MCQs

Question 1

what should be included in audit engagement letter?

Answer 1

objective and scope of audit

managements responsibilities

Question 2

when should an auditor make a voluntary disclosure?

Answer 2

where its in publics best interest to disclose

where its made to non governmental bodies

Question 3

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

Answer 3

a receivables circularisation and review of post yr end cash receipts

Question 4

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

Answer 4

observe whether client staff follow inventory count

inspect and review managements inventory count

Question 5

which of the following isnt an advantage of outsourcing internal audit

Answer 5

reduction in costs

Question 6

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

Answer 6

they may contain a large number of irrelevant controls

Question 7

companies and internal control

Answer 7

companies arent required to establish an internal audit function

Question 8

what is observation

Answer 8

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

Question 9

what isnt a limitation of inter al control systems

Answer 9

insufficient segregation of duties

Question 10

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

Answer 10

Can assist in identifying the risks of material misstatement

And assist in identifying unusual transactions and events

Question 11

what provides evidence over the completeness of NCAs

Answer 11

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

Question 12

substantive audit procedure for wages and salaries

Answer 12

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

Question 13

internal auditors scope of work should be

Answer 13

determined by those charged with governance

Question 14

what shows all goods despatched are completely and accurately invoiced?

Answer 14

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

Question 15

levels of assurance

Answer 15

negative, reasonable, limites

Question 16

definition of audit

Answer 16

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

Question 17

appointment of auditors?

Answer 17

appointed by members (shareholders) every year

Question 18

what right does a statutory auditor not have?

Answer 18

to attend board meetings

Question 19

who sets standards on auditing

Answer 19

International Auditing and Assurance Standard Board

Question 20

who sets the UK corporate governance code

Answer 20

IASB

Question 21

who sets ISA?

Answer 21

IAASB

Question 22

5 principles of ACCA?

Answer 22

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

Question 23

audit opinion and audit report

Answer 23

audit opinion is part of the audit report

Question 24

what does an auditor not have to report on?

Answer 24

directors report

Question 25

what regarding materiality is true?

Answer 25

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

Question 26

what does materiality depend on?

Answer 26

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

Question 27

a matter is material if it

Answer 27

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

Question 28

the other matters paragraph in an audit report

Answer 28

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

Question 29

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

Answer 29

fee, reputation, ethical threats and resources

Question 30

a letter of engagement is

Answer 30

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

Question 31

new auditor and existing auditor

Answer 31

must have the clients permission to communicate with eachother

Question 32

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

Answer 32

decline the appointment

Question 33

benefits of adequate audit planning

Answer 33

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

Question 34

whats interim and final audit

Answer 34

interim during the year | final after year end

Question 35

material misstatement prior to the audit dependant on?

Answer 35

inherent risk and control risk

Question 36

an audit can change these risks

Answer 36

audit risk and detection risks

Question 37

audit risk =

Answer 37

inherent, control and detection

Question 38

audit procedures performed by the auditor will reduce

Answer 38

detection risk only

Question 39

what is inspection

Answer 39

examination of documents, assets, etc

Question 40

what is observation

Answer 40

watching an activity or procedure whilst its being carried out

Question 41

what is recalculation

Answer 41

a check of arithmetic accuracy

Question 42

what is enquiry

Answer 42

request for a verification of information which provides confirmation

Question 43

appropriateness of audit evidence concerns

Answer 43

the relevance and reliability of audit evidence

Question 44

analytical procedures are not

Answer 44

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

Question 45

haphazard selection is

Answer 45

innapropriate for statistical sampling

Question 46

what type of evidence is the most reliable?

Answer 46

written or external

Question 47

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

Answer 47

appropriate and sufficient

Question 48

who should significant deficiencies in internal control be reported to?

Answer 48

those charged with governance

Question 49

how would you ensure all sales to customers are invoiced?

Answer 49

by matching good despatch notes to sale invoices

Question 50

how would you prevent suppliers invoices being paid twice?

Answer 50

cancelling an invoice once its paid

Question 51

whats the most effective control over overtime payments?

Answer 51

approval of employees overtime claims by their managers

Question 52

what would help safeguard NCAs

Answer 52

regular physical inspection against a NCA register

Question 53

what is confirmation request for receivables balance?

Answer 53

sent by the auditor requesting replies directly to the auditor?

Question 54

what is stratification?

Answer 54

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

Question 55

a way to assess the occurrence of sales would be

Answer 55

audit procedure on credit notes issued after year end

Question 56

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

Answer 56

cash payments and purchase invoices

Question 57

omission of accrual effects the financial statements by

Answer 57

overstating profits and understating expenses

Question 58

rule for external confirmation is

Answer 58

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

Question 59

purpose of reviewing repair and maintenance accounts of NCA

Answer 59

identifying amounts to be written off or capitalised

Question 60

main purpose of audit documentation

Answer 60

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

Question 61

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

Answer 61

the engagement partners

Question 62

engagement quality control review

Answer 62

objective evaluation of the significant judgements made by the engagement team

Question 63

whens an engagement quality control review performed?

Answer 63

on or before the date of the auditors report

Question 64

whats a characteristic of any fraud

Answer 64

its intentional

Question 65

who's responsible for the prevention and detection of fraud

Answer 65

those in charge of governance and management

Question 66

to whom must the auditor report immaterial fraud

Answer 66

those charged with governance

Question 67

who's responsible for correcting material misstatements?

Answer 67

management

Question 68

whats a characteristic of a non adjusting events

Answer 68

comes after the reporting date

Question 69

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

Answer 69

provide for the account | provision for the liability

Question 70

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

Answer 70

disclose event in notes

Question 71

whats a representation letter?

Answer 71

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

Question 72

an auditor might use this person work

Answer 72

property valuer

Question 73

auditors can use the work of an internal audit function if

Answer 73

its objective, competent and quality controls are met

Question 74

inherent limitation of internal control systems

Answer 74

employees colluding, human error