk is higher or lower than
normal.

Purchase invoices are not authorised prior to payment

1 điểm

Control risk is higher than normal

Control risk is lower than normal

Which regards to internal control systems in small entities, select whether each of the
following statements is true or false:

Smaller companies are more likely to be successful in the implementation of segregation of

duties controls

True

False

ISA 315 states that an internal control system in an organisation consists of five components:
the control environment, the entity's risk assessment process, the information system, control
activities and monitoring of controls.

For each of the following examples select the component which it illustrates: The entity's
organisational structure

Control environment

Control activity

Monitoring of controls.

Most entities make use of IT systems for financial reporting and operational purposes.
Controls operating in an IT environment can be split into general controls and application
controls.

Which ONE of the following is an application control?

Training staff in new IT procedures

Taking back - up copies of programs

Maintenance agreements over IT equipment

Cyclical reviews of all master files

The following are examples of computer controls which operate in the payroll system at ABC
Ltd.

For example, select the type of computer control which it illustrates: Password protection
limiting access to data

General

Application

ISA 315 states that an internal control system in an organisation consists of five components:
the control environment, the entity's risk assessment process, the information system, control
activities and monitoring of controls.

For each of the following examples select the component which it illustrates: Review by
management of monthly bank reconciliations

Control environment

Control activity

Monitoring of controls.

Which Three of the following would be the best sources of information about a company's
systems?

The company's procedures manual

The internal audit function's system notes

The prior year audit file

Inquiries made of company staff

The company's website

Which TWO of the following are authorisation control activities

A bank reconciliation signed by the finance director

A cheque payment run approved by the finance director

An appraisal of the sales ledger clerk by the finance director

A trial balance complied by the finance director

The following are examples of internal controls which operate at ABC plc.
For each example, select the type of control activity which it illustrates: The financial
controller counts petty cash on a monthly basis

Authorisation

Information processing

Physical control

The following are examples of computer controls which operate at PQ plc.

For the example, select the type of computer control which it illustrates: Storing extra copies
of programs and data files off-site

1 điểm

General

Application

Which TWO of the following are reasons why organisations need to have effective systems
of control? To assist the organisation in

Minimising business risks

Maximising its profitability

Managing its assets and liabilities

Cutting down the time needed for the audit

Complying with laws and regulations

ABC plc is large organisation with a complex accounting and information system. Critical to
an understanding of the system are the reporting lines and relationships between different
departments.

In this situation which ONE of the following methods is most likely to be used by the auditor
to record the system of document flow?

Narrative notes

Flowcharts

Questionnaires
Organisational charts

One of the five elements of internal controls is monitoring of controls.

Which TWO of the following are activities which would be used to monitor controls

Management's review of whether bank reconciliations are being prepared on a timely basis

Internal auditor's evaluation of whether the sales team are following company policy regarding
customer discounts

Authorisation of purchase invoices before they are paid

Authorisation of purchase orders by the department manager

ISA 315 states that an internal control system in an organisation consists of five components:
the control environment, the entity's risk assessment process, the information system, control
activities and monitoring of controls.

For each of the following examples select the component which it illustrates: Review of
actual performance against budget

Control environment

Control activity

Monitoring of controls

The following are examples of internal controls which operate at XYZ plc.

For each example, select the type of control activity which it illustrates: The receivables
ledger clerk posts invoices to the receivables ledger. The cash book clerk posts cash receipts
to the receivables ledger

1 điểm

Performance review

Information processing

Segregation of duties

In each of the following three cases, select whether control risk is higher or lower than
normal:
(2) Management often override internal controls

Control risk is higher than normal

Control risk is lower than normal

According to ISA 315 which THREE of the following are respects of an entity's control
environment?

The attitude of the directors to internal controls

The attitude of staff to internal controls

The awareness of internal control issues in the company

The actions of senior management in relation to internal control

In each of the following three cases, select whether control risk is higher or lower than
normal.

The company has an established and well resourced internal audit function

1 điểm

Control risk is higher than normal

Control risk is lower than normal

An audit committee is a committee with responsibility for audit related matters.

Which ONE of the following should be members of an audit committee?

1 điểm

Executive directors only

Non-executive directors only

Non-executive directors and internal auditors

Non-executive directors and external auditors

For each of the following statements select whether they are true or false in respect of the
limitations of a system of internal control.

The effectiveness of many controls rely on the integrity of those applying them
1 điểm

True

False

The following are examples of computer controls which operate at PQ plc.

For the example, select the type of computer control which it illustrates: Manual checks to
ensure that input data was authorised

1 điểm

General

Application

Which regards to internal control systems in small entities, select whether each of the
following statements is true or false:

Management override is more likely to take place in smaller companies

1 điểm

True

False

The following are examples of internal controls which operate at ABC plc.

For example, select the type of control activity which it illustrates: The financial controller
reconciles the payables ledger to the payables ledger control account on a monthly basis

Performance review

Information processing

Which ONE of the following is NOT a general control?

Disaster recovery procedures

Back-up copies of programs stored at an alternative safe location

Procedures for resubmission of rejected data

Staff training in the use of new/revised programs

The following are examples of internal controls which operate at ABC plc.

For each example, select the type of control activity which it illustrates: There are two keys to
the locked finance department safe: one held by the finance director and the other by the
managing director

1 điểm

Authorisation

Information processing

Physical control

ISA 315 states that an internal control system in an organisation consists of five components:
the control enviroment, the entity's risk assessment process, the information system, control
activities and monitoring of controls.

For each of the following examples, select the component which it illustrates:

Locking the inventory storeroom.

Control enviroment

Information system

Control activities

The following are examples of internal controls which operate at ABC plc.

For example, select the type of control activity which it illustrates: The payables ledger clerk
posts invoices to the payables ledger. The cash book clerk posts cash receipts to the payables
ledger

Segregation of duties

Performance review.

For each of the following statements select whether they are true or false in respect of the
limitations of a system of internal control.

Standard controls may not be designed to deal with unusual transactions

True

False

ISA 315 states that an internal control system in an organisation consists of five components:
the control environment, the entity's risk assessment process, the information system, control
activities and monitoring of controls.

For each of the following examples select the component which it illustrates: Training
programme for all staff

Control environment

Control activity

Monitoring of controls

The following are examples of computer controls which operate in the payroll system at ABC
Ltd.

For example, select the type of computer control which it illustrates: Range checks on payroll
processing

General

Application

For each of the following statements select whether they are true or false in respect of the
limitations of a system of internal control.

Internal controls are only applied to material items

1 điểm

True

False

For each of the following internal controls, which is the principal limitation?

Segregation of duties in a sales system

Human error
Collusion

Which one of the following would be the simlpest way of recording a straightforward system
not subject to a great deal of change annually?

1 điểm

Flowchart

Narrative notes

Questionnaire

Family tree

The following are examples of internal controls which operate at XYZ plc.

For each example, select the type of control activity which it illustrates: The controller
reconciles the receivables ledger to the receivables control account montly

1 điểm

Performance review

Information processing

Segregation of duties

For each of the following statements select whether they are true or false in respect of the
limitations of a system of internal control.

The cost of implementing controls may be more expensive than the cost of any potential risk
arising

1 điểm

True

False

In each of the following three cases, select whether control risk is higher or lower than
normal:

(3) Entry to the inventory storeroom is only for authorised personnel

1 điểm

Control risk is higher than normal

Control risk is lower than normal

The following are examples of internal controls which operate at ABC Ltd.

For example, select the type of control activity which it illustrates: The finance director
compares monthly expenditure on consumables to budgeted expenditure

1 điểm

Authorisation

Performance review

The following are examples of computer controls which operate in the payroll system at ABC
Ltd.

For example, select the type of computer control which it illustrates: Manual checks to ensure
that timesheets are authorised before details are processed

1 điểm

General

Application

Which TWO of the following represent inherent limitations of a system of internal control?

1 điểm

Lack of controls over the purchases system

Lack of understanding of the purposes of controls

Lack of staff to ensure segregation of duties

The possibility that staff members will collude in fraud

In each of the following three cases, select whether control risk is higher or lower than
normal:

(1) The paybles ledgers is not regularly reconciled to the payables ledger control account
1 điểm

Control risk is higher than normal

Control risk is lower than normal

For each of the following statements, select whether they are true or false in respect of the
information system in a company.

The information system companies only the IT system in a company

1 điểm

True

False

Most entities make use of IT systems for financial reporting and operational purposes.
Controls operating in an IT environment can be split into general controls and application
controls.

Which ONE of the following is an application control?

1 điểm

Use of passwords

Testing of new systems

Authorisation of data for input

Disaster recovery plan

For each of the following statements select whether they are true or false in respect of
business risk:

Business risk is of no relevance to the auditor. The auditor is only concerned with audit risk

1 điểm

True

False

The following are examples of computer controls which operate at PQ plc.

For the example, select the type of computer control which it illustrates: Programmes to
check data fields on input transactions

1 điểm

General

Application

Which TWO of the following will reduce password effectiveness as a means of restricting
access to a computer system?

1 điểm

Frequent changes of passwords

User selection of passwords

Automatic disconnection after failed attempts to access system

Disciplinary offence if passwords revealed

Displaying the password on screen

In each of the following three cases, select whether control risk is higher or lower than
normal.

The company has a history of reviewing financial performance on a regular basis at board
level

1 điểm

Control risk is higher than normal

Control risk is lower than normal

The following are examples of internal controls which operate at ABC Ltd.

For example, select the type of control activity which it illustrates: The financial accountant
signs the bank reconciliation, which has been prepared by a member of his staff.

1 điểm

Authorisation
Performance review

For each of the following internal controls, which is the principal limitation?

The preparation of a bank reconciliation

1 điểm

Human error

Collusion
Đề kiểm tra:

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

(1) and (2) only

(1) and (3) only

(2) and (3) only

(1) and (4) only

Which of the following are valid disadvantages of having an audit committee?

It can undermine the authority of the board of directors

The internal audit function may communicate directly with the audit committee rather than
with management.

It may be difficult to find non-executive directors with the relevant experience.

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

(1) and (2)

(1) and (4)

(2) and (3)

(3) and (4)

Which of the following internal audit assignments aims to monitor management's

performance and ensure that company policy is followed?

Value for money

Fraud investigation

Financial

Operational
Which of the following activities should the internal audit function not be involved in?

Monitoring of management's performance

Reviewing adequacy of management information for decision-making purposes

Taking responsibility for the implementation of a new sales ledger system

Assessing compliance with regulation relevant to the business

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

(1) and (4)

(1) and (2)

(2) and (3)

(1) and (3)

Which of the following statement is not true?

The auditor’s responsibility for detection and prevention of errors and fraud is similar

Internal control system reduces all of employee fraud

Management fraud is more difficult to detect than employee fraud

All statements are correct

When gaining an understanding of the specific business operations of an audit client which of
the following matters would an auditor need to consider?

Acquisitions or disposals of the client's business activities

Leasing of property, plant or equipment for use in the client's business

Products or services and markets of the client's business

Accounting principles and industry specific practices relevant to the client's business

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

(1) and (2)

(1) and (3)

(1), (2) and (3)

(2), (3) and (4)

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?

Under basis for opinion paragraph

Under opinion paragraph since the opinion is to be on the financial statements

Under management’s responsibility paragraph since management is responsible for the

preparation of the financial statements as per applicable financial framework

Under auditor’s responsibility paragraph since auditor is responsible for auditing the
financial statements

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.

(2) only

(4) only

(1) and (3)

(3) and (4)

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?

$100,000

$120,000

$150,000

$200,000

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

(1) and (2)

(1) and (3)

(2) and (4)

(2) and (3)

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?

The auditor is 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 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.

The auditor is responsible for obtaining reasonable assurance that the financial statements
are free from material misstatement whether caused by fraud or error
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?

Obtain sufficient appropriate audit evidence about F Co's compliance with the regulations

Actively prevent and detect non-compliance with the regulations

Perform specific audit procedures to identify possible non-compliance

Nothing – the food hygiene regulations do not have a direct effect on the financial
statements

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?

Increase the materiality level

Decrease the inherent risk

Decrease the detection risk

Decrease the materiality level

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

(1) and (3)

(1) and (4)

(2) and (3)

(2) and (4)

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

1 và 2

2 và 3
 3 và 4

1 và 3

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.

(1) only

(2) only

(1) and (2)

Neither (1) nor (2)

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?

Existence

Completeness
 Rights and obligations

Accuracy and valuation

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.

True

False

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?

Unmodified opinion without an emphasis of matter paragraph

Unmodified opinion with an emphasis of matter paragraph

Qualified opinion

Adverse opinion
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?

Adverse opinion

Qualified opinion

Unmodified opinion

A disclaimer of opinion

Which of the following factors likely to be identified as a fraud fact by the auditor?

Bank reconciliation statement includes deposits in transit

Plant and machinery is sold at a loss

The company has made political contributions

The company is planning an initial public offer of share to raise additional capital for
expansion

The statement of financial position of R Co includes a material amount of $200,000 in respect

of costs capitalised in the year as development expenditure. The auditor has concluded that
these costs are research expenditure.
If the auditor is to issue an unmodified opinion which financial statements will require
adjustment?

Statement of financial position only

Statement of profit or loss only

Statement of financial position and statement of profit or loss

Neither the statement of financial position nor the statement of profit or loss
 1. The level of assurance provided by an assurance engagement will
depend on the type of engagement. Which of the following type of
engagemeent will give the level of reasonable assruance?
A. Review of financial information
B. Report on profit and cashflow forcast
C. Internal audit reviews
D. Statutory audit
2. Which one of the following statements best describes the evidence
obtained and the opinion given in a reasonable assurance engagement?
A. Sufficient appropriate evidence and a negatively worded opinion
B. Sufficient appropriate evidence and a positively worded opinion
C. A lower level of evidence and a negatively worded opinion
D. A lower level of evidence and a positively worded opinion

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. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1) and (4) only
4. 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

5. In any assurance engagement, there are three parties involved: the

responsible party, the practitioner and the user. In respect of given subject
matter, which party determines suitable criteria?

A. User
B. Practitioner
 C. Responsible party

6. 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

7. 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.

8. 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.

9. 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 statements B

Auditors' responsibilities

C Audit opinion

D Deficiencies of internal controls

 10. 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 Adverse opinion

B Unmodified opinion
C Disclaimer of opinion
D Qualified opinion due to overstatement of receivables (2 marks)

11. 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
Disclaimer
B Unmodified opinion with an emphasis of matter paragraph

C Unmodified opinion without an emphasis of matter paragraph D Qualified

opinion

D Unmodified opinion with an emphasis of matter paragraph explaining the circumstances of the
flood

12. 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
13. Which of the following is/are not a statutory right of the auditors of a
limited liability company?

(1) A right to attend all directors' meetings and receive all

notices and communications relating to such meetings.
(2) A right to speak at general meetings on any part of the
business that concerns them as auditors.
(3) A right to attend any general meeting and receive all
notices and communications relating to such
meetings.
A (1) only
B (1) and (3)
C (2) only
D (2) and (3)

14. Is the following statement true or false?

In an effective system of corporate governance the directors take responsibility for risk management
strategies within the business.

A True
B False

15. Every company must have an audit committee. Is this statement true
or false?
A True
B False

16. Every company must have an internal audit department. Is this

statement true or false?
A True
B False

17. Which type of risk is the internal auditor normally

responsible for monitoring?
A Audit risk
 B Business risk
C Audit risk and business risk
D Neither audit risk nor business risk

18. The format of the internal audit report is governed by statute. Is this
statement true or false?
A True
B False

19. Is the following statement about outsourcing the internal audit function
true or false?
One of the advantages of outsourcing the internal audit function is that
the company will not need to exercise any controls over the outsourced
department.
A True
B False

20. The role of the internal audit function in risk management

is to identify risk and implement strategies to minimise
risks.
Is this statement true or false?

A True

B False

21. Which of the following is not a benefit of establishing an audit

committee?
A Reduced opportunity of fraud, as the audit committee can advise the
executive directors on managing the risks in the financial reporting
process

B Greater external audit independence, as the audit committee can be

responsible for appointing the external auditors
C Reduced external audit fees, as the presence of the audit committee reduces
audit risk and consequently, the amount of audit procedures required.
 22. Which of the following statements relate to review engagements?

(1) Subject matter is plausible

(2) Reasonable assurance
(3) Nothing has come to our attention which would
indicate that the subject matter contains material
misstatements
(4) Positive

assurance A (1)

and (3)

B (2) and (4)

C (2) and (3)

D (1) and (4)

23. Which of the following is an appropriate response to the risks

of material misstatement at the assertion level?
A Emphasising the need to maintain professional scepticism B
Increasing supervision on the audit
C Increasing sample sizes for inspecting recorded assets where assets are more
susceptible to theft
D Making changes to the nature of the audit procedures

24. 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

25. 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
 26. 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
27. 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

28. In accordance with ISA 250 Consideration of laws and

regulations in an audit of financial statements what are the
responsibilities of the external auditor?
A To obtain sufficient appropriate evidence regarding compliance with laws
and regulations that have both a direct and indirect effect on the
financial statements
B To obtain sufficient appropriate evidence regarding compliance with laws
and regulations that have a direct effect on the financial statements
only.
C To obtain sufficient appropriate evidence regarding compliance with laws
and regulations that have an indirect effect on the financial statements
only regulations which affect the business

A (1) and (2)

B (1) and (3)

C (2) and (4)
D (3) and (4)

29. 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 Control environment
B The information system relevant to financial reporting C
Human resource policies and practices
D. Monitoring of controls
 30. Is the following statement true or false regarding directional testing?
An audit procedure which tests for the understatement of a class of expenditure will
simultaneously test for the overstatement of the related liability.
A True
B False

31. Is the following statement regarding the use of internal audit work by the
external auditor true or false?
The external auditor must reperform some of the work carried out by the
internal audit function if the work of the internal auditor is to be relied on.
A True
B False

32. Which two of the following statements are true regarding the auditor's
attendance at the inventory count?
(1) It is the auditor's responsibility to organise the inventory count.
(2) The auditor observes client staff to determine whether
inventory count procedures are being followed.
(3) The auditor reviews procedures for identifying damaged,
obsolete and slow-moving inventory.
(4) If the results of the auditors' test counts are not satisfactory,
the auditor should arrange for the inventory to be recounted.
A (1) and (2)
B (1) and (4)

C (2) and (3)

D (3) and (4)

33. An audit junior has been assigned to the audit of bank and cash balances of
Howard Co. He has obtained the
following audit evidence:

(1) Bank reconciliation carried out by the cashier

(2) Bank confirmation report from Howard's bankers
(3) Verbal confirmation from the directors that the overdraft limit is to be
increased
(4) Cash count carried out by the audit junior
What is the order of reliability of the audit evidence starting with the most reliable first?

A (4), (2), (1) and (3)

B (2), (1), (4) and (3)

C (4), (3), (2) and (1)

D (2), (4), (1) and (3)

34. As part of the review stage of an audit, the auditor will consider
subsequent events.
Up to which date does the auditor have an active responsibility to perform procedures designed to
identify

subsequent events?
A The reporting
date

B The date of the auditor's report

C The date of issue of the financial statements

D The date of approval of the financial statements

35. Is the following statement regarding the purpose of subsequent events

true or false?

The purpose of the subsequent events review performed by the auditor is to ensure that the effects
of all subsequent events identified are reflected in the financial statements.
A
Tru
eB
Fal
se
36. Which of the following factor distinguishes an error from fraud and ot
a. Whether it is a rupee amount or a process
b. Intent.
c. Materiality
d. Whether it is a caused by the auditor or the client
37. Independent auditors of financial statements perform audit that reduce?
a. Business risk faced by investor
b. Information risk faced by investor
c. Complexity of financial statements
 d. Timeliness of financial statements

38. The management’s responsibility paragraph includes a statement that

management is responsible for design, implementation and maintenance of
internal financial controls and that they were operating effectively. Should
this paragraph be amended if the internal financial controls are not operating
effectively?
a. Auditor should modify the management’s
responsibility paragraph appropriately
b. Management’s responsibility paragraph is not required to be
amended. The auditor’s opinion on internal financial controls should
be modified appropriately.

39. What is the significance of the date of the auditor’s report?

a. There is no significance of date of auditor’s report and it is not

mandatory that the report should be dated
b. Date of the auditor’s report informs the user of the auditor’s
report that the auditor has considered subsequent events up to that
date in making his audit report and has obtained sufficient
appropriate audit evidence to support his opinion.
40. Can an auditor sign the auditor’s report at a place other than the place
where the registered office of the entity is situated?
a. No, place of signature should be the same location where the
registered office of the entity is situated

b. Yes, an auditor can sign at a place which is different from the

registered office of the entity and ordinarily, location as per ISA 700
(Revised) is the place where audit report is signed.
41. Which of the following is not likely to be a fraud risk factor
relating to management’s characteristics:

a. Tax evasion

b. Failure to correct known weakness in internal control system

c. Comply with the accounting standards.
d. High management turnover

42. An example of an incentive or pressure that increase the risk of fraud is:
a. The client operates in a stable industry
b. The client has history of making losses
c. Management remuneration mostly comprises base salary
d. All of the above