Chapter 4 - Evidence and reporting

Question 1

What does ISA 500 relate to?

Answer 1

Audit evidence

Question 2

What is audit evidence?

Answer 2

Info used by the auditor in arriving at conclusions on which their opinion is based

Question 3

What are tests of controls?

Answer 3

Audit procedures designed to evaluate the operating effectiveness of controls in preventing/detecting material misstatements

Question 4

What are substantive procedures?

Answer 4

Audit procedures designed to detect material misstatements at assertion level

Question 5

What do tests of controls assess?

Answer 5

Whether there is good operation of the control system

Question 6

What do substantive procedures involve?

Answer 6

Testing specific items

Question 7

What does ISA 500 require from auditors?

Answer 7

Obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions for the audit opinion

Question 8

What is sufficiency?

Answer 8

Measure of the quantity of audit evidence

Question 9

What is appropriateness?

Answer 9

Measure of the quality of audit evidence

Question 10

What does the quantity of evidence required depend on?

Answer 10

Level of assurance being offered in the engagement

Question 11

What is the quantity of evidence required affected by?

Answer 11

Risk level and quality of evidence

Question 12

What does ISA 330 follow on from?

Answer 12

ISA 315

330 requires auditors to respond to risks encountered when applying 315

Question 13

What substantive procedures should the auditor carry out?

Answer 13

• agreeing the financial statements to underlying accounting records
• examining material journal entries

Question 14

What do analytical procedures tend to be appropriate to?

Answer 14

Large volumes of predictable transactions

E.g. wages

Question 15

When are tests of detail appropriate?

Answer 15

• To gain info about accounting balances
• Verifying assertions of existence and valuation

Question 16

What does the auditor’s opinion state?

Answer 16

• True and fair
• Prepared in accordance with IFRS and Companies Act 2006

Question 17

What items of the audit report are only included by exception?

Answer 17

• Adequate accounting records kept
• Financial statements that agree with accounting records

Question 18

What basic items are required on every audit report?

Answer 18

Title
Addressee
Opinion
Basis of opinion

Question 19

What does ISA 701 give guidance on?

Answer 19

On determining which key audit matters to include in the report

Question 20

What are key audit matters?

Answer 20

Matters of most significance to the audit

Not a substitute for disclosures

Question 21

What is the expectations gap?

Answer 21

Difference between the apparent public perceptions of the responsibilities of auditors and the legal and professional reality

Question 22

Does the auditor have to carry out substantive procedures on all material items?

Answer 22

Yes

Question 23

What type of procedure is reviewing an invoice?

Answer 23

Test of control

Question 24

What does a review of the financial statements using a Companies Act checklist ensure?

Answer 24

Classification

Question 25

What does tracing non-current assets which have been observed in use back to the non-current asset register ensure?

Answer 25

Completeness

Question 26

Do substantive procedures include both analytical procedures and tests of details?

Answer 26

Yes

Question 27

Is reviewing authoisation a test of control or substantive procedure?

Answer 27

Test of control

Question 28

Is inquiring into the systems used to process purchases a test of control or substantive procedure?

Answer 28

Test of control