MCQ Flashcards
Which three of the following describe aspects of the expectations gap with respect to the external audit?
A. Users do not understand the meaning of the audit opinion
B. Users are not aware of the limitations of the audit process
C. Users do not appreciate that reasonable assurance is a low level of assurance
D. Users do not understand what the audit process involves
A,B,D
Which two of the following might indicate than an assurance client could have higher than normal inherent or control risk?
A. Poor recent performance
B. Strong internal controls
C. Unusual transactions
D. The existence of an internal audit department
A,C
Which three of the following constitute analytical procedures?
A. Consideration of comparable information for prior periods
B. Consideration of relationships between elements of financial information that are expected to confirm a predicted pattern
C. Consideration of whether a balance has been calculated correctly
D. Consideration of similar industry information
A,B,D
Which one would be the simplest way of recording a straightforward system not subject to a great deal of change annually?
A. Flowchart
B. Narrative notes
C. Questionnaire
D. Family tree
B
Which two controls best mitigate the risk that customers might not be able to pay?
A. Authorisation of credit terms to customers
B. Obtaining customers signatures on delivery documentation
C. Regular preparation of trade receivables statements
D. Checking the ageing of the current receivables ledger balance before accepting orders
A,D
Redesign is a large property management company which makes use of the services of many different contractors for building, designing, and decorating services.
Which two internal controls are most likely to prevent services being used for the private purposes of employment?
A. Purchase orders are processed by the buying department,ent following authorisation by the production director
B. Purchase requisition must be signed by two team members for any given project
C. Purchase orders should only be placed with authorised contractors
D. Purchase invoices are matched to authorised purchase orders
A,B
Which two features in the payroll system of Tyne plc could result in the employee costs figure in the financial statements being misstated?
A. Rates of pay are negotiated at a local level; there is no central control
B. The payroll clerk can amend standing data on the payroll system without authorisation from a senior member of staff
C. Personnel records are not kept up to date
D. The payroll department receives confirmation of new employees in writing
B,C
The FRCs ethical standard gives examples of threats in its six classificatory categories. For each threat, select the category in which they would most likely be placed.
Auditing financial statements prepared by the firm
A. Familiarity threat
B. Self review threat
Making a loan to an audit client
C. Familiarity threat
D. Self interest threat
B,D
Which two of the following are examples of when a familiarity threat might arise?
A. The auditor has acted for the same client for several years
B. An audit client has requested the auditor to provide additional tax services on an ongoing basis
C. A client is taking legal action against the audit firm
D. There is a family relationship between a member of the audit team and the finance director of the client
A,D
The UK GDPR obliges auditors to secure any data held on an audit client
A. True
B. False
Upon returning home from working at an audit clients site, you discover that you have misplaced a memory stick that contained personal data on individuals working at the audit client. This is a breach of the UK GDPR
C. True
D. False
B,C
What kind of review relating to audit quality review is carried out after the audit report is signed off.
A. Hot
B. Cold
C. Year end review
D. Quality check
B
Which means corroborating evidence from third parties with the internal evidence
A. Confirmation
B. Analytical procedures
C. Observations
D. None of the above
A
What do you call the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated?
A. Audit risk
B. Risk assessment
C. Inherent risk
D. Control risk
A
Which one is not a stage in the planning process?
A. Establish materiality levels
B. Undertake analytical review
C. Assess the risks involved with the business
D. Preparing the financial statements
D
What type of audit evidence should be gathered as part of a UK statutory audit?
A. Sufficient and analytical
B. Sufficient and appropriate
C. Reasonable and trustworthy
D. Reasonable and sufficient
B
The auditor has a duty to form an opinion on whether the financial statements…
A. Are accurate
B. Show a true and a fair view
C. Contain fraud
D. Are free from all error
B
Which of the following statements about internal and external audit is false?
A. External auditors are appointed from outside the organisation
B. External audit is planned in accordance with IASs
C. Internal audits main purpose is to ensure accounts free from material misstatement and prepare in line with reporting framework
D. All of the above
C
A due diligence assignment is what level of assurance?
A. Absolute
B. Reasonable
C. Limited
D. Exact
C
If a company prepares their accounts under breakup basis, as they believe they are no longer a going concern, what do we not expect to see in their accounts?
A. Liabilities
B. Prepayments
C. Redundancy costs
D. All of the above
B
Who does not need an audit?
A. Companies with assets of £7m and 55 employees
B. UK charities
C. Pension schemes
D. Companies with a turnover of £4m and 49 employees
D
Which three are key engagements of a general assurance engagement
A. User
B. A subject matter
C. Suitable criteria
D. Assurance file
A,B,C
Which three describe aspects of the expectations gap with respect to the external audit?
A. Users do not understand the meaning of the audit opinion
B. Users are not aware of the limitations of the audit process
C. Users do not appreciate that reasonable assurance is a low level of assurance
D. Users do not understand what the audit process involves
A,B,D
Which qualification is required for individuals working on audits in the UK?
A. University degree
B. Professional qualification
C. Membership of a recognised supervisory body
D. Employment by a firm controlled by qualified persons
D
Which two are limitations of the provisions of assurance?
A. Assurance work is carried out by people independent of the entity
B. Sampling is used in assurance work
C. Client systems have inherent limitations
D. Unqualified staff may be used on assurance engagements
B,C
Which party determines the suitable criteria for
A. User
B. Practitioner
C. Reasonable party
Provides an opinion on whether the subject matter complies with the criteria
D. User
E. Practitioner
F. Reasonable party
C,E
Which statement best describes the evidence obtained and the opinion given in a reasonable assurance engagement
A. Sufficient appropriate evidence and a negatively worded opinion
B. Sufficient appropriate evidence and a positively worded opinion
C. A lower level of evidence and a negatively worded opinion
D. A lower level of evidence and positively worded opinion
B
A statutory audit gives reasonable assurance that the financial statements give a true and fair view
A. True
B. False
A negative assurance conclusion gives a limited level of assurance
C. True
D. False
Reasonable assurance is absolute assurance of the correctness of the subject matter
E. True
F. False
A,C,F
Jones is the external auditor of Blue, a listed company. The directors of blue have requested that Jones carry out a review engagement assessing the effectiveness of its corporate governance policies against the UK Corporate Governance Code.
The subject matter
A. Blue corporate governance policies
B. The uk corporate governance code
The suitable criteria
C. Blue corporate governance policies
D. UK corporate governance code
The responsible party
E. Jones
F. Directors of blue
A,D,F
The criteria for all assurance engagements will be the same
A. True
B. False
Suitable criteria can only be identified for assurance engagements relating to financial statements
C. True
D. False
Relevant criteria for assurance engagements relating to financial statements are likely to be accounting standards
E. True
F. False
B,D,E
Reasonable assurance
A. Positive form of words
B. Negative form of words
Limited assurance
C. Positive form of words
D. Negative form of words
A,D
An individual or firm is eligible for appointment as statutory auditor of the individual or form is a member of a recognised supervisory body and is eligible for appointment under the rules of that body.
An individual or firm is eligible for appointment as statutory auditor if the individual or firm is a member of a recognised supervisory body and is eligible for appointment under the rules of that body
A. True
B. False
A person may not act as a statutory auditor if that person is an officer or employee of the audit client
C. True
D. False
A,C
Which best describes the concept of assurance
A. An assurance firms high level of satisfaction as to the reliability of an assertion being made by one party for the use of another party
B. An assurance firms satisfaction as to the reliability of an assertion being made by one party for the use of another party
C. A users satisfaction as to the reliability of an assertion being made by another party
D. An assurance firms limited level of satisfaction as to the reliability of an assertion being made by one party for the use of another party
B
Which three are benefits of an assurance report on financial information
A. Enhances the credibility of the information being reported on
B. Reduces the risk of management bias in the information being reported on
C. Attests to the correctness of the info being reported on
D. Draws the attention of the user to deficiencies in the info being reported on
A,B,D
Prepares the subject matter
A. Responsible party
B. Practitioner
C. User
Gathers evidence on subject matter
D. Responsible party
E. Practitioner
F. User
A,E
Extract from an independent accountants unmodified report on a profit forecast:
-> based on our examination of the evidence supporting the assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the forecast’
Which best describes the type of assurance provided by this statement?
A. Positive assurance expressed negatively
B. Negative assurance expressed positively
C. High level of assurance expressed negatively
D. Limited level of assurance expressed negatively
D
In the context of a statutory audit which tree are examples of the expectations gap?
Belief that…
A. The auditors report certifies the financial statements as correct
B. The auditors principle duty is to detect fraud
C. The auditor is employed by the directors
D. The auditor checks all transactions
A,B,D
Select the level of assurance which would be given
Statutory audit
A. Absolute
B. Reasonable
Review of financial information
C. Reasonable
D. Limited
Report on profit and cash flow forecasts
E. Reasonable
F. Limited
B,D,F
Which two factors would render a person ineligible to be a company auditor, in line with the companies act 2006?
A. They are a partner in a firm of auditors regulated by an RSB
B. Their partner is an officer/employee of the company
C. They are an officer/employee of a directory connected company
D. They do not hold an appropriate qualification, although they do work for a firm controlled by qualified persons
B,C
The companies act 2006 requires all companies to be audited, but allows small companies an exemption if they meet certain requirements.
Small has annual turnover of £10m, total assets of £5.1m and 101 employees. Are they required to have an audit?
A. Yes
B. No
Tiny has an annual turnover of £15, total assets of £5.2m and 99 employees. Are they required to have an audit?
C. Yes
D. No
Little has an annual turnover of £5m, total assets of £4.9m and 45 employees. Are they required to have an audit in the uk?
E. Yes
F. No
B,C,F
Which 3 constitute analytical procedures
A. Consideration of comparable information for prior periods
B. Consideration of relationships between elements of financial information that are expected to conform to a predicted pattern
C. Consideration of whether a balance has been calculated correctly
D. Consideration of similar industry information
ABD
Which 3 are auditors helped to decide by setting a preliminary materiality threshold
A. What audit staff to assign to audit
B. How many items to examine
C. Whether to use sampling
D. What level of misstatement is likely to lead to the auditor not being able to,e to give an unmodified opinion
BCD
The company operates a profit related pay scheme
A. Inherent risk is higher than normal
B. Inherent risk is lower than normal
Business of the company is cash based
C. Higher
D. Lower
Financial statements contain balances with straightforward financial accounting requirements
E. Higher
F. Lower
ACF
Materiality may depend on the size of the error in the context of its omission or misstatement
A. True
B. False
Materiality should be considered when planning audit procedures and when evaluating discovered misstatement
C. True
D. False
Materiality is always expressed as a proportion of profits
E. True
F. False
ACF
The organisation is seeking to raise finance for a new venture
A. Inherent
B. Control
C. Detection
Organisation has a number of estimates in its financial statements
E. Inherent
F. Control
G. Detection
AD
Organisation has high turnover of staff in accounts department
A. Inherent
B. Control
C. Detection
The auditor will be using samples in testing
E. Inherent
F. Control
G. Detection
BF
Materiality should be calculated at the planning stage of all audits
A. True
B. False
Once established, materiality level initially set cannot be revised during the course of the audit
C. True
D. False
Materiality will influence the audit opinion given
E. True
F. False
ADE
Senior management regularly override the systems of controls
A. Inherent
B. Control
C. Detection
Directors pay is related to company profitability
E. Inherent
F. Control
G. Detection
BD
Which three would increase inherent risk
A. Sample sizes have been calculated incorrectly and are too small
B. Significant number of balances are based on expenditure
C. Audit staff are inexperienced
D. Audit staff are inexperienced
E. The company is seeking to raise finance
BCE
As part of their overall risk assessment an auditor has concluded that detection risk must be set low. Select the appropriate consequence of this.
Materiality
A. Higher
B. Lower
Sample size
C. Higher
D. Lower
BC
Gross profit margin decreased. Which two could be a valid explanation doe this decrease
A. Unusually high sales at the end of the year resulted in lower levels of closing inventory as compared to the previous year
B. Increased competition resulted in sales prices being cut
C. Bank overdraft resulted in a higher interest expense than in previous year
D. Was a significant change in the mix of products sold
BD
Company has recently listed on the local stock exchange with high profit expectations from analysts
A. Inherent risk is higher than normal
B. Inherent risk is lower than normal
Inventory is the largest balance on the statement of financial position
C. Higher
D. Lower
Company operates in a slow moving stable industry
E. Higher
F. Lower
ACF
Materiality depends only on the monetary amount of an item
A. True
B. False
Materiality may depend on either the nature of an item of its monetary amount
C. True
D. False
Materiality is a matter of professional judgement
E. True
F. False
BCE
Organisation has few employees in its accounting department
A. Inherent
B. Control
C. Detection
Organisation operates in a fast moving high tech environment
D. Inherent
E. Controls
F. Detection
BD
Which one explained the decline if quick ratio
A. Allowance for receivables has been reduced
B. Credit control has been poor
C. Entity has purchased a property for cash
D. Inventory levels have fallen
C
An electrical store and cake shop have the same mark up on costs. However, gross profit margin of the electrical store is significantly higher than the cake shop. Which one explains a reason for this
A. Cake shops revenue is increasing, while that of the electrical shop is decreasing
B. Cake shop has a higher level of wastage of inventory than the electrical store
C. Electrical shop takes advantage of trade discounts for bulk buying
D. Cake shop has a high turnover of inventory than the electrical store
B
Two reason for current ratio to increase
A. Paid payables earlier than usual out of bank overdraft
B. Made an usually large sale immediately before the year end
C. Made an unusually large purchase of good for cash immediately before the year end, these remain in inventory
D. Paid payables earlier than usual out of positive cash balance
BC
Which one correctly described the principle purpose of an external audit of a limited company
A. To help the preparation of the company’s financial statements
B. To help prevent fraud within the company
C. To examine and express an opinion on the company’s financial statements
D. To help the directors in improving the company’s financial reporting process
C
Which three should an auditor consider if there is a threat to independence?
A. Withdrawing from the engagement
B. Applying specific safeguards
C. Making disclosures to the client
D. Making disclosures to ICAEW
ABC
Which three should not own a material financial interest in an audit client
A. A member of audit team
B. Minor child of a member of the audit team
C. Patent of a member of audit team
D. Spouse of a member of the audit team
ABD
Which three threats to independence might arise on the current audit when an audit team, member is involved in employment negotiations with an audit client during the course of the audit
A. Self interest
B. Self review
C. Intimidation
D. Familiarity
ACD
Which two are examples of when a familiarity threat might arise
A. Auditor has acted fir the same client for several years
B. Audit client has requested the auditor to provide additional tax services on an ongoing basis
C. A client is taking legal action against the audit team
D. There is a family relationship between a member of the audit team and the finance director of the client
AD
Which three ares in which a self interest threat might arise
A. Where there is a close business relationship between the auditor and the client
B. Where the auditor prepares and audited the financial statements
C. Where auditor has a financial interest in the client
D. Where there is a significant amount of overdue fees
ACD
The audit firm has been asked to underwrite its clients shares in relation to a proposed flotation
A. Self review
B. Advocacy
The board of directors does not contain a qualified finance professional and the company has asked the audit firm to prepare the financial statements
C. Self review
D. Advocacy
BC
Talland is the external auditor of Huntley, a retailer. The managing partner has been called to a meeting with the board of directors of Huntley. At that meeting the firm has been asked if it can provide the following non audit service.
Huntley would like to implement a new sales system. They have asked talland to take in a consultancy project whereby the firm will evaluate several possible systems, advise on which system should be selected and oversee the installation of the new systems
A. Advocacy and management
B. Management and familiarity
C. Management and self review
D. Advocacy and familiarly
C
Bouldry has been asked to carry out a valuation service. The valuation is material to the financial statements but does not involve a significant degree of subjectivity
A. Accept with safeguards
B. No safeguards possible
Bodley been asked to provide accounts preparation assistance.
C. Accept
D. No safeguards
Been asked to design and implement an IT system which will significantly impact on the accounting system.
E. Accept
F. No safeguards
ACF
Titania will require helma to prepare the financial statements
A. Do not accept
B. Accept with safeguards
C. Accept with no safeguards
Puck whose financial director is the brother of one of the partners at the assurance firm
D. Do not accept
E. Accept with safeguards
F. Accept with no safeguards
AE
Autumn hasn’t paid audit fees for previous audit
A. Continue to act but don’t issue current year audit report until overdue fees are paid
B. Continue to act and charge interest on overdue amounts
C. Carry out audit planning
D. Consider whether necessary to resign from engagement
D
Finance director has a very strong personality and insists in the audit team working in her office
A. Familiarity
B. Intimidation
C. Management
The audit team and the management team at the client have remained unchanged for several years
D. Familiarity
E. Intimidation
F. Management
BD
Which two are the principe reasons why confidentially is so important to accountants
A. It is a fundamental principle of all the major ethical codes
B. Failure to keep info confidential reflects badly on the accountant
C. Accountant needs their clients to be comfortable to make full disclosure of company affairs to them
D. It means the accountants can work for competitors
AC
Which three should an accountant take care not to do, in order to safeguard confidentiality
A. Discuss client matters with third parties
B. Discuss client matters with colleagues in public places
C. Discuss client matters with colleagues in non public places
D. Leave working papers in the car
ABD
Which three are situations where here is a legal duty to disclose confidential information
A. When a fraud has taken place, it should be reported to the police
B. When terrorist activity has taken place, it should be reported to the police
C. When regulatory breaches have taken place at a charity, it should be reported to the charities commission
D. When money laundering is suspected, it should be reported to the national crime agency
BCD
If an assurance provider suspects that money laundering is taking place which should be reported to
A. Police
B. Department of trade and industry
C. Board of directors
D. Firms money laundering nominates officer
D
Where a conflict of interest exists between two audit clients, the auditor must cease to vat for one party
A. True
B. False
If the effects of conflict can be mitigated by safeguards these should be recorded
C. True
D. False
Where adequate safeguards are available the parties involved do not need to be informed of the conflict of interest
E. True
F. False
BCF
Situations may confidential info in respect of a clients only be disclosed if the permission of the client has first been granted
A. As a defence in a negligence claim
B. In order to avoid giving an incorrect auditors report to another client
C. Where money laundering is suspected
D. Where terrorsim is suspected
B
Whip three are objectives of audit planning
A. Determine scope of engagement
B. Ensure appropriate attention is devoted to the important areas of the audit
C. To identify potential problems and resolve them on a timely basis
D. To assign work to members of the audit team
BCD
Which three must be used in understanding the entity and its environment
A. Inquires of management and other appropriate individuals within the entity
B. Inquires of third parties
C. Analytical procedures
D. Observation and inspection
ACD
Which three constitute analytical procedures
A. Consideration of comparable information for prior periods
B. Consideration of relationships between elements of financial information that are expected to conform to a predicted pattern
C. Consideration of whether a balance has been calculated correctly
D. Consideration of similar industry information
ABD
Which three would be included in the overall audit strategy
A. Details of economic factors and industry conditions
B. The result of initial analytical procedures
C. Confirmation of managements responsibility for the financial statements
D. Identification of specific audit risks
ABD
Who’s two would be used as part of the risk assessment to understand the entity and its environment
A. Industry, regulatory and other external factors
B. How inherent risk factors make assertions susceptible to misstatement
C. The results of tests of details
D. The results of a review of events after the date of the financial statements
AD
Gross profit margin has decreased, why
A. Unusually high sales at the end of the year resulted in a lower level of closing inventory as compared to the previous year
B. Increased competition resulted in sales prices being cut
C. Bank overdraft resulted in higher interest expense than in previous years
D. There was a significant charge in the mix of products sold
BD
Materiality depends on the monetary amount if an item
A. True
B. False
Materiality may depend on either the nature of an item or it’s monetary amount
C. True
D. False
Materiality is a matter of professional judgement
E. True
F. False
BCE
Quick ratio fallen why
A. Allowance for receivables has been reduced
B. Credit control has been poor
C. Entity has purchased a property for cash
D. Inventory levels have fallen
C
Which is the most appropriate definition of going concern
A. Business has been trading for many years
B. Company will prepare their financial statements on a going concern basis
C. Business will continue to trade for the foreseeable future (at least 12 months)
D. Business will continue to trade for foreseeable future (at least 6 months)
C
Which is the most appropriate audit procedure for determining whether or not the company is a going concern
A. Review financial statements for the previous year
B. Discuss past performance with management
C. Review last years budget to see if it’s been achieved
D. Review cash flow and profit forecast for the next 12 months
D
Under which circumstance should the break up basis of accounting be used
A. Company has closed an operating division, or there has been a major change in management
B. Business has ceased to trade or there has been a major change in management
C. Company has ceased to trade or gone into liquidation
D. Company has closed an operating division
C
Auditors do not believe there are any material uncertainties regarding concern
A. Qualified opinion due to material misstatement
B. Disclaimer of opinion
C. Unmodified opinion (no additional communication)
D. Unmodified opinion with an emphasis of matter paragraph
C
Auditors disagree with the treatment of financial statements as going concern how should it be treated
A. Adverse opinion
B. Disclaimer of opinion
C. Unmodified opinion (no additional communication)
D. Unmodified opinion with an emphasis of matter paragraph
A
Financial statements prepared on break up basis and disclosed the basis of preparation in notates. Auditor agrees
A. Disclaimer of opinion
B. Unmodified opinion with a material uncertainty related to going concern paragraph
C. Unmodified opinion (no additional communication)
D. Unmodified opinion with an emphasis of matter paragraph
D
Financial statements prepared as going concern with detailed note highlighting material going concern issue, auditor agrees
A. Disclaimer of opinion
B. Unmodified with an emphasis of matter paragraph
C. Unmodified opinion (no additional communication)
D. Unmodified opinion with a material uncertainty related to going concern paragraph
D
Financial statement as going concern with no disclosure of material uncertainty. Auditor believes disclosure is required.
A. Qualified opinion due to material misstatement
B. Disclaimer of opinion
C. Unmodified opinion (no additional communication)
D. Unmodified opinion with an emphasis of matter paragraph
A
Which three are risks associated with sales system
A. Orders may be taken from customers who are not able to pay
B. Goods may be despatched but not invoiced
C. Full credit period offered might not be taken
D. Money might be received at the premises but not banked
ABD
Which two controls best mitigate the risk that customers might not be able to pay
A. Authorisation of credit terms to customers
B. Obtaining customers signatures on delivery documents
C. Regular preparation of trade receivables statements
D. Checking the ageing of the current receivables ledger balance before accepting orders
AD
In the sales system the following duties should be segregated
Recording sales and access to remittances from customers
A. True
B. False
Credit control and invoicing
C. True
D. False
AC
Overdue accounts are not followed up
A. Invoices sales might not be properly recorded
B. Credit notes might not be properly recorded
C. Debts might be included on the receivables ledger that are not collectable
Invoices are not in numerical sequence
D. Invoiced sales might not be properly recorded
E. Credit notes might not be properly recorded
F. Debts might be included on the recievables ledger that are not collectable
CD
Which two are risks associated with the sales system
A. Orders may be taken from customers who are not able to pay
B. Invoices may be cancelled by valid credit notes
C. Goods may be received but not invoiced
D. Sales might be recorded in the wrong customer accounts
AD
Despatch document is not sequentially pre numbered
A. Sales may be made to customers who cannot pay
B. Invoices may not be raised for all goods dispatched
C. Customers may not pay promptly
Customers are not required to evidence receipt of goods
D. Sales may be made to,customers who cannot pay
E. Invoices may not be raised for all goods dispatched
F. Customers man not pay promptly
BF
Which two are objectives of the sales ordering part of the sales system,
A. Sales are only made to creditworthy customers
B. Goods are correctly invoiced
C. Cut off is correct
D. Orders can be fulfilled
AD
Which one is a control objective relating to the sales system
A. Credit notes are only issued for valid reasons
B. Sales invoices are checked to goods despatched records by accounts staff
C. Customer accounts are scrutinised to see if credit limits have been observed
D. Orders are made only to authorise suppliers
A
Which control provides the most positive assurance regarding the completeness of the sales figure in the financial statements of a manufacturing company
A. Segregation of duties between the preparation of goods despatched records and the preparation of the sales invoice
B. The issue of pre numbered sales invoices for every sales transaction and internal checking for completing of processing
C. The use of a pre numbered goods despatched record for every sales transaction and internal checking for completeness of processing
D. Authorisation of all sales invoices by the sales manager before processing
C
Which population should the auditor start from when testing for the completeness of reported sales of a manufacturing company
A. Sales receipts
B. Sales invoices
C. Goods dispatch records
D. Receipts from customers
C
Which is a control objective relating to the revenue system
A. Credit notes are only issued for valid reasons
B. Sales invoices are checked to goods despatched notes by accounts staff
C. Customer accounts are scrutinised to determine whether credit limits have been observed
D. Orders are made only from authorised suppliers
A
Which two are risks directly associated with recording in the revenue system
A. Sales are included in the wrong customer accounts
B. Goods are recorded incorrectly
C. Goods may be despatched but nit invoiced for
D. Credit notes might not be properly recorded
AD
Monthly management accounts are compared to budgets and differences investigated
A. Authorisation and approval
B. Reconciliations
C. Verifications
Numerical sequence checks are undertaken on goods received records
D. Authorisation and approval
E. Reconciliation
F. Physical or logical
CF
Goods inwards are not checked
A. Accepting inferior quality goods
B. False invoices could be paid
C. Services received are not accurately recorded
Invoices are not checked to original orders
D. Accepting inferior quality goods
E. False invoices could be paid
F. Services received are not accurately recorded
AE
Which two internal controls are most likely to prevent services being used for the private purpose of employees
A. Purchase orders are processed by the buying department following authorisation by the production director
B. Purchase requisitions must be signed by two team members for any given project
C. Purchase orders should only be placed with authorised contractors
D. Purchase invoices are matched to authorised purchase orders
AB
Purchases have been made from suppliers nit included on the approved list
A. Authorisation and approval
B. Physical or logical controls
There have been increasing levels of theft from the main distribution centre
C. Authorisation and approval
D. Physical controls
AD
Purchase of goods from unauthorised suppliers
A. Payment to fictitious suppliers
B. Purchase of inferior goods
C. Prompt payment discounts not obtained
Purchase ledger clerks permitted to amend standing data on the payables master file
D. Payment to fictitious suppliers
E. Purchase of inferior goods
F. Prompt payment discounts not obtained
BD
Which three are control activities relating to purchase system
A. All orders are authorised by a senior staff member
B. Blank order forms are kept in a secure location with restricted access
C. All goods and services received are accurately recorded
D. Order forms are sequentially pre numbered
ABD
Which control would best ensure that employees are only paid for work they perform
A. Temporary staff records should be maintained for each member of temporary staff
B. Should complete work schedules authorised by supervisor
C. Temporary staff pay should be authorised by Human Resources manager
D. Should be paid by direct transfers to their bank accounts
B
Which three controls would ensure that correct payments are made to employers
A. Payroll should be checked back to individual employee personnel records
B. Payroll tolls should be compared to adjusted budgets on a monthly basis
C. Total tax deductions should be reconciled with tax returns
D. BACS transfer lists should be authorised by the head of personnel
ABD
Payroll should be checked back to individual employee personnel records on a regular basis
A. True
B. False
Leavers and joiners should be authorised by a senior member of staff
C. True
D. False
Re performance of calculations is unnecessary wheee the payroll sheet, is computerised
E. True
F. False
ACF
Which two control procedures will reduce the risk of unauthorised disclosure of payroll data
A. Exception reporting of high amounts of net pay
B. Access controls
C. Back up procedures
D. Encryption procedures
E. Independent review of payroll
BD
Details of wages are not regularly checked to the personnel file
A. Pay might not be recorded correctly in the general ledger
B. The company may pay employees who have left
Regular reconciliations of the payroll to timesheets are not performed
C. Pay might not be recorded correctly in the general ledger
D. The various elements of pay might not be calculated correctly
Regular reconciliations of the wages and salaries control account are not performed
E. Payments might be made incorrectly
F. The various element of pay might not be calculated correctly
BDE
The payroll mated file should contain details of the employees cumulative statutory deductions to date
A. True
B. False
Reviewing changes to statutory deductions helps to ensure that changes to the calculation of gross pay are processed correctly
C. True
D. False
Reviewing wages paid against budgets and timesheets helps to ensure that employees are only paid for the work that they have done
E. True
F. False
BDE
Which two controls reduce the risk that the different elements of pay might not be recorded correctly in the payroll
A. One for checking of payroll details back to independently maintained personnel records
B. Segregation of duties throughout the payroll department
C. Reconciliation of total pay and deductions between one pay day and the next
D. Encryption of data
AC
Which is not a category of a quality management system
A. Engagement resources
B. Engagement performance
C. Engagement quality review
D. Monitoring and remediation
C
The planning meeting of audit team members is an example of which element of quality management
A. Direction
B. Consultation
C. Review
D. Supervision
A
Which statement regarding quality management is false
A. Where deficiencies in quality management procedures are identified the from should take action (additional training)
B. The firm only needs to act on deficiencies identified by an external quality review
C. Firm should monitor its quality management procedures and police’s at least annually
D. Every person within the audit firm has a responsibility to ensure quality management is adhered to
B
Which should the internal auditor not be involved
A. Identifying deficiencies in internal controls
B. Providing recommendations to management on how to overcome the deficiencies identified
C. Implementing the new controls recommended
D. Evaluating the effectiveness of the new controls implemented
C
Which is not part of internal auditors role
A. Risk identification and monitoring
B. Expression of opinion to the shareholders on whether the annual financial statements give a true and fair view
C. Fraud investigations
D. Assessing compliance with laws and regulations
B
Internal audit reports must be produced in a standardised format as set out by the financial reporting framework
A. True
B. False
B
Which is not a valid reason to outsource internal audit function
A. External audit will be more efficient as the external audit staff will have a good understanding of the company if they are also involved with the internal audit work
B. Outsourcing may be more cost effective as compared with employing staff and providing training and other employment benefits
C. A professional firm is more experiences and able to provide better recommendations for improvement
D. Greater independence
A
Internal audit reports are issued to shareholders
A. True
B. False
B
There is no legal requirement for companies to have an internal audit department
A. True
B. False
A
The presence of an internal audit function may act as a deterrent for fraud
A. True
B. False
A
Which two are correct
A. Inspection of assets confirms rights and obligations
B. Inspection of a purchase invoice confirms the cost of inventory
C. Observation gives strong ongoing evidence of the matter being observed
D. Inquirey of third parties gives better evidence than inquires of entity insiders
BD
In which three situations could audit software be used appropriately
A. When checking calculations on a selection of invoices
B. When extracting a sample of invoices over a certain value
C. When extracting all invoices to specific customers
D. When testing controls over invoice processing
ABC
Which three statements correct. When using analytical procedures, assurance providers should
A. Consider whether the information they might require will be available
B. Consider the knowledge gained during previous assurance engagement
C. Consider the source of the info and whether it is reliable
D. Not use info that has been internally generated at the entity
ABC
Which is the most appropriate for verifying the interest accrued in borrowings
A. Confirming the interest rate with the lender
B. Vouching to the interest paid
C. Testing internal controls over cash payments
D. Recalculating the interest accrued on the basis of outstanding amount, interest rate and period to which it relates
D
Who’s two are correct
A. When testing for overstatement, the assurance provider will test items from the accounting records to the supporting documents
B. When testing for understatement the assurance provider will test items from the accounting records to the supporting documents
C. When testing for overstatement the assurance provider will select items from outside the accounting records and trace to the records
D. When testing for understatement the assurance provider will select items from outside the accounting records and trace to the records
AD
Which two are factors that an surname providor should take into account when determining the sample size for a test of details
A. The time available to complete the test
B. The skill of the team member assigned to carry out the test
C. A decrease in the assurance providers assessment of the risk of material misstatement
D. An increase in the level of expected misstatements
CD
The assurance providor is using statistical sampling. Which three method’s would be most appropriate to use to select a sample of accounts receivable
A. Random selection
B. Systematic selection
C. Haphazard selection
D. Sequence selection
E. Monetary unit selection
ABE
Assurance providor writes to a sample of customers asking them to inform him of the balance they owe the company at the year end
A. Inspection
B. Observation.
C. Confirmation
Assurance providor looks at a share certificate to confirm that the company has an investment in company a
D. Inspection
E. Observation
F. Confirmation
Assurance providor attends the inventory count and ensures that it is being carried out in accordance with the issued instructions
G. Inspection
H. Observation
I. Confirmation
CDH
CAATs can be used to perform the assurance procedure of re performance
A. True
B. False
Test data can be used to ensure that controls in the clients system are operating as the assurance provider expects them to
C. True
D. False
Audit software makes use of the clients specialised software to run audit procedures
E. True
F. False
ACF
For audit engagement which is the least persuasive method of gathering evidence
A. Inspection of suppliers invoice
B. Reperformance of a clients supplier statement reconciliations
C. Reperformance of a depreciation calculation
D. Inspection of a sales invoice
D
Select the impact on sample size
An increase in tolerable misstatement
A. Increase
B. Decrease
C. No effect
An increase in number of invoices in the population
D. Increase
E. Decrease
F. No effect
A decades in auditors required confidence level
G. Increase
H. Decrease
I. No effect
BFH
Which two would reduce reliability of results of analytical procedures
A. Detailed info is available analysed by department
B. Budget figures in the past have proved to be highly optimistic
C. Reliable industry date are available
D. Significant deficiencies in the internal control system have been identified in the past
BD
Higher than expected number of misstatements. Which three steps would be an appropriate response to this
A. Investigate the nature and cause of the misstatements
B. Consider the effect of the misstatements on other parts of the audit
C. Estimate th probable overall misstatement by extrapolating the results
D. Increase the tolerable misstatement
ABC
Test data is a type of substantive procedure
A. True
B. False
Test data can include real date and dummy data
C. True
D. False
Test data can be used to help in the calculation of rations
E. True
F. False
BCF
