General Knowledge (Weeks 1 - 4)

Question 1

What are the 5 fundamental principles of professional conduct?

Answer 1

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behaviour

Question 2

What are the 5 fundamental principles of professional conduct?

Answer 2

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional behaviour

Question 3

What do auditors do?

Answer 3

1. Make sure numbers are correct (free of material misstatements and show a true and fair view)
2. Make sure the presentation and disclosures are correct and free from material misstatement
3. Make sure the entity is a going concern as per ASA 570

Question 4

Appointment of an Auditor

Answer 4

• Appointed by shareholders at general meeting
• Engagement letter to state the conditions of the audit
• Individual auditors must be rotated every 5 years

Question 5

Threats to Independence (5 threats)

Answer 5

1. Self-Interest Threat
2. Self-Review Threat
3. Advocacy Threat
4. Familiarity Threat
5. Intimidation Threat

Question 6

What can be done to reduce the threats to independence down to an acceptable level?

Answer 6

The auditor can implement safeguards, and if no safeguards can be implemented, the threat must be removed.

Question 7

Management Asserts (Transaction Assertions)

Answer 7

1. Occurrence (Actually Happened)
2. Completeness (ALL are included)
3. Accuracy (recorded at correct amount)
4. Classification (Recorded in the correct accounts)
5. Cutoff (In correct period)

Question 8

Management Assertions (Balance Assertions)

Answer 8

Existence (Do the assets, liabilities and equity actually exist?)
Completeness (Have all the accounts been included in the reports?)
Valuation and Allocation (Are the assets, liabilities and equity included in the reports the appropriate amounts?)
Rights and Obligations (Are the liabilities owed by the entity and are the assets controlled by the entity)

Question 9

Management Assertions (Presentation and Disclosure Assertions)

Answer 9

1. Occurrence (Disclosed events occurred)
2. Rights and Obligations (Disclosed assets and liabilities owned by the entity)
3. Completeness (All required disclosures are included)
4. Accuracy and valuation (Disclosed fairly and the appropriate amounts)
5. Classification (Appropriately classified)

Question 10

Steps to Develop Audit Objectives

Answer 10

1. Understand the overall objectives and responsibilities for audit
2. Divide financial statements into segments
3. Use management assertions to develop segments

Question 11

What are the four phases of the audit report?

Answer 11

Phase 1: Plan and design audit approach
Phase 2: Perform Substantive Tests of Controls and Tests of Transactions
Phase 3: Perform Tests of Details of Balances and Perform Analytical Procedures
Phase 4: Complete audit and issue audit report

Question 12

What are the two types of audit objectives?

Answer 12

1. Transaction related

2. Balance related

Question 13

What are the audit objectives?

Answer 13

Transaction Related
A - Accuracy 
C - Completeness 
C - Classification 
E - Existence 
P - Posting and Summarisation 
T - Timing 
Balance Related 
R - Rights and Obligations 
R - Realisable Value 
P - Presentation and Disclosure

Question 14

Reasonable Assurance is Contained In which standard

Answer 14

ASA 700 regarding forming an opinion

Question 15

What are some inherent risk factors?

Answer 15

Financial Report Level:
Management - Integrity / Changes / Pressure
Nature of Business
Industry Factors

Account / Class of transactions Level:
Complexity of transactions
Subjectivity in Accounting
Consequence of failure to meet contractual obligations

Special Areas of Audit Risk:
Going Concern
Possibility of Fraud or Manipulation