Lecture Notes

Question 1

6 threats

Answer 1

SSMAFI

Question 2

safeguards to SSMAFI

Answer 2

review, Chinese walls, partner rotation, independent advice, confidentiality

Question 3

materiality

Answer 3

if its misstatement or omission affect decisions of users of financial statements

Question 4

revenue materiality

Answer 4

0.5 -2

Question 5

profit materiality

Answer 5

5 - 10

Question 6

net assets

Answer 6

5 - 10

Question 7

performance materiality

Answer 7

50 - 90 of overall materiality

Question 8

audit risk

Answer 8

inherent control detection

Question 9

approach to fraud

Answer 9

assess and identify indications of fraud
respond to identified risks
report

Question 10

audit report

Answer 10

true & fair
emphasis of matter
qualified opinion except for missing evidence
disclaimer of opinion
qualified opinion except for material misstatement
adverse opinion

Question 11

ISA 580 written representation

Answer 11

provide necessary audit evidence obtained

Question 12

indicators of going concern

Answer 12

negative cash flows, adverse key financial ratios, inability to pay creditors, indications of withdrawal of financial support

Question 13

isa 570 going concern

Answer 13

assumption company will operate for foreseeable future

Question 14

isa 560 consideration of subsequent events

Answer 14

auditor must perform procedures to ensure all subsequent events have been identified and adjusted

Question 15

non adjusting events

Answer 15

arising after date of financial statements

Question 16

adjusting events

Answer 16

arise during reporting period

Question 17

audit procedure NCA

Answer 17

bank statement,
look at investment register
confirm ownership by looking at title deeds

Question 18

audit procedure Investment

Answer 18

look at supporting bank statements,
investment register,
confirm ownership by looking at certificates

Question 19

audit procedure bank and cash

Answer 19

reperform fx
attend cash count
review bank reconciliations

Question 20

audit procedure inventories

Answer 20

inventory count,
attend stocktake
inventory held in one place

Question 21

audit procedure revenue and receivables

Answer 21

look at credit notes,
prepayments
credit notes
doubtful debts

Question 22

audit procedure purchases and payables

Answer 22

look at invoices,
supplier statement reconciliations
accruals
loans

Question 23

audit procedure share capital and reserves

Answer 23

share capital issue docs
ensure dividends paid correctly
ensure interest share is disclosed

Question 24

audit procedures payroll

Answer 24

access to payroll restricted,
changes to pay rate notified,
keep payroll separate from other depts.

Question 25

types of control

Answer 25

manual, automated, detective, preventative

Question 26

example of control activities

Answer 26

segregation of duties
physical controls
system controls
reconciliations

Question 27

internal controls

Answer 27

system of control implemented by management in order to carry on the business

Question 28

isa 620 using work of an expert

Answer 28

propert valuer

Question 29

isa 540 accounting estimates

Answer 29

auditors dealing with estimate which increases risk

Question 30

methods of audit evidence

Answer 30

inspection, observation, reperforming, inquiry, confirmation, recalculation, analytical procedures

Question 31

quality of audit evidence

Answer 31

external vs internal
direct vs indirect
documentary vs oral
orignal vs copy