ISA Question Bank

Question 1

Auditors responsibility for identifying instance of non compliance with laws and regulations

Answer 1

1. When planning and performing audit procedures, should recognize non compliance may materially affect FS
2. Cannot held responsible for preventing non compliance
3. Plan and perform with attitude of professional skepticism and recognize audit may reveal instances of non compliance
4. Auditor should generate understanding of legal and regularity framework applicable to entity
5. Perform procedures to help ID instances of non compliance
6. Obtain management representation stating that all know actual or possible non compliance have been considered in FS have been disclosed
7. When discovered
   - obtain understanding of the nature of the act
   - obtain sufficient audit evidence and document finding
   - discuss matter with management
8. If cannot obtain sufficient information regarding the suspected non compliance consider implication for other aspects of audit

Question 2

Auditors general responsibilities for detection and prevention of fraud

Answer 2

1. Maintain professional skepticism while performing audit
2. Hold discussion with audit team on how and where FS are susceptible to fraud
3. Make enquiry of management and others within the entity to determine whether they have knowledge of actual or suspected or alleged fraud affecting the entity
4. Discuss risk of fraud with internal auditors
5. Obtain info directly from internal auditor of their knowledge of actual, suspected or alleged fraud affecting the entity
6. Enquiry of those in charged with governance how they exercise oversight of management fraud assessment of fraud risk and internal control established to mitigate those risks
7. Evaluate presence of fraud risk factors in the entity
8. Treat fraud risk a significant risk
9. adapt nature, timing and extent of further audit procedure to address the risk

Question 3

Quality control at firm level

Answer 3

1. Leadership responsibility with quality
2. Ethical requirements
3. Acceptance and continuance of client
4. Engagement performance
5. Monitoring

Question 4

Audit procedures to ensure the completeness of management identification of related party and transaction with such parties

Answer 4

1. Identification of related parties
   - review procedures for identification of related parties
   - enquire as to the affliction of directors and officer of other entity
   - review minute of meetings of shareholders, directors and other relevant statutory report
2. Identification of transaction with related parties
   - abnormal terms
   - lack of logical business reason
   - substance different from form
   - unusual manner
   - high volume of significant transaction with certain customers or suppliers compared with others
   - unrecorded transactions
3. Obtain management representation stating completeness of related party identification as well as related party disclosure
4. Compare management current year listing regarding related party to prior year listing

Question 5

Consider the experts qualifications and suitability

Answer 5

1. Membership and professional body
2. Reputation and experience
3. Independence and objectivity in relation to client

Question 6

Factors to consider before appointment of expert

Answer 6

1. Nature, scope and objectives of experts work
2. Respective roles and responsibilities of the auditor and experts
3. Experts understanding of purposes for which the expert opinion are required
4. Communication between auditor and experts
5. Experts access to all records and information necessary
6. Confidentiality requirements
7. Assumptions used for reasonableness

Question 7

Assessing the internal audit function

Answer 7

1. Organizational status
   - independence, objectivity, limitations on work and freedom to communicate
   - scope of internal audit function
   - nature and extent of their assignments and managements reaction to their report
2. Technical competence
   - training and qualification
3. Professional due care
   - planning and supervision and review of work and quality if programs, working papers and documentation

Question 8

Assess work done by internal auditors by

Answer 8

1. Performing a review on their working papers
2. Re performance of items already assessed by internal audit
3. Performing testing on similar items
4. Observation and enquiry of internal audit procedures