MCQ's Flashcards
what are the 5 compnenets of an audit report
the independent auditors report
addressee
- shareholders
auditors opinions
modified etc
Basis of opinion section Reasons for qualification
key matters section
what is a good report opnion
Unqualified and un modified opinion
what is a good audit opinion
unmodified unqualified
what are the different audit procedures
inquiry
observation
inspection
re-performance
recalculation
third part confirmation
analytical procedures - calculations of ratios
substantive procedures - test of details, expensive
universal audit procedure
review the minutes of meeting to confirm purchase/sales
inspect the purchase/sale agreement
inquire from management the specific accounting treatment of transaction
agree the amount received or paid with the bank statement
recalculate the deprecitation etc
obtain 3rd party confirmation such as supplier etc
review the presentation and disclosures in FD
what should be considered before agreeing an engagement
professional clearance can be obtained from previous auditor
review your firm have competence, experience and staff resources to complete engagement
Access any ethical and professional issues e.g. self-interest, conflict of interest
types of internal controls
segregation of duties
authorisation control
physical control - security tag
IT control
Supervisory control
Review control
Reconciliation
sequential numbering of invoices
weakness of segregation of duties leads to
one person doing many things high risk of material misstatement and fraud.
what is the purpose of the basis for opinion paragraph in the auditors report, which contains unmodified opinion
to confirm the audit has been conducted in accordance with ISAs and ethical requirements
what is the correct orer of the elements to be included in the auditors report
addressee
opinion
auditors responsibilities
date
if a disclaimer of opinion is to be issued the key audit matters should
not be included in the auditors report as to do so may suggest other aspects of the financial statements are reliable
what is the primary reason for maintaining an inventory count timetable?
to ensure all areas are counted during the year
what does perpetual inventory system mean
all material must be counted at least 1
what is not a benefit of auditing
sampling is used
what is an explanation for integrity
auditor should be straightforward and honest in all professional and business relationships
what are the different levels of assurance
reasonable
limited
what are the 5elements of an assurance engagement
3 party relationship
appropriate subject matter
suitable criteria
appropriate evidence
conclusion
the auditor will express an opinion as to whether the financial statements give a
true and fair view
in order to form an audit opnion the auditor has to
obtain sufficent and appropriate evidence
what happens if the financial statement is found contain material misstatement
negative audit opinion will be given
what are an examples of expectation gap
the independent auditors report confirms the financial statements are accurate
an unmodified opinion means the company is a going concern
the auditor tests all transations
what is going concern
accounting term for a company that is financially stable enough to meet its obligations and continue its business for the foreseeable future
if there is a material misstatement in the financial statement but not persuasive what type pf report is produced
qualified opinion except for ….
if there is material misstatement and persuasive in the financial statement what type of report is produced §
adverse negative
if the type of matter found is limitation on scope of audit work, with material misstatement and not persuasive what type of report will be produced
qualified opinion except for ….
if the type of matter found is limitation on scope of audit work, with material misstatement and persuasive the report produced will be
disclaimer of opinion
what response is given to the audit risk of 1 month given to produce audit
hire more staff to complete audit
what response is given if 1/3 of machinery is received/ so assests overstated in value
check the existence of order, make a provision and put in auditory report
what is the response for the audit risk of a patent, over/under valued
intangible asset so needs to be amortised
what is the response for the audit risk of payroll being outsourced/ risk of confidentiality
test their internal control and follow procedures
what is the response for the audit risk of redundancies and legal issues
hire an expert (layer)
what is the response to the audit risk of going concern and risk of over trading
check financial statements and bored minutes
what is the response to the audit risk of revaluing land and building - IAS 16
revaluation needs to be done by an expert
describe the steps an auditor should perform in undertaking a positive receivable circularisation for a company
check materiality
contact customers
match payments to bank statements
check bored minutes
select samples from receivables
circularisation letters should be prepared on the companies letter head paper
what are the substantive procedures
review after date cash receipts
inspect aged receivables report
review bank confirmations and loan agreements fir evidence of receivables
select sample of goods despatched notes from before yr end
list 7 deficiencies in systems
-director authorising payments - needs to delegate/segregate of duties due to risk of fraud
-purchase ledger doesn’t apply controls - risk of error and segregation of duties
-reconciliation of savings account every two months - risk of fraud error, should be done more often
-delayed payments to suppliers leads to risk of going concern as suggest financial issues- pay them sooner
-orders not numbered - can lead to orders being lost, under/overstatement of assets
-process of selecting suppliers is weak due to only going to who can dispatch soonest, research suppliers, find best suited, check price and quality.
