TEST 4 MCQs

Identify which of the following facts from the scenario represent valid threats to independence, matching each threat to the appropriate category.

The audit engagement partner for Velo Co, a listed company, has been in place for approximately eight years.

• Self-interest

• Familiarity

• Self-review

• No threat

Identify which of the following facts from the scenario represent valid threats to independence, matching each threat to the appropriate category.

Velo Co has asked for advice from BKL & Co regarding the role of internal audit.

• Self-interest

• Familiarity

• Self-review

• No threat

Identify which of the following facts from the scenario represent valid threats to independence, matching each threat to the appropriate category.

Fee will be 20% of profit after tax.

• Self-interest

• Familiarity

• Self-review

• No threat

The finance director has suggested to the board that if BKL & Co are appointed as internal as well as external auditors.

In line with ACCA's Code of Ethics and Conduct, which TWO of the following factors must be considered before the internal audit engagement should be accepted?

• Whether the external audit team have the expertise to carry out the internal audit work.

• If the assignments will relate to the internal controls over financial reporting.

• If management will accept responsibility for implementing appropriate recommendations.

• The probable timescale for the outsourcing of the internal audit function.

Which of TWO the following should be included in a formal document regarding the responsibilities of the audit committee?

• A. To monitor and review the effectiveness of the newly established internal audit function

• A. To evaluate the balance of skills, experience and independence of board members

• A. To monitor and review the effectiveness of internal financial controls established by the company

• A. To take responsibility for the appointment and removal of the external auditors

The board has started to compile a list of tasks for the IA department to carry out once it is up and running. It has been agreed that the first assignment to be completed will be for IA to review Bellerina Co's processes over capital expenditure to verify if the right items are purchased at an appropriate time and competitive price.

What type of internal audit assignment does this represent?

• Value for money audit

• Management audit

• Financial audit

• An IT audit

When deciding on the role of the IA department in undertaking operational audits, which of the following should the team NOT be involved in?

• Observing procedures carried out by Bellerina Co's staff

• Reperforming procedures documented in procedures manuals

• Designing and implementing internal control procedures to address deficiencies

• Reporting findings directly to the board of directors

The audit team of Bellerina Co comprises an engagement partner (who has only been appointed this year due to the rotation of the previous partner who had been involved in the audit for seven years), a recently appointed audit manager, an audit senior (who has experience of auditing a company in this specialised industry) and a number of audit assistants.

In relation to the composition of the current audit team, the fundamental principle of ?????? is at risk. An appropriate safeguard to deal with this risk would be to ??????

• confidentiality, appoint a completely new audit team

• confidentiality, reinstate the previous partner

• professional competence, Provide industry training for team members

• professional competence, appoint a completely new audit team

The audit manager has requested that you cover a number of specified areas in the audit planning documentation.

For each area, indicate whether the information would be included in the audit strategy (AS) document or in the detailed audit plan (AP).

The availability of the client's data and staff (including internal audit).

The audit manager has requested that you cover a number of specified areas in the audit planning documentation.

For each area, indicate whether the information would be included in the audit strategy (AS) document or in the detailed audit plan (AP).

The allocation of responsibility for specific audit procedures to audit team members.