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AA Question Rote > Section A Rote (2) > Flashcards

Section A Rote (2) Flashcards

1
Q

What should annual report regarding work of audit committee include? (significant)

A

Significant issues relating to FSs

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2
Q

What should annual report regarding work of audit committee include? (Effectiveness external process)

A

Assess independence and effectiveness of external audit process

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3
Q

What should annual report regarding work of audit committee include? (independence)

A

How auditor independence and objectivity are safeguarded, if external auditor provides non-audit services

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4
Q

How should NED renumeration be trated?

A

A set amount based on time committed

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5
Q

Which department does IA department report to?

A

The audit committee

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6
Q

What is a value for money audit for?

A

Assess economy, effectiveness and efficiency

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7
Q

What should IA department not do? (design)

A

Design and implementing internal control procedures

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8
Q

What should IA department not do? (transactions)

A

Authorising transactions and performing reconciliations

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9
Q

How long is cooling off period for an engagement quality reviewer for a listed company?

A

5 years

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10
Q

Is it a rule-book or conceptual framework apporach for easy to know what is allowed or not allowed?

A

Rule book approach

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11
Q

What is the ethical issue with 40% of fee for last year’s audit still outstanding?

A

Self-interest

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12
Q

When there are large outstanding fees?

A

Auditor’s report should not be issued until fees have been paid

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13
Q

Should a 40% disocunt be rejected?

A

Yes, as it is not a trivial amount.

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14
Q

Does preparing tax returns create a self-review threat?

A

No

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15
Q

Does provision of tax advice create a self-review threat?

A

YES

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16
Q

Should all employees sign a confidentialty agreement?

A

NO, only audit teams of each client

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17
Q

When is partner rotation required for listed companies>

A

Only when one has been in place seven years

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18
Q

When can payroll and bookkeeping services be provided to a non-listed audit client? (Routine)

A

If they are routine and mechancial in nature

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19
Q

When is confidentality not an issue for an audit of a listed company?

A

Info relates to same client and is not being provided to any other parties

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20
Q

What threat does a contingent fee create?

A

A self-interest threat

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21
Q

What is likely a public interest matter

A

When a global company and issue r elates to environmental pollution

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22
Q

What should be done on a board when executive directors are paid a fixed salary which increases annualy in line with inflation?

A

Introduce share options to align renumeration of executive directors with long-term success of the company

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23
Q

When is independence on the board compromised from a director? (Time served)

A

Served on the board for more than 9 years

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24
Q

Should workforce renumeration be taken into consideration when setting renumeration of executive directors?

A

TRUE

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25
Q

Should company withhold bonuses and share awards whose performance is not acceptable?

A

TRUE

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26
Q

Example of advocacy threat and tax services?

A

Tax services whereby company would liaise with tax authority on another company’s behalf

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27
Q

What doesn’t address a self-interest threat from fee levels? (Teams)

A

Using separate teams

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28
Q

When there is a legal requirement to report a bad transaction?

A

Overrides disclosure done by law

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29
Q

Which partner should take over an audit?

A

No ongoing relationship with company

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30
Q

Should a partner of a firm serve as a director of an audit client?

A

FUCK NO

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31
Q

Methods taken by management for internal audit services (design)

A

Designing and maintaining internal control systems

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32
Q

Methods taken by management for internal audit services (recommendations)

A

Determine which recommendations should take priority and implemented

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33
Q

Methods taken by management for internal audit services (setting scope internal)

A

Setting scope of internal audit work to be carried out

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34
Q

How should matters affecting independence of listed client be disclosed

A

Must be disclosed to TWCG of a listed client. Also request pre-issuance review

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35
Q

When fees from a non-listed client represent 30% of firm’s total fees for five consecutive years? (independence)

A

Independence is threatened

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36
Q

Example of a self-review threat for an auditor

A

Auditor responsible for auditing areas where they were responsible for

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37
Q

When should audit dpeartment resign from an engagement?

A

If there is no alternative engagement partner assigned to audit

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38
Q

Most appropriate reason for previous aduit firm resigned without notice and several firms have declined engagement?

A

Management of Mickey may have lacked integrity

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39
Q

Most appropriate reason if audit client is a competitor (objectivity)

A

Threats to objectivity and confidentiality

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40
Q

What must be done first for a conflict of interest in a firm?

A

Infrom company

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41
Q

What must be done last for a conflict of interest in a firm?

A

Perform engagement quality review

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42
Q

What is done after obtaining consent to act? (Safe)

A

Implement safeguards

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43
Q

Example of a self-interest threat (shares)

A

Receiving shares as part of his renumeration

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44
Q

When are contingent fees not allowable according to ACCA Code of Ethics?

A

Not allowed for non-assurance services provided to audit clients if fee material to firm

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45
Q

Does reviewing qualifications and assessing competence of applicants create a threat to objectivity?

A

NO

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46
Q

Should the board chair be appointed externally or internally?

A

Externally

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47
Q

What membership can board chair have?

A

Can’t sit on audit committee but can be a member of renumeration committee provided they are not the committee chair

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48
Q

When is independence of non-exec director compromised (employed five)

A

Was employed by company less than five years ago

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49
Q

When is independence of non-exec director compromised (shares)

A

Owned shares in the company within last three years

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50
Q

When is independence of non-exec director compromised (pension)

A

Receives a pension (or other renumeration not a fixed salary)

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51
Q

Why is a non-exec director committing to a three year contract a dsiadvantage? (re-election)

A

As all directors stand for re-election annually

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52
Q

What should annual report explain for succession and evaluation of directors? (nomination process)

A

Annual report should explain work of nomination committee including process for making appointments

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53
Q

When should performance of board chair, board and directors be evaluated according to corporate governance guidelines?

A

Annually

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54
Q

Are provisions and legal issues common with oil and gas companies?

A

YES

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55
Q

When is detection risk greater?

A

If there is a lack of knowledge and experience of the client

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56
Q

Materiality ranges for revenue?

A

0.5% to 1%

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57
Q

Profit before tax ranges for revenue?

A

5% to 10%

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58
Q

When is completeness a risk for revenue?

A

If revenue is lower than expected

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59
Q

When is cut-off and occurence a risk for revenue?

A

If revenue is higher than expected

60
Q

Appropriate audit response for recoverability of receivables?

A

Review correspondence with customers

61
Q

Appropriate audit response for damage to non-current assets?

A

Perform an impairment review to determine if an impairment charge is required

62
Q

Appropriate audit response for calculating amortisation of non-current assets?

A

Calculating expected amortisation charge and comparing it with management’s figure

63
Q

Counter for increased detection risk? (quality)

A

It results in increased quality management procedures such as need for an engagement quality review

64
Q

When does risk of revenue cut-off occur for bonus?

A

Aim to maximise their current year bonus

65
Q

Analytical procedures for planning stage of an audit (MM)

A

Assist with identification of risks of material misstatement

66
Q

Analytical procedures for planning stage of an audit (transactions)

A

Assist in identifying unusual transactions and events

67
Q

What audit test is not reasonable for valuation of inventory and receivables?

A

Cut-off testing

68
Q

What does an increase in trade payables mean? (cash)

A

There are cash flow problems

69
Q

What is meant by performance materiality?

A

Amount which reduces probability that aggregate of uncorrected and undetected misstatements exceeds materiality for FSs as a whole

70
Q

What is meant by tolerable misstatement?

A

Maximum amount of misstatement auditor is willing to accept and still conclude that FSs are fairly stated

71
Q

Appropriate audit risk relates to increase in useful of non-current assets (directors)

A

Discuss with directors the reason for change in useful life

72
Q

Issue if returned goods have not been recorded back into inventory?

A

Inventory may be misstated

73
Q

What needs to be done when there;s a lack of supplier statement reconciliations (misstatement)

A

Increased risk of misstatement of trade payables

74
Q

What needs to be done when there;s a lack of supplier statement reconciliations (accrual balance)

A

Misstatements in the purchase accrual balance may go undetected

75
Q

What needs to be done when there;s a lack of supplier statement reconciliations (substantive testing)

A

Increased substantive testing needs to be performed over purchases and payables

76
Q

How would a sale not occurring affect the revenue balance?

A

It would be overstated as gross profit margin will increase

77
Q

When the gross profit margin decreases?

A

It indicates that website sales may not be completely recorded

78
Q

Is detecting material misstatements relevant for planning stage of an audit?

A

No

79
Q

What audit strategy section is risk of MM including the risk of fraud?

A

Significant factors, preliminary engagement activities and knowledge gained on other engagements

80
Q

What audit strategy section is use of professional scepticism?

A

SIgnificant factors, preliminary engagement activities

81
Q

What audit strategy section is selection of audit team?

A

Nature, timing and extent of resources

82
Q

What audit strategy section is use of automated tools and audit techniques?

A

Characteristics of the engagement

83
Q

What happens to detection and control risk if there’s a misappropriation of assets?

A

Detection risk decreases as control risk is higher

84
Q

Best way to go about securing segragation of duties control?

A

People working in the payroll department

85
Q

Can internal control questionnaires and narrative notes be prepared in advance?

A

Internal control questionnaires

86
Q

Can internal control questionnaires and narrative notes be easy to udnerstand?

A

Yes

87
Q

Can internal control questionnaires and narrative notes overstate controls?

A

Just internal control questionnaires

88
Q

Can internal control questionnaires and narrative notes miss controls?

A

Both

89
Q

Is goods are counted and agreed to supplier’s delivery note before signing the delivery note to accept the goods a strength or deficiency?

A

Deficiency as should be agreed before signing the delivery notes

90
Q

What is the benefit of reviewing a payment list?

A

Identifies any unusual or duplicate names

91
Q

When there’s greater emphasis on internal controls, what is the trade off>

A

Decreased sample sizes when performing substantive testing

92
Q

Do discounts received relate to purchase or sales system?

A

Purchase system

93
Q

What should be done to increase independence of internal auditors when reporting deficiencies?

A

Reporting directly to board of directors not the finance director

94
Q

Is tracing a transaction through system to ensure it is recorded in detailed sales listing test of control or substantive procedure?

A

Substantive procedure of completeness

95
Q

Difference between general and information processing?

A

General: Covers everything

Information processing: More specific

96
Q

When a control is a computerised control?

A

Can be used to place a dummy sales order

97
Q

What can’t the auditor simply assume with the presence of an audit committee?

A

Work of the internal auditor will be reliable, must assess the work to ensure it is appropriate for audit purposes

98
Q

What type of control is internal audit department agrees the physical assets to the asset register to ensure completeness?

A

Reconciliation

99
Q

What type of control is variances between actual and budgeted expenditure are analysed in quarterly management accounts?

A

Verification

100
Q

What is persuasive evidence assets purchased during the year have been authorised?

A

Requisition

Order

Minutes of asset expenditure committee meetings

101
Q

When there;s a comparison of actual to budget. Is it a test of control or a substantive procedure?

A

A substantive procedure

102
Q

When an internal audit employee wants to provide direct assistance with external audit procedures?

A

Do what doesn’t require significant judgement (e.g. cash counts)

103
Q

When a supplier has a low balance at year-end but with a high volume of transactions during the year. What does this indicate?

A

That not all liabilities have been recorded at year-end date

104
Q

When there’s a liability to pay for goods at the date of receipt?

A

An accrual should be created for goods received but not yet received

105
Q

Are accruals recorded separately from trade payables?

A

YES

106
Q

What is most reliable evidence in accuracy of wages and salaries calculation?

A

Proof-in-total calculation

107
Q

What procedure does a proof-in-total relate to?

A

A substantive procedure

108
Q

What substantive procedure does review the treatment of a sample of post-year-end returns relate to?

A

Occurrence

109
Q

What substantive procedure does select a sample of GDNs and agree to invoices in detailed sales listing relate to?

A

Completeness

110
Q

What substantive procedure does select a sample of invoices from the detailed sales listing and agree to GDNs relate to?

A

Occurrence

111
Q

What substantive procedure does select a sample of invoicess and recalculate the invoiced amount agreeing to price list?

A

Accuracy

112
Q

What shouldn’t be done when completeness is the key assertion for trade payables testing?

A

Suppliers where the statement agrees to the balance on the list of individual suppliers

113
Q

How to determine whether a payables balance is understated? (GRN)

A

Use GRN to determine when the goods were received

114
Q

Which documents need to be examined to confirm trade payables balance?

A

Inspect pre-year-end GRN

Inspect post-year-end bank ledger

115
Q

Is it appropriate to project a one-off error across the popuilation?

A

NO, as it is not representative of the population

116
Q

What is meant by test data?

A

Inputting dummy transactions into the client’s system to test how the transactions are processed

117
Q

When is it most beneficial to review post-year-end receipts?

A

Confirms actual recoverability of outstanding balance, therefore provides the most reliable evidence

118
Q

What substantive procedure does performing a receivables circularisation relate to?

A

Existence

119
Q

What substantive procedure does reviewing post-year-end cash receipts from customers?

A

Existence

120
Q

What is the result of a decrease in selling price?

A

May result in cost of inventory being higher than NRV

121
Q

When an inventory turnover decreases (valuation)

A

It indicates valuation issues

122
Q

What is the effect of inclusion of third-party inventory?

A

Overstates inventory quantities but not overvaluation

123
Q

Ins inspecting the inventory for evidence of damage test of control or substantive procedure?

A

Substantive procedure

124
Q

Audit responce to a lawsuit? (inspect)

A

Inspect correspondence between client and their legal advisors

125
Q

Audit responce to a lawsuit? (review)

A

Review board minutes to understand management’s view about the claim

126
Q

When must an external auditor attend an inventory count?

A

If inventory is a material balance

127
Q

Primary reason for maintaining an inventory count timetable for the perpetual inventory counting system?

A

Ensure all areas are counted during the year

128
Q

What procedure does agreeing the items listed on the count sheets to the physical inventory confirm?

A

Existence

129
Q

What procedure does agreeing the physical inventory quantities to the count sheet confirm?

A

Completeness

130
Q

Should the external auditors attend at least one count?

A

Yes, to ensure adequate controls are applied

131
Q

When the team prints inventory quantities from system and these records are then compared to the inventory physically present a strength or deficiency?

A

Deficiency

132
Q

Should all lines of inventory be counted at least twice in a year?

A

It is not necessary

133
Q

Do external auditors need to request a surprise inventory count?

A

False

134
Q

When should sampling be used (Appropriateness)

A

Appropriateness of the population

135
Q

When should sampling be used (Size)

A

Size of the population

136
Q

When should sampling be used (Completeness)

A

Completeness of the population

137
Q

What does sampling always have to be?

A

RANDOM

138
Q

What is meanr by a systematic sampling?

A

Where a sample is chosen with a constant interval

139
Q

Is assertion of occurence relevant to payables or purchases

A

Just purchases

140
Q

What is meant by client generated evidence?

A

Individual supplier balances

Accruals listing

Bank ledger account

GRNs

141
Q

Priority of third-party generated evidence or client generated evidence?

A

Third party takes priority

142
Q

What should be done if several misstatements have been found?

A

Increase the amount of testing

143
Q

When direct evidence can’t be obtained, what is the issue?

A

Difficult to determine why the errors occurred

144
Q

Can audit software slow systems down?

A

YES

145
Q

What year is an audit more costly to setup?

A

In the initial year

146
Q

Issue if an audit partner advises which accounting system to choose?

A

It is a self-review threat

147
Q

What must audit firm do when a new computerised accounting system is implemented?

A

Audit firm should dealy use of audit software to ensure designed to effectively work with the new system

AA Question Rote (30 decks)

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