Test Assurance 1.1

According to Company Act 2006 in UK, which THREE of the following statements are true?

• An individual or firm is eligible for appointment as statutory auditor if the individual or firm is a member of a recognized supervisory body and is eligible for appointment under the rules of that body

• Auditors in the UK are subject to both legal and professional requirements

• In UK, recognized supervisory body (RSB) is responsible for issuing auditing standards.

• A person may not act as a statutory auditor of a company if that person is an officer or employee of the company.

According to the Companies Act 2006 in UK requires all companies to be audited, but allows small companies an exemption from this requirement where they meet two of three of the following criteria for both this financial year and the last financial year. Which THREE of the following criteria can be used to decide the audit exemption?

• Turnover <£10.2millions

• Turnover <£10.1millions

• Total assets <£5.1millions

• Number of employees<50

Which THREE of the following statements relating to the purpose of an engagement letter are true?

• The purpose of an engagement letter is to define clearly the extent of the firm's responsibilities

• The purpose of an engagement letter is to maximize the possibility of any misunderstanding between the client and the firm

• The purpose of an engagement letter is to provide written confirmation of the firm's acceptance of the appointment

• The purpose of an engagement letter is to clarify the form of their report

Which ONE of the following is the responsibility of the external auditor?

• To obtain sufficient appropriate evidence regarding compliance with laws and regulations that have an indirect effect on the financial statements only

• To prevent and detect all non-compliance with laws and regulations which affect the business

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

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

Which TWO of the following must be included in an audit engagement letter?

• Details of client identification procedures to be performed in relation to Money Laundering Regulations

• The scope of the audit

• The reporting framework that is applicable for the financial statements being prepared

• A statement that, in accordance with the Companies Act 2006, the auditor’s liability cannot be restricted

Which THREE of the following would be found in the overall audit strategy document?

• Timetable

• Calculation of preliminary materiality thresholds

• Detailed plan of audit procedures

• Budget and fee

Which THREE of the following statements in respect of risk are true?

• Inherent and control risks are components of audit risk

• Auditors cannot impact on inherent risk to bring audit risk to an acceptable audit risk

• Identifying business risks is part of the company's risk assessment processes

• Auditors can impact on inherent risk to bring audit risk to an acceptable audit risk

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

• Completeness

• Existence

• Occurrence

• Accuracy, valuation and allocation

Which TWO of the following describe manifestations of the expectations gap?

• Users discovering that the directors refuse to cooperate in providing the auditor with evidence he requests

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

• Users blaming the auditors for a fraud discovered in a company subsequent to an audit

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

Which ONE of the following statements about audit committees is incorrect?

• All of the members of an audit committee must be non-executive directors

• Listed companies are required to have audit committee

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

• Audit committees are an important aspect of a company’s control monitoring