Which of the following are recognised threats to independence and objectivity as identified in ACCA's Code of Ethics and Conduct? (1) Familiarity (2) Self-interest (3) Integrity (4) Advocacy

Familiarity, Self-interest, and Advocacy

AAB & Co is the statutory auditor of Y Co, a public interest entity. Which of the following services is AAB & Co prohibited from providing to Y Co under any circumstances? Provision of bookkeeping services, Assistance in the resolution of tax disputes, Internal audit services, Valuation services where the valuation will have a material effect on the financial statements

Valuation services where the valuation will have a material effect on the financial statements

Which of the following statements is true regarding the audit committee? An audit committee must comprise at least four independent non-executive directors., Where there is no internal audit function the audit committee should consider the need for one on an annual basis., The role and responsibilities of the audit committee are set out in statute

Where there is no internal audit function the audit committee should consider the need for one on an annual basis.

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.

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

Which of the following is a limitation of the internal audit function? The internal audit report is not circulated to the members., Internal audit assignments are designed to meet the needs of the business., Internal auditors may be employees of the company., Internal auditors may report to an audit committee.

Internal auditors may be employees of the company.

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

Taking responsibility for the implementation of a new sales ledger system

Which of the following is not a benefit of establishing an audit committee? Reduced opportunity of fraud, as the audit committee can advise the executive directors on managing the risks in the financial reporting process., Greater external audit independence, as the audit committee can be responsible for appointing the external auditors, Reduced external audit fees, as the presence of the audit committee reduces audit risk and consequently, the amount of audit procedures required.

Reduced external audit fees, as the presence of the audit committee reduces audit risk and consequently, the amount of audit procedures required.

A private company has requested that its auditor prepare a valuation report on a prospective acquisition target in order to help it obtain finance for the acquisition from its bank. Which two of the following threats may arise if the auditor agrees to take on this assignment? (1) Self-review threat (2) Advocacy threat (3) Familiarity threat (4) Self-interest threat

Advocacy threat, Self-interest threat

Which of the following statements best reflects the auditor's duty of confidentiality? Auditors must never, under any circumstances, disclose any matters of which they become aware during the course of the audit to third parties, without the permission of the client. Auditors may disclose any matters in relation to criminal activities to the police or taxation authorities, if requested to do so by the police or a tax inspector. Auditors may disclose matters to third parties without their client's consent if it is in the public interest, and they must do so if there is a statutory duty to do so. Auditors may only disclose matters to third parties without their client's consent if the public interest or national security is involved.

Auditors may disclose matters to third parties without their client's consent if it is in the public interest, and they must do so if there is a statutory duty to do so.

When gaining an understanding of the specific business operations of an audit client, which matters would an auditor need to consider? A Accounting principles and industry specific practices relevant to the client's business, B Acquisitions or disposals of the client's business activities, C Leasing of property, plant or equipment for use in the client's business, D Products or services and markets of the client's business

Products or services and markets of the client's business

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.

The audit strategy should be established before the audit plan is developed.

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

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

Who is responsible for the prevention and detection of fraud?

Those charged with governance and management

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

Increasing sample sizes for inspecting recorded assets where assets are more susceptible to theft

Which of the following correctly describes the auditors' responsibilities in accordance with ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements? A The auditor is responsible for the prevention and detection of fraud and error. B The auditor is not responsible for the prevention of fraud and error but is responsible for detection. C The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material misstatement whether caused by fraud or error. D 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.

When determining whether the preconditions for an audit are present, the auditor obtains management's agreement that it acknowledges and understands its responsibilities. Which of the following is not included in the agreement obtained by the auditor? A Management's responsibility for preparing the financial statements, B Management's responsibility for internal control to enable the preparation of financial statements which are free from material misstatement, C Management's responsibility to provide the auditor with all information relevant to the preparation of the financial statements, D Management's responsibility to prevent and detect fraud

Management's responsibility to prevent and detect fraud

Which of the following must be included in an audit engagement letter? A Arrangements concerning the use of experts, B Obligations to make audit working papers available to other parties, C Expected form and content of any reports, D Basis on which fees are computed

Expected form and content of any reports

As F Co's external auditor, what is your responsibility regarding the company's compliance with the hygiene regulations? A Actively prevent and detect non-compliance with the regulations, B Perform specific audit procedures to identify possible non-compliance, C Obtain sufficient appropriate audit evidence about F Co's compliance with the regulations, D Nothing – the food hygiene regulations do not have a direct effect on the financial statements

Perform specific audit procedures to identify possible non-compliance

In accordance with ISA 250 Consideration of laws and regulations in an audit of financial statements what are the responsibilities of the external auditor?

To obtain sufficient appropriate evidence regarding compliance with laws and regulations that have a direct effect on the financial statements only.

Which two of the following are application controls? (1) Records of program changes (2) Virus checks (3) Batch reconciliations (4) Document counts

Batch reconciliations and Document counts

Which control activity assists B Co in ensuring that goods and services are sold to credit-worthy customers? Options: 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.

Credit limits are checked before sales orders are accepted.

Audit and Assurance Flashcard

Flashcard

•

Other

•

11th Grade

•

Practice Problem

•

Hard

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75 questions

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FLASHCARD QUESTION

Front

Is the following statement regarding stewardship true or false? Directors are stewards of the investment made by shareholders in a company.

Back

True

FLASHCARD QUESTION

Front

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

Back

(1) and (2) only

FLASHCARD QUESTION

Front

What is the correct order of the following stages involved in the development of an ISA? (1) Distribution of exposure draft for public comment (2) Consideration of comments received as a result of the exposure draft (3) Approval by IAASB members (4) Establishment of task force to develop draft standard (5) Discussion of proposed standard at a public meeting

Back

(4), (5), (1), (2), (3)

FLASHCARD QUESTION

Front

Who normally appoints the external auditors of a company?

Back

Shareholders

FLASHCARD QUESTION

Front

Which of the following is the most appropriate definition of the external audit?

Back

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.

FLASHCARD QUESTION

Front

The level of assurance provided by an external audit is absolute. Is this statement true or false?

Back

False

FLASHCARD QUESTION

Front

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.

Back

(1) only

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