Audit Documentation Quiz

The use of standardised working papers may improve the efficiency with which the audit file is prepared and reviewed. However, the extent to which a standardised approach is desirable will vary from audit to audit and will be more appropriate for some forms of documentation than others.

For which document would a standardised approach be particularly appropriate?

• An engagement letter

• An annual bank confirmation letter

• An audit programme

• Written representations from management

Which of the following papers would normally be retained on the permanent file maintained for a limited liability company audit client?

• Completed checklist of statutory disclosure requirements

• Extracts of minutes of meetings of the directors

• Written representations from management

• Copy of the company’s legal constitution

Which of the following is a MAIN reason for maintaining audit documentation?

• To assist the audit engagement team in planning and performing the audit

• To enable the conduct of quality management reviews

• To provide evidence of the basis for the auditor’s conclusions

• To retain a record of significant matters for future audits

Which of the following statements about audit documentation is TRUE?

• Audit documentation must be assembled as a final audit file on or before the date of the auditor’s report

• After final assembly, audit documentation cannot be deleted or modified

• Both 1 and 2

• Neither 1 nor 2

Which of the following statements about an engagement partner’s review of audit documentation is TRUE?

• All audit documentation must be reviewed

• Formal written communications to management must be reviewed before they are issued

• Both 1 and 2

• Neither 1 nor 2

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

• To set out the form of any report to be issued

• To provide constructive suggestions to management concerning improvements in internal control

• To document management’s and the auditor’s respective responsibilities

• To provide evidence of management’s judgement or intent

Which of the following factors would be most likely to cause an auditor to decline a new audit engagement?

• The auditor lacks an understanding of the prospective client’s operations and industry

• Management’s disregard of its responsibility to maintain an adequate control environment

• The auditor is unable to perform substantive procedures before the year end

• The prospective client has already completed the year-end physical inventory count

Which TWO of the following statements regarding an engagement letter are correct?

• It must be reissued every year

• It includes the exact fees to be charged

• It includes the details of the limitations of an audit

• It identifies an applicable financial reporting framework

Which of the following statements about advice given by an auditor is correct?

1) Auditors who provide negligent advice may be held liable for breach of contract by the company which appointed them 2)Auditors who provide negligent advice to the company which appointed them may be held liable for breach of contract by the company and its individual shareholders 3)Auditors who provide advice to an individual and know how the advice will be used may be held liable if they are negligent in giving that advice

• 1 only

• 1 and 2

• 1 and 3

• 2 and 3

Which of the following are owed a duty of care by an auditor when preparing a company’s auditor’s report?

• A potential investor with no current holding

• An existing shareholder looking to increase their holding

• A company looking to make a takeover bid for the company

• The company and the existing shareholders in the company as a body