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AA Question Rote > Section A Rote (3) > Flashcards

Section A Rote (3) Flashcards

1
Q

Should audit team have staff with experience of public sector audits for auditing a public sector company

A

YES

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2
Q

Should government authorities refer to going concern uncertainties

A

Yes, as they are not immune

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3
Q

Does compare income by shop and category to the prior year cause income to understate or overstate?

A

Understate

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4
Q

Does inspect credit notes issued post-year-end cause income to understate or overstate?

A

Overstate

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5
Q

Does agree total on till receipts to detailed sales listing, bank statements and bank ledger account cause income to understate or overstate?

A

Understate

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6
Q

Does obtain detailed sales listing and cast to confirm accuracy cause income to understate or overstate?

A

Understate

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7
Q

What is the best evidence for a bonus issue of oprdinary share capital?

A

Companies house information

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8
Q

What assertion does inspect the independent expert’s report satisfy?

A

Valuation

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9
Q

What assertion does match the physical properties to independent expoert’s report and non-current asset register satisfy?

A

Completeness

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10
Q

What assertion does recalculate the depreciation on revalued properties satisfy?

A

Valuation

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11
Q

Where are movements in equity shown in the financial statements?

A

Statement of changes in equity

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12
Q

What is the structure of a completeness assertion?

A

Procedure must start from outside of the accounting records and agreed into the accounting records

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13
Q

What assertion does obtain a breakdown of payment to each director, recalculate the total and agree to FSs test?

A

Completeness

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14
Q

What assertion does review board minutes for details of bonuses or additional payments to be made to directors test?

A

Completeness

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15
Q

What assertion does inspect directors’ service contracts for salaries and trace through to payroll reports for the year test?

A

Completeness

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16
Q

Where is the detailed review of audit working papers included?

A

As part of the firm’s quality management procedures

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17
Q

Where is reviewing adequacy of the disclosure of accounting policies included?

A

Part of auditor’s overall review of FS

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18
Q

What does an increase in proportion of cash sales do to trade receivables collection period?

A

It decreases trade receivables collection period

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19
Q

Should name of valuer in a revaluation be disclosed for adequacy?

A

No

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20
Q

When can an unmodified opinion still be issued?

A

If a misstatement is immaterial

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21
Q

Is 2.2% of profit before tax considered material?

A

NO

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22
Q

Should a manager form conclusions on the balances for sample sizes?

A

NO

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23
Q

How are sample sizes chosen?

A

Based on judgment of auditor responsible for planning taken into consideration to obtain sufficient appropriate evidence

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24
Q

When sample sizes are reduced, what needs to be done?

A

Audit plan should be updated to reflect this

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25
Q

Does enquiry provide sufficient appropriate evidence on its own for subsequent events review

A

No

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26
Q

Should a written representation have been obtained from management confirming they have disclosed subsequent events to the auditor for subsequent events review?

A

Yes

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27
Q

Do firms report unprofessional staff to ACCA?

A

No

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28
Q

When is an engagement quality review performed?

A

On or before the date of the auditor’s report

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29
Q

Should all working paper be signed by the person who prepared them?

A

True

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30
Q

Should all team members’ work should be reviewed by someone more senior than the preparer?

A

True

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31
Q

Does the audit engagement partner review all working papers on audit file before issuing an opinion?

A

No

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32
Q

Could a revenue decrease of 30% have an impact on company going forward?

A

YES

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33
Q

What is the effect on gross profit margin if sales prices charged to customers had increased whilst costs were the same?

A

It goes up

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34
Q

What can cause a decrease in the gross profit margin?

A

Increase in cost of sales or reduction in sales price

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35
Q

Affect on quick ratio if there’s more reliance on an overdraft?

A

It decreases

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36
Q

Affect on payables payment period if there are delays in paying suppliers?

A

it increases

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37
Q

What is generally meant when an inventory holding period has increased significantly?

A

Implies that items are taking longer to sell

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38
Q

What provides most reliable evidence that a new business won post-year-end?

A

Review post-year-end sales orders from new customers

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39
Q

What must auditor do in respect of management’s going concern assessment?

A

Request management extend the assessment cover by another year

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40
Q

What is a material uncertainty related to going concern section?

A

A matter of fundamental importance to the user’s understandings

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41
Q

Does a material uncertainty related to going concern section change the audit opinion?

A

No, it can remain unmodified

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42
Q

When are subsequent events procedures performed?

A

Between date of FSs and date of the auditor’s report

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43
Q

Should auditor contact a manager no longer an officer of a company?

A

NO

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44
Q

Appropriate opinion for an unfair dismissal case that is not material?

A

Unmodified and no additional communica ction

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45
Q

What is included in a key audit matters section?

A

Matters which required significant auditor attention

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46
Q

When 7.7% of profit before tax, is it material or immaterial?

A

It is material

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47
Q

When there’s a material misstatement, who should auditor contact?

A

Enquire how management intends to address the matter in FSs when appropriate

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48
Q

What auditor do with other information?

A

Ensure it is consistent with FSs and their knowledge of entity is obtained during the audit

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49
Q

Are notes in the financial statements considered part of FSs

A

Yes, and are subject to audit. Not considered other information

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50
Q

Where inconsistency between chair’s statement and financial statements be addressed in auditor;s report?

A

Included in Other Information

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51
Q

Should an auditor expose management’s incompetence?

A

No

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52
Q

If there’s an inconsistency between other information and FSs

A

It undermines the auditor’s report

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53
Q

What paragraph in auditor’s report is included for restricting liability?

A

Included in an Other Matter paragraph

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54
Q

What is considered material for total assets?

A

1 to 2% of total assets

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55
Q

Issue with inspecting sales invoice and GDN for forming a conclusion as to level of adjustment for receivables balance?

A

Does not provide evidence of when the balance will be received

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56
Q

When a matter is considered material and management refuse to adjust. What opinion is issued?

A

Qualified

57
Q

When is an emphasis of matter paragraph required in an auditor’s report?

A

If there is a matter disclosed adequately in FS which auditor considers to be fundamentally important

58
Q

When is an other matter paragraph only required?

A

If matter is not related to FSs but the auditor wishes to bring to attention of the user such as further explanation of auditor’s responsibilities

59
Q

Which paragraph would restricting reliance on auditor’s report by third parties be included?

A

Other matter paragraph

60
Q

Which paragraph would conclude that there is material inconsistency between audited financial statements and other info contained in the annual report be included?

A

Other information

61
Q

Do auditor’s make disclosures in financial statements?

A

FUCK NO

62
Q

Do ratios provide evidence a company is a going concern?

A

No

63
Q

Does reviewing level of profit made in past provide evidence for going concern?

A

No, as going concern is future based

64
Q

What opinion is adequate disclosure of going concern uncertainities?

A

Unmodified opinion with going concern section

65
Q

What opinion is adequate disclosure of going concern uncertainties is not made?

A

Modified opinion

66
Q

When should a company not prepare financial statements using the break up basis?

A

Material uncertainties relating to going concern

67
Q

What happens if auditor believes the basis of preparation of FSs is incorrect?

A

Adverse opinion with basis for adverse opinion

68
Q

Is an 86% effect on profit likely to cause an adverse opinion?

A

Yes as it is material and pervasive

69
Q

Is an 41% effect on profit likely to cause an adverse opinion?

A

No, as it material but not pervasive

70
Q

Is a 3% effect on profit considered material?

A

No

71
Q

What is done in FSs if a legal claim against a company is possible>

A

A contingent liability disclosure is required

72
Q

When is an unmodified opinipn with no additional communication given?

A

Matter is correctly treated in FSs

73
Q

What does basis for opinion matter paragraph represent?

A

Provides a description of professional standards applied during audit to provide confidence to users that report can be relied upon

74
Q

What is the wording for a disclaimer of opinion?

A

States the auditor does not express an opinion

75
Q

What is the wording for an unmodified opinion?

A

Means FSs give a true and fair view

76
Q

What is the wording for an adverse opinion?

A

Means FSs do not give a true and fair view

77
Q

What is the wording for a qualified opinion?

A

Except for the issue described, FSs give a true and fair view

78
Q

Is 4% of profit before tax material?

A

No

79
Q

Is 8% of profit before tax material?

A

Yes

80
Q

When both issues were in existence at year end, are they adjusting events?

A

Yes

81
Q

If an issue is material but not pervasive, is a qualified opinion required?

A

Yes

82
Q

Are the responsibilities of both auditors and management included in every auditor’s report?

A

Yes

83
Q

When is key audit matters only compulsory?

A

For listed companies

84
Q

When a condition causing damage occurred after year end. What sort of event is it?

A

A non-adjusting event

85
Q

When is a non-adjusting event disclosed of?

A

If it is material

86
Q

When is a written representation appropriate?

A

If the matter involves managemetn judgment

87
Q

When is a written representation not appropriate for a receivable balance?

A

Other procedures can be performed which provide more reliable evidence

88
Q

Issue if directors refuse to provide a written representation to the auditors?

A

May cast doubt over management integrity and as such reliability of other evidence provided by client may be called into question

89
Q

What opinion is performed if company refuses to provide a written representation letter?

A

Qualified opinion due to an inability to obtain sufficient appropriate evidence

90
Q

When is a disclaimer of opinion given?

A

When auditor does not have sufficient appropriate evidence to be able to express an audit opinion

91
Q

Are plans or intentions of management that affect carrying values of assets always included in every written representation?

A

Not required

92
Q

Are confirmation from management that they have provided the auditor with all info and access to records during the audit always included in every written representation?

A

Required

93
Q

Are confirmation from management that financial statements are accurate/free from error always included in every written representation?

A

Not required

94
Q

Are confirmation from management that all transactions have been reflected in FSs always included in every written representation?

A

Required

95
Q

What must be considered for work performed by the expert (competence)

A

Must consider competence and objectivity of the experrt

96
Q

What must be considered for work performed by the expert (appropriate)

A

Must assess expert’s work to ensure it is appropriate for audit purposes

97
Q

Does an auditor have to ask management to adjustment financial statements?

A

YES

98
Q

Does a contingent liability disclosure require an emphasis of matter paragraph?

A

Yes

99
Q

When defective inventory is included in FSs. Is it adjusting or non-adjusting event?

A

Adjusting event

100
Q

When an explosion occurred after the year-end. Is it an adjusting or non-adjusting event?

A

Non-adjusting event

101
Q

In IAS 2, what should inventory be valued at?

A

The lower of cost and NRV

102
Q

What needs to be obtained in respect of subsequent events?

A

A written representation

103
Q

When 13.4% of profit before tax?

A

It is material

104
Q

When 1.4% of revenue?

A

It is material

105
Q

When something is material, does it require amendment?

A

Yes

106
Q

Which opinion is included if events are material and require amendments. But misstatements are not pervasive?

A

A basis for qualified opinion

107
Q

When is key audit matter paragraph not appropriate?

A

For a non-listed company

108
Q

When is an emphasis of matter paragraph included>

A

To draw user’s attention to a matter correctly disclosed in FSs

109
Q

When is the end of period covered by the subsequent events review?

A

When auditor’s report is signed

110
Q

When is a fire a non-adjusting event?

A

If it occurred and caused damage after year-end

111
Q

When should certain audit procedures be carried out for a fire at the oil factory?

A

Could cast on the appropriateness of the use of the going concern basis of accounting

112
Q

When a condition is at year-end (is it an adjusting or non-adjusting event)?

A

Adjusting

113
Q

When a condition is post-year-end and only creates an obligation at that point (is it an adjusting or non-adjusting event)?

A

Non-adjusting

114
Q

What should be done if directors do not issue the financial statements?

A

Take steps to prevent reliance on the existing auditor’s report

115
Q

What is the correct opinion if directors have decided to reissue FSs which audit engagement partner has reviewed and confirmed as appropriate>

A

Unmodified opinion with disclosure in an emphasis of matter paragraph

116
Q

Does provides audit evidence to satisfy the objective of testing evidence positive or negative confirmation?

A

BOTH

117
Q

Does cannot be used as the sole substantive procedure unless population consists of a large number of small homogeneous balances positive or negative confirmation?

A

Negative

118
Q

If customer requested to reply, indicating whether they agree or disagree with the balance included in the request positive or negative confirmation?

A

Positive

119
Q

What should be carried out to determine if prepayment for advertising costs is understated?

A

Inspect the signed contract and confirm the commencement date and recalculate the contract cost for May 20X5 to January 20X6

120
Q

What can be done to confirm a genuine prepayment?

A

Inspect cash book/bank ledger for evidence of amount paid to advertising company and agree to the signed contract

121
Q

Should audit engagements always provide reasonable assurance?

A

True

122
Q

Does a true and fair view mean FSs contain no misstatements?

A

False

123
Q

Do most non-audit engagements provide reasonable assurance?

A

False

124
Q

How many prescribed elements are there to an assurance engagement?

A

Five

125
Q

Disadvantages of outsourcing internal audit?

A

Creates a self-review threat during external audit and internal audit has less understanding of the business

126
Q

What procedures should be done on financial forecasts?

A

A comparison and enquire with directors on assumptions made

127
Q

What type of internal audit assignment does review of procedures around sales orders represent?

A

A financial audit

128
Q

Does a new bank account reduce the reliabiltiy of audit evidence?

A

NO

129
Q

Which procedure is used to verify accrued interest at the accounting period end>

A

Recalculate accrued interest based on outstanding loan value, interest rate and accrual period

130
Q

Completeness assertion for bank and cash example?

A

Agreeing a sample of accounts detailed on the bank confirmation letter to the TB

131
Q

Rights and obligation assertion for bank and cash example?

A

Reviewing all relevant bank statements to verify that the accounts are held under a company

132
Q

Existence assertion for bank and cash example?

A

Attend the cash countat the year-end and reperform the count

133
Q

What type of assurance is judgment required to determine appropriate procedures required to obtain this level of assurance?

A

BOTH

134
Q

What form of conclusion does a limited assurance give?

A

Negative form

135
Q

Should the materiality of FS amount affected by internal audit service be considered when evaluating significance of any self-review threat?

A

YES

136
Q

When is audit sampling not considered an inherent limitation?

A

If it doesn’t test 100% of all balances and transactions

137
Q

When is reliability of evidence generated internally increased?

A

When related controls are effective

138
Q

Is direct or indirect evidence by the auditor more reliable

A

Direct evidence

139
Q

Best way to address audit engagement partner’s concern in relation to share issue?

A

Inspect consituition docuyments for evidence that share issue is permitted

AA Question Rote (26 decks)

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