AA chap 1,2 & 3

Assurance is given about the financial statements in the auditor’s report.

Which of the following statements is correct in relation to external statutory audits?

• External audits give absolute assurance that the financial statements are free from all

  misstatement.

• External audits give limited assurance that the financial statements are free from material

  misstatement.

• External audits give reasonable assurance that the financial statements are free from

  material misstatement.

• External audits can only give limited assurance because of the inherent limitations of an

  audit.

Consider the following statements regarding stewardship and agency.

(1) Directors are stewards of the investment made by shareholders in a company.

(2) Auditors act as an agent for the shareholders in a company.

Which of these statements is/are true?

• (1) only

• (2) only

• (1) and (2)

• Neither (1) nor (2)

The International Standards on Auditing are issued by which of the following bodies?

• IAESB

• IAASB

• IASB

• FRC

Which of the following statements are correct with regards to the International

Standards on Auditing (ISA)?

(i) The ISAs aim to ensure that audits performed on different companies, in different

jurisdictions, adhere to common standards.

(ii) Where it is not possible to comply with one or several of the ISAs in an audit, the auditor

should explain the reason for the non-compliance in the auditor's report.

(iii) The ISAs apply to the audit of smaller entities.

(iv) An auditor is legally required to follow ISAs when auditing a public interest entity.

• (ii) and (iii)

• (i) and (iii)

• (iii) and (iv)

• (i) and (iv)

To ensure transparency, the internal audit team should report to:

• The company's directors

• The audit committee

• Both the directors and the audit committee

• The shareholders

Consider the following statements:

(1) In an effective system of corporate governance the directors take responsibility for risk

management strategies within the business.

(2) In an effective system of corporate governance a business is likely to have an internal

audit department.

Which of these statements is/are true?

• (1) only

• (2) only

• (1) and (2)

• Neither (1) nor (2)