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1 Audit > MCQs > Flashcards

MCQs Flashcards

1
Q

what should be included in audit engagement letter?

A

objective and scope of audit

managements responsibilities

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2
Q

when should an auditor make a voluntary disclosure?

A

where its in publics best interest to disclose

where its made to non governmental bodies

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3
Q

what two procedures provide evidence over the existence of trade receivables?

A

a receivables circularisation and review of post yr end cash receipts

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4
Q

what tests of control should an auditor perform when testing inventory?

A

observe whether client staff follow inventory count

inspect and review managements inventory count

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5
Q

which of the following isnt an advantage of outsourcing internal audit

A

reduction in costs

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6
Q

which is a disadvantage of recording accounting and control systems using questionnaires

A

they may contain a large number of irrelevant controls

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7
Q

companies and internal control

A

companies arent required to establish an internal audit function

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8
Q

what is observation

A

consists of looking at a procedure or process being performed by others

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9
Q

what isnt a limitation of inter al control systems

A

insufficient segregation of duties

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10
Q

regarding the use of analytical procedures in the planning stage of an audit

A

Can assist in identifying the risks of material misstatement

And assist in identifying unusual transactions and events

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11
Q

what provides evidence over the completeness of NCAs

A

reviewing the repairs and maintenance expense account to identify any items of capital nature

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12
Q

substantive audit procedure for wages and salaries

A

recalculate a sample of payroll deductions such as employment taxes to confirm accuracy

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13
Q

internal auditors scope of work should be

A

determined by those charged with governance

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14
Q

what shows all goods despatched are completely and accurately invoiced?

A

good despatched notes are matched to sales invoices and regular review of unfilled orders

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15
Q

levels of assurance

A

negative, reasonable, limites

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16
Q

definition of audit

A

independent examination of and expression of opinion on the financial statements of an entity by a duly appointed auditor in pursuit of that appointment

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17
Q

appointment of auditors?

A

appointed by members (shareholders) every year

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18
Q

what right does a statutory auditor not have?

A

to attend board meetings

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19
Q

who sets standards on auditing

A

International Auditing and Assurance Standard Board

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20
Q

who sets the UK corporate governance code

A

IASB

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21
Q

who sets ISA?

A

IAASB

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22
Q

5 principles of ACCA?

A

integrity, objectivity, PC, due care, confidentiality&professional behaviour

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23
Q

audit opinion and audit report

A

audit opinion is part of the audit report

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24
Q

what does an auditor not have to report on?

A

directors report

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25
Q

what regarding materiality is true?

A

performance materiality is set at a lower level than materiality for the financial statements

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26
Q

what does materiality depend on?

A

nature of errors (qualitative) and size of errors (quantitative)

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27
Q

a matter is material if it

A

would reasonable be expected to influence the economic decision of a users take on the basis of financial statements

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28
Q

the other matters paragraph in an audit report

A

may be used to refer to info in the directors report which conflicts the financial statements

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29
Q

what should be considered before accepting an appointment as an auditor?

A

fee, reputation, ethical threats and resources

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30
Q

a letter of engagement is

A

sent by the auditor to record the agreed T’s and C’s of the audit engagement

31
Q

new auditor and existing auditor

A

must have the clients permission to communicate with eachother

32
Q

what is the appropriate response if a client doesn’t give permission to a new auditor to communicate with the previous auditor

A

decline the appointment

33
Q

benefits of adequate audit planning

A

give appropriate attention to important areas and facilitate review of audit work

34
Q

whats interim and final audit

A

interim during the year

final after year end

35
Q

material misstatement prior to the audit dependant on?

A

inherent risk and control risk

36
Q

an audit can change these risks

A

audit risk and detection risks

37
Q

audit risk =

A

inherent, control and detection

38
Q

audit procedures performed by the auditor will reduce

A

detection risk only

39
Q

what is inspection

A

examination of documents, assets, etc

40
Q

what is observation

A

watching an activity or procedure whilst its being carried out

41
Q

what is recalculation

A

a check of arithmetic accuracy

42
Q

what is enquiry

A

request for a verification of information which provides confirmation

43
Q

appropriateness of audit evidence concerns

A

the relevance and reliability of audit evidence

44
Q

analytical procedures are not

A

a test of controls as they’re substantive and used to obtain evidence

45
Q

haphazard selection is

A

innapropriate for statistical sampling

46
Q

what type of evidence is the most reliable?

A

written or external

47
Q

what type of evidence is used to base an audit opinion on?

A

appropriate and sufficient

48
Q

who should significant deficiencies in internal control be reported to?

A

those charged with governance

49
Q

how would you ensure all sales to customers are invoiced?

A

by matching good despatch notes to sale invoices

50
Q

how would you prevent suppliers invoices being paid twice?

A

cancelling an invoice once its paid

51
Q

whats the most effective control over overtime payments?

A

approval of employees overtime claims by their managers

52
Q

what would help safeguard NCAs

A

regular physical inspection against a NCA register

53
Q

what is confirmation request for receivables balance?

A

sent by the auditor requesting replies directly to the auditor?

54
Q

what is stratification?

A

process of dividing a population into sub population in which it shares similar characteristics

55
Q

a way to assess the occurrence of sales would be

A

audit procedure on credit notes issued after year end

56
Q

what provides evidence of the completeness of liabilities at the year end

A

cash payments and purchase invoices

57
Q

omission of accrual effects the financial statements by

A

overstating profits and understating expenses

58
Q

rule for external confirmation is

A

request must be from the auditor with the reply directed back towards the auditor

59
Q

purpose of reviewing repair and maintenance accounts of NCA

A

identifying amounts to be written off or capitalised

60
Q

main purpose of audit documentation

A

provide evidence that the overall objectives of the audit have been met

61
Q

who’s responsible for the performance of an audit on financial statements

A

the engagement partners

62
Q

engagement quality control review

A

objective evaluation of the significant judgements made by the engagement team

63
Q

whens an engagement quality control review performed?

A

on or before the date of the auditors report

64
Q

whats a characteristic of any fraud

A

its intentional

65
Q

who’s responsible for the prevention and detection of fraud

A

those in charge of governance and management

66
Q

to whom must the auditor report immaterial fraud

A

those charged with governance

67
Q

who’s responsible for correcting material misstatements?

A

management

68
Q

whats a characteristic of a non adjusting events

A

comes after the reporting date

69
Q

treatment of a probable event occurring before period ends giving risk to an outflow of resources

A

provide for the account

provision for the liability

70
Q

probable event occurring after period end giving rise to material outflow of resources

A

disclose event in notes

71
Q

whats a representation letter?

A

a written statement signed by management to confirm certain matters or support evidence

72
Q

an auditor might use this person work

A

property valuer

73
Q

auditors can use the work of an internal audit function if

A

its objective, competent and quality controls are met

74
Q

inherent limitation of internal control systems

A

employees colluding, human error

1 Audit (5 decks)

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