Incorrect questions

Question 1

acronym for quality control (detail)

Answer 1

Leadership
Ethical compliance 
Acceptance
Resources
Engagement performance
Monitoring

Question 2

acronym for when you can accept a client ( detail)

Answer 2

Technical competence
Resources
Independence
Money laundering
Risk / reputation
Outgoing auditor
Terms of engagement

Question 3

acronym for quality control

Answer 3

LEAREM

Question 4

acronym for when you can accept a client

Answer 4

TRIMROT

Question 5

when are audit risks found

Answer 5

FS level or balance and transactional level

Question 6

example of balance and transactional level risk answer in exam

Answer 6

there is a risk of over/under/mis statement of xxx because xxx

could be recievables/ inventory /revenue etc

Question 7

3 examples of FS level of risk

Answer 7

risk of misstatement at FS:
going concern

Fraudulent reporting

Internal controls

Question 8

2 sentences must be used when discussing going concern as a audit risk

Answer 8

if xxxx is not a going concern, the FS must be prepared on a break up basis. If this has not happened, the uncertainty must be prepared in the notes of the FS

Question 9

should you include audit tests in your audit risk question

Answer 9

NEVER

Question 10

subheadings for a tender question

Answer 10

Overview of the firm
areas of expertise and key staff
assessment of client needs
deadlines
fees
non audit services
quality control and ethics

Question 11

how are things material

Answer 11

by nature
value
or impact

Question 12

criteria for material (revenue)

Answer 12

0.5%-1%

Question 13

criteria for material (total assets )

Answer 13

1%-2%

Question 14

criteria for material (profit before tax)

Answer 14

5%-10%

Question 15

what is insolvency

Answer 15

the inability of a company to pay its debts when they are due (not enough assets even if you were to sell them)

Question 16

what is illiquidity

Answer 16

the inability of a company to readily obtain its cash from its assets in order to meet obligations (they do have assets but cant easily get cash from them)

Question 17

two common reasons of becoming insolvent

Answer 17

overtrading

lack of profitability

Question 18

what happens when a company becomes insolvent

Answer 18

administration - continues to exist but under control of administrator
liquidation - company is wound up and ceases to exist

Question 19

format of evidence questions

Answer 19

example:

Copy of Bank statement to confirm the amount paid for the asset

you must start with a noun and not a verb otherwise its a procedure

Question 20

evidence question - one to always use

Answer 20

Copy of FS note to confirm the disclosure is appropriately made

Question 21

audit report question - do two parts, what are they?

Answer 21

impact on the audit opinion

additional paragraphs that may need to be included in the audit report

Question 22

example of pervasive

Answer 22

turns profit into a loss

Question 23

4 points to include in the impact on audit opinion section of audit report question

Answer 23

explain problem in accounting knowledge
assess whether problem is material, immaterial or pervasive
explain reason for modifying opinion - the audit opinion will modified on the basis of material misstatement
give conclusion - in conclusion the audit opinion is qualified

Question 24

what are the different audit opinions and why

Answer 24

qualified - material misstatement
unmodified - no problems
adverse - pervasive misstatement
disclaimer - pervasive inability to provide to obtain sufficient appropriate audit evidence

Question 25

example of something not pervasive

Answer 25

only one or two balances that are wrong

Question 26

what shouldnt you use in an audit report question

Answer 26

emphasis of matter - they hate it

Question 27

uk variant - going concern. when does the 12 month going concern valuation need to be from

Answer 27

audit report date

Question 28

3 guaranteed marks for cash flow evidence

Answer 28

working paper agreeing the opening balance to the bank statement

working paper confirming that the additions/ adding up is accurate

working paper confirming or comparing the forecast to actual

Question 29

how do you go into liquidation

Answer 29

creditor must show they are owed more than £750 and that its served a payment request at the registered address

petition is presented in court if not paid within 21 days

if the debt is undisputed, a winding up order is granted

court will appoint official reciever who will wind up company

the directors must prepare a statement as to why the company is failed

a meeting is held with creditors then final return at court and then its dissolved

Question 30

what happens when you go into administration

Answer 30

you have 12 months of breathing space where you cannot be demanded for unpaid debt. an administrator is appointed and makes all decisions. they will decide if you can continue or if not they will put them in liquidation