You are an audit senior of YHT Co and have worked on the external audit Of BJM co (BJM); an unlisted company, since your firm was external auditor two years ago. BJM owns a chain of nine restaurants and is a successful company. BJM has always subject to national hygiene regulations, especially in relation to the preparation process. Non- compliance can result in a large fine or closure of the restaurant concerned. The board of BJM has notified you that the national hygiene regulations have updated and are much more stringent and onerous than before. With this in mind, the board has asked your firm to a review of BJM's compliance with hygiene regulations. in order to allow the board to assess whether the appropriate processes have been implemented at each Of the nine restaurants. The review is not to include the provision of accounting advice or the preparation of figures in the financial statements. The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement. Despite running a successful company, BJM's board has often needed to be reminded of some fundamental principles and you often have to explain keg concepts. Which of the following statements best defines 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 fairly presented.

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 purpose of the external audit is 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.

You are an audit senior of YHT & Co and have worked on the external audit Of BJM co (BJM); an unlisted company, since your firm was external auditor two years ago. BJM owns a chain of nine restaurants and is a successful company. BJM has always subject to national hygiene regulations, especially in relation to the preparation process. Non- compliance can result in a large fine or closure of the restaurant concerned. The board of BJM has notified you that the national hygiene regulations have updated and are much more stringent and onerous than before. With this in mind, the board has asked your firm to a review of BJM's compliance with hygiene regulations. in order to allow the board to assess whether the appropriate processes have been implemented at each Of the nine restaurants. The review is not to include the provision of accounting advice or the preparation of figures in the financial statements. The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement. Q. The has also struggled to differentiate its and those of the external auditor in circumstances such as the prevention and detection of fraud and error, and compliance with regulations. Which of the following statements best describes YHT & Co's responsibility regarding BJM's compliance with hygiene in line with ISA 250 (Revised) Consideration of Laws and Regulations in an Audit of Financial Statements?

YHT & Co should perform specific audit procedures to identify possible non- compliance.

YHT & Co should actively prevent and detect non-compliance with the regulations.

YHT & Co should obtain sufficient appropriate audit evidence about BJM's compliance with the regulations as they have a direct effect on the financial statements.

YHT & Co does not have any responsibility as the hygiene regulations do not have a direct effect on the financial statements.

You are an audit senior of YHT & Co and have worked on the external audit Of BJM co (BJM); an unlisted company, since your firm was external auditor two years ago. BJM owns a chain of nine restaurants and is a successful company. BJM has always subject to national hygiene regulations, especially in relation to the preparation process. Non- compliance can result in a large fine or closure of the restaurant concerned. The board of BJM has notified you that the national hygiene regulations have updated and are much more stringent and onerous than before. With this in mind, the board has asked your firm to a review of BJM's compliance with hygiene regulations. in order to allow the board to assess whether the appropriate processes have been implemented at each Of the nine restaurants. The review is not to include the provision of accounting advice or the preparation of figures in the financial statements. The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement. Q. The partner responsible for the review of hygiene compliance hos informed you that the engagement is an assurance engagement. Which of the following would NOT have been relevant to the partner in forming this opinion?

The determination of materiality

The existence of a three-party relationship

The existence of suitable criteria

You are an audit senior of YHT & Co and have worked on the external audit Of BJM co (BJM); an unlisted company, since your firm was external auditor two years ago. BJM owns a chain of nine restaurants and is a successful company. BJM has always subject to national hygiene regulations, especially in relation to the preparation process. Non- compliance can result in a large fine or closure of the restaurant concerned. The board of BJM has notified you that the national hygiene regulations have updated and are much more stringent and onerous than before. With this in mind, the board has asked your firm to a review of BJM's compliance with hygiene regulations. in order to allow the board to assess whether the appropriate processes have been implemented at each Of the nine restaurants. The review is not to include the provision of accounting advice or the preparation of figures in the financial statements. The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement. The audit engagement partner has told you that the threats arising from YHT & Co the review engagement should monitored carefully. Which of the following is likely to cause the audit engagement partner most concern?

The lucrative nature of the review engagement may make the external audit team less inclined to management to make adjustments or to issue a audit opinion, for the fear of losing the review engagement.

According to the ACCA Code of Ethics and Conduct, YHT & co is prohibited from providing other assurance services to an audit client.

The review engagement is likely to give rise to a self-review threat, the outcomes of the review could form the basis of the financial statements which the audit team will audit.

If the new review engagement causes YHT & Co's fee income from BJM to 15% Of the firm's total fees, the ACCA Code of Ethics and Conduct states that the new engagement must be turned down.

AA - Interim Mock - Ch 1 to 6 (50%)

Authored by Nimesh Jain

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MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co (Tangerine), a company which is planning to list on a stock exchange within Six months. The listing rules Of the stock exchange require compliance With corporate governance principles, and the directors are unsure whether they are following practice in relation to this. They hove asked the audit engagement partner for their view on this matter.
Tangerine's board is comprised of six executive directors, a chair and three other directors (NEDs). The chair and one of the NEDS are former directors of Tangerine and on reaching retirement age were asked to take on roles. The company has established an audit committee, and all NEDS are members including the chair who chairs the committee, All four members of the audit committee were previously involved in sales or roles.
All of the directors have members of the board for at least four gears. As the chair not have an executive role, he has sole for liaising with the shareholders and answering their questions. The has not established an internal audit function to monitor internal controls.
Q. Which of the following features are corporate governance deficiencies which Tangerine Co would need to prior to their listing?
(1) The chair has sole responsibility for liaising with shareholders.
(2) The company has not established an internal audit function.
(3) The Chair and one of the NEDs are former executive directors of Tangerine co.

1 and 2 only

1 and 3 only

2 and 3 only

1, 2 and 3

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co (Tangerine), a company which is planning to list on a stock exchange within Six months. The listing rules Of the stock exchange require compliance With corporate governance principles, and the directors are unsure whether they are following practice in relation to this. They hove asked the audit engagement partner for their view on this matter.
Tangerine's board is comprised of six executive directors, a chair and three other directors (NEDs). The chair and one of the NEDS are former directors of Tangerine and on reaching retirement age were asked to take on roles. The company has established an audit committee, and all NEDS are members including the chair who chairs the committee, All four members of the audit committee were previously involved in sales or roles.
All of the directors have members of the board for at least four gears. As the chair not have an executive role, he has sole for liaising with the shareholders and answering their questions. The has not established an internal audit function to monitor internal controls.
The audit engagement partner hos assessed the make-up of the audit committee.
Which of the following would valid conclusions from this assessment?
(1) It is acceptable for the Chair to Chair the audit committee.
(2) A new member of the audit with relevant financial experience must be recruited.

1 only

2 only

1 and 2

Neither 1 or 2

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co (Tangerine), a company which is planning to list on a stock exchange within Six months. The listing rules Of the stock exchange require compliance With corporate governance principles, and the directors are unsure whether they are following practice in relation to this. They hove asked the audit engagement partner for their view on this matter.
Tangerine's board is comprised of six executive directors, a chair and three other directors (NEDs). The chair and one of the NEDS are former directors of Tangerine and on reaching retirement age were asked to take on roles. The company has established an audit committee, and all NEDS are members including the chair who chairs the committee, All four members of the audit committee were previously involved in sales or roles.
All of the directors have members of the board for at least four gears. As the chair not have an executive role, he has sole for liaising with the shareholders and answering their questions. The has not established an internal audit function to monitor internal controls.
The of Tangerine is considering establishing an internal audit function.
Which of the following factors would be relevant in making this decision?
(1) It would help the audit committee to discharge its responsibilities for monitoring internal control.
(2) The board would no longer need to take responsibility for the prevention and detection of fraud and error.
(3) The costs Of establishing an internal audit function should be considered against the benefits.

1 and 2 only

1 and 3 only

2 and 3 only

1, 2 and 3

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are the audit manager of Jones & co and you are planning the audit of LV Fones co. a listed compony, which hos an audit client for four years and specializes in manufacturing luxury mobile phones.
During the planning stage of the audit you have obtained the following information. The employees of LV Fones co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years Offered the same level of staff discount.
During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a audit senior of Jones G Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income from LV Fones was by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).
From a review of the files you note of last gear's audit fee is still outstanding. Based on the information above you have summarised some of the potential risks to independence in the audit of LV as follows.
(1) The audit team has been offered a discount on luxury phones.
(2) The audit senior seconded to LV to cover for the financial controller.
(3) Total fees from LV are over 15% of the total fees of the firm for the second consecutive year.
(4) Fees are overdue in respect of last gear's audit.
Which of the following options best identifies the potential Self Interest threats to independence in the audit of LV Fones and the threat to the most appropriate category?

1 and 2 only

3 and 4 only

1, 3 and 4

3 only

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are the audit manager of Jones & co and you are planning the audit of LV Fones co. a listed compony, which hos an audit client for four years and specializes in manufacturing luxury mobile phones.
During the planning stage of the audit you have obtained the following information. The employees of LV Fones co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years Offered the same level of staff discount.
During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a audit senior of Jones G Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income from LV Fones was by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).
From a review of the files you note of last gear's audit fee is still outstanding. Based on the information above you have summarised some of the potential risks to independence in the audit of LV as follows.
(1) The audit team has been offered a discount on luxury phones.
(2) The audit senior seconded to LV to cover for the financial controller.
(3) Total fees from LV are over 15% of the total fees of the firm for the second consecutive year.
(4) Fees are overdue in respect of last gear's audit.
Which of the following options best identifies the potential Self review threats to independence in the audit of LV Fones and the threat to the most appropriate category?

3 and 4 only

1 and 2 only

2 only

1, 2 and 4

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are the audit manager of Jones & co and you are planning the audit of LV Fones co. a listed compony, which hos an audit client for four years and specializes in manufacturing luxury mobile phones.
During the planning stage of the audit you have obtained the following information. The employees of LV Fones co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years Offered the same level of staff discount.
During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a audit senior of Jones G Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income from LV Fones was by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).
From a review of the files you note of last gear's audit fee is still outstanding. Based on the information above you have summarised some of the potential risks to independence in the audit of LV as follows.
(1) The audit team has been offered a discount on luxury phones.
(2) The audit senior seconded to LV to cover for the financial controller.
(3) Total fees from LV are over 15% of the total fees of the firm for the second consecutive year.
(4) Fees are overdue in respect of last gear's audit.
Which of the following Steps must Jones G Co take, as the fees from LV have exceeded 15% for the last two years?
(1) Resign from the audit
(2) Disclose the matter to those charged With governance
(3) Arrange for a pre- or post-issuance review

1 only

2 only

3 only

2 and 3

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are the audit manager of Jones & co and you are planning the audit of LV Fones co. a listed compony, which hos an audit client for four years and specializes in manufacturing luxury mobile phones.
During the planning stage of the audit you have obtained the following information. The employees of LV Fones co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years Offered the same level of staff discount.
During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a audit senior of Jones G Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income from LV Fones was by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).
From a review of the files you note of last gear's audit fee is still outstanding. Based on the information above you have summarised some of the potential risks to independence in the audit of LV as follows.
(1) The audit team has been offered a discount on luxury phones.
(2) The audit senior seconded to LV to cover for the financial controller.
(3) Total fees from LV are over 15% of the total fees of the firm for the second consecutive year.
(4) Fees are overdue in respect of last gear's audit.
You have also that the audit engagement partner and the finance director have known each other socially for many gears, and in fact went on holiday together last summer with their families to the finance director's villa.
Which TWO threats to independence are raised by this relationship and what safeguards should applied?

Threat -

Familiarity and self-interest

Safeguards -

Jones G Co to resign as auditors

Threat -

Self-review and intimidation

Safeguards -

Rotation of audit engagement partner

Threat -

Self-review and intimidation

Safeguards -

Jones & Co to resign as auditors

Threat -

Familiarity and self-interest

Safeguards -

Rotation of audit engagement

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), which specializes in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.
The directors are planning to list orange on a exchange within the next few months and have if the audit engagement con attend the meetings With investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he hos asked if Currant & co can produce the financial statements for the current year.
During the year, the assistant finance director of Orange left and Currant & co as a partner. It has been suggested that due to his familiarity with Orange, he should to provide an independent partner review for the audit.
Once Orange obtains its exchange listing it will require several assignments to be undertaken; for example, obtaining advice about corporate governance practice. Currant & Co is very to be to these engagements; however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.
The finance director has informed you that once the stock exchange listing has completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior of the engagement team a short-term loan at a significantly reduced interest rate.
Orange is aware that subsequent to the stock exchange listing it Will need to establish an audit committee, and has asked for some advice in relation to this.
The finance director has made offers to members of the audit team:
(1) Weekend away
(2) Loan at reduced rates
Which of the following correctly summarises which of the offers, if any, can be accepted?

(1) - Accepted

(2) - Accepted

(1) - Accepted

(2) - Not accepted

(1) - Not accepted

(2) - Accepted

(1) - Not accepted

(2) - Not accepted

10.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), which specializes in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.
The directors are planning to list orange on a exchange within the next few months and have if the audit engagement con attend the meetings With investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he hos asked if Currant & co can produce the financial statements for the current year.
During the year, the assistant finance director of Orange left and Currant & co as a partner. It has been suggested that due to his familiarity with Orange, he should to provide an independent partner review for the audit.
Once Orange obtains its exchange listing it will require several assignments to be undertaken; for example, obtaining advice about corporate governance practice. Currant & Co is very to be to these engagements; however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.
The finance director has informed you that once the stock exchange listing has completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior of the engagement team a short-term loan at a significantly reduced interest rate.
Orange is aware that subsequent to the stock exchange listing it Will need to establish an audit committee, and has asked for some advice in relation to this.
In accordance with ACCA's Code of Ethics and Conduct you have concluded that if you win the additional work you will need to disclose the proportion of fees obtained from Orange Financials to those charged with governance and conduct a review.
Which of the following explains the basis for your conclusion?

Total fees from Orange Financials will make up more than of Currant & Co's total fees for the first time Since your appointment.

Total non-audit fees from all Currant & Co's clients make up more than 5% of the total fees of the firm.

Total fees from Orange Financials make up more than 15% of Currant & Co's total fees for the second consecutive year.

The disclosure and review are in all circumstances where services other than audit are offered, irrespective of the level of fees.

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