Assurence

1.      Which THREE of the following describe aspects of the expectation gap with respect to the external audit?

• Users do not understand the meaning of the audit opinion.

• Users are not aware of the limitations of the audit process.

• Users do not appreciate that reasonable assurance is a low level of assurances.

• Users do not understand what the audit process involves.

  The level of assurances given by an assurance engagement will depend on the type of engagement. Select the level of assurance you would expect to be given in the statutory audit.

• Absolute

• Reasonable

•   Limited

• Unlimited

If type of engagement is report on prospective financial information

• Absolute

• Reasonable

• Limited

• Unlimited

Which THREE of the following are benefits of an assurances report on financial information?

• An assurance report enhances the credibility of the information being reported on

• An assurance report reduces the risk of management bias in the information being reported on

• An assurance report draws the attention of the user to the deficiencies in the information being reported on

• An assurance report attests to the correctness of the information being reported on

Which TWO of the following are elements of a general assurance engagement?

• A.     a three-party relationship

• B.     sufficient appropriate evidence

• C.      determination of materiality

• D.     an engagement letter

In respect of a given subject matter state, which ONE of the following party must determine the suitable criteria?

• Intended user

• Responsible party

• Shareholder

• Practitioner

Which ONE of the following statements is false?

• A positive assurance conclusion gives a reasonable level of assurance

• Reasonable assurance is a high level of assurance, which allows a conclusion to be expressed positively and negatively

• A statutory audit gives reasonable assurance that the financial statements give a true and fair view in all material respects

• A negative assurance conclusions given a limited level of assurance

Which THREE of the following are benefits of assurance work?

• Assurance may act as a deterrent to error of fraud

• An independent, professional opinion

• Testing as a result of sampling is cheaper for the responsible party

• Additional confidence given to other related parties

Which of the following is the most appropriate definition of the external audit

• The external audit is performed by management to identify areas of deficiency within a company and to make recommendation to mitigate those deficiencies

• The external audit is an exercise carried out by auditors in order to give an opinion on whether the financial statement of a company are materially misstated

• 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 external audit provides negative assurance on the truth and fairness of a company’s financial statements

According to the Companies Act 2006 in the UK, which THREE of the following criteria can be used to decide the audit exemption?

• Turnover < £10.2 millions

• Total assets <£5.2 millions

• Total assets. <£5.1 millions

• Number of employees < 50