Assurance1 part2

The auditor of Grey Co has set overall materiality level at $200,000. Which ONE of the following could be the performance materiality set for the financial statements for Grey Co?

• $220,000

• $250,000

• $200,000

• $100,000

White Ltd's quick ratio has fallen from 1.8:1 to 1.6:1. Which TWO of the following might help to explain this decline?

• Credit control has been poor

• Current liabilities have increased.

• The allowance for receivables has been reduced

• The entity has purchased a number of inventories for cash.

Which TWO of the following statements correctly describe the auditors' responsibilities in accordance with ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements?

• The auditor performs the audit with the aim of deterring fraud

• The auditor must only obtain evidence regarding the risks of material misstatement due to error

• The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material misstatement whether caused by fraud or error.

• The auditor is not responsible for the prevention and detection of fraud and error.

Linda has obtained a list of items which make up the cash and cash equivalents balance (£3,556) in the financial statements of Baker Ltd. Materiality has been set at £3,800. Which ONE of the following items should not be tested by Linda?

• Current account balance (overdrawn) £5,600

• Petty cash float £750

• Special directors' cash account £794

• Special managers' cash account £500

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

• Occurrence

• Existence

• Accuracy, valuation and allocation

• Completeness

Which TWO of the following are valid comments about the quality of assurance evidence?

• Evidence in the form of documents or written representation are more reliable than oral representations

• Evidence from external sources is more reliable than evidence obtained from the entity's records

• Evidence from internal sources is more reliable when related internal controls operate ineffectively

• Evidence from internal sources is more reliable than evidence created by the assurance provider

The following are items that might be included in an auditor's report. Which TWO of the following are reported on by exception only?

• Whether the financial statements are in agreement with the accounting records and returns

• Whether details of directors' emoluments and other benefits have been correctly disclosed in the financial statements.

• Whether the financial statements give a true and fair view of the state of the company's affairs at the end of the financial year

• Information in the strategic report and the directors' report is consistent with the financial statements

The auditor of Grey Co has concluded that Grey Co is not a going concern. The financial statements have been prepared on a going concern basis and management has refused to change them. What form of audit opinion will be issued by the auditor?

• A qualified 'except for' opinion due to material misstatement

• A qualified 'except for' opinion due to insufficient appropriate audit evidence

• An adverse opinion

• A disclaimer

ISA 705 Modification to the opinion in the independent auditor's report identifies three possible types of modification. In which of the following circumstances would a disclaimer of opinion be issued?

• The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion but has concluded that the possible effects of any undetected misstatements could be material but not pervasive

• The auditor concludes that the financial statements include misstatements which are both material and pervasive to the financial statements

• The auditor concludes that the financial statements include misstatements which are material but not pervasive to the financial statements

• The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion and has concluded that the possible effects of any undetected misstatements could be both material and pervasive.

The financial statements of Green Co include a receivables balance of $30,000 which the auditors do not believe will be recovered. Materiality has been set at $90,000. There are no other unadjusted misstatements. What form of audit opinion would be issued by the auditor?

• Qualified opinion due to overstatement of receivables

• Adverse opinion

• Disclaimer of opinion

• Unmodified opinion.