ICA (Ghana) – Page 9

AAA – L3 – SA – Q3.7 – Directional Testing

Focus of directional testing in auditing.

Question

Directional testing is an approach to auditing which tests:

A asset and liability balances for overstatement

B asset and liability balances for understatement

C asset balances for understatement and liability balances for overstatement

D asset balances for overstatement and liability balances for understatement

Answer

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Tags: Audit Approach, Directional Testing, ICAG, Substantive testing

Topic: Audit Evidence

AAA – L3 – SA – Q3.6 – Auditor’s Expert Valuation

True statements about auditor’s expert valuation.

Question

Which of the following are true about a valuation by an auditor’s expert?

1 It may be a part of audit evidence

2 The auditor’s expert should be experienced in the particular field

3 It reduces the responsibility of the auditor

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2 and 3

Answer

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Tags: Audit Evidence, Auditor’s Expert, ICAG, Valuation
Level: Level 3

Topic: Audit Evidence

AAA – L3 – SA – Q3.5 – Internal Business Risk

Identifying internal business risk.

Question

Which one of the following is an internal business risk?

A A new competitor in the market

B Insolvency of a customer

C Poor working capital control

D Suppliers demanding tighter credit terms

Answer

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Tags: Business Risk, ICAG, Internal Risk, Working Capital
Level: Level 3

Topic: The audit approach

BCL – L1 – SA – Q46 – Contract Law

Effect of fraudulent misrepresentation in a contract document.

Question

If there is a fraudulent misrepresentation as to the contents of a document, the contract is –

A. Void

B. Voidable

C. Valid

D. Illegal

Answer

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Tags: Contract Validity, Document Contents, Fraudulent Misrepresentation
Level: Level 1

Topic: Contract Law

AAA – L3 – SA – Q3.4 – Quality Management System

Non-component of audit firm’s quality management.

Question

Which of the following would not be part of a system of quality management at an audit firm?

A Use of technical manuals

B Standardized audit documentation

C Continuing professional development of audit staff

D Audit committee

Answer

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Tags: Audit committee, Audit Firm, ICAG, Quality management
Level: Level 3

Topic: Practice management

AAA – L3 – SA – Q3.3 – Suspected Fraud

First step when suspecting fraud by senior management.

Question

When an auditor suspects that fraud has occurred in a corporate client’s business, and that senior management are involved in the fraud, the auditor should as a first step:

A discuss the matter with the audit committee

B seek legal advice

C ask a professional accountancy body for advice

D report the matter to the police authorities.

Answer

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Tags: Auditor Responsibility, Confidentiality, Fraud, ICAG
Level: Level 3

Topic: Professional responsibility and liability

AAA – L3 – SA – Q3.2 – Conflict of Interest

Incorrect statement about conflict of interest.

Question

Which of the following statements is INCORRECT?

A A conflict of interest between two clients may be resolved for the auditor by segregating certain responsibilities and duties.

B In taking on a new client, an audit firm shall consider the potential conflict of interests with providing service to an existing client.

C In a takeover bid, an audit firm can act as the sole adviser to both companies involved in the bid.

D If a potential conflict of interest exists between a potential new client and an existing client, the audit firm may need to either decline the engagement with the new client or withdraw from the engagement from the existing client.

Answer

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Tags: Client Engagements, Conflict of Interest, ICAG, Professional Ethics
Level: Level 3

Topic: Rules of Professional Conduct

BCL – L1 – SA – Q45 – Contract Law

Liability of a minor misrepresenting age to borrow money.

Question

A minor, by misrepresenting his age, borrows some money –

A. He can be sued for the fraud

B. He cannot be sued for the fraud

C. He is liable to return the money

D. None of the above

Answer

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Tags: Contract Capacity, Fraud, Liability, Minor
Level: Level 1

Topic: Contract Law

AAA – L3 – SA – Q3.1 – Audit Committee Role

Non-role of the audit committee.

Question

Which of the following is NOT a role of the audit committee?

A To monitor the effectiveness of the internal audit function

B To appoint the external auditors

C To monitor the effectiveness of the external audit process

D To review the auditor’s report on the financial statements

Answer

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Tags: Audit committee, Auditor Appointment, Corporate Governance, ICAG
Level: Level 3

Topic: The regulatory environment

AAA – L3 – SA – Q2.10 – True and Fair

Implication of ‘true and fair’ in financial statements.

Question

Which one of the following should be implied by the term ‘true and fair’ when applied to financial statements?

A free from misstatements

B meaningful presentation and disclosure of information

C complying with ethical standards

D independent

Answer

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Tags: Audit opinion, Financial Statements, ICAG, True and Fair
Level: Level 3

Topic: Reporting

Professional Body (SQ): ICA (Ghana)

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AAA – L3 – SA – Q3.7 – Directional Testing

Focus of directional testing in auditing.

AAA – L3 – SA – Q3.6 – Auditor’s Expert Valuation

True statements about auditor’s expert valuation.

AAA – L3 – SA – Q3.5 – Internal Business Risk

Identifying internal business risk.

BCL – L1 – SA – Q46 – Contract Law

Effect of fraudulent misrepresentation in a contract document.

AAA – L3 – SA – Q3.4 – Quality Management System

Non-component of audit firm’s quality management.

AAA – L3 – SA – Q3.3 – Suspected Fraud

First step when suspecting fraud by senior management.

AAA – L3 – SA – Q3.2 – Conflict of Interest

Incorrect statement about conflict of interest.

BCL – L1 – SA – Q45 – Contract Law

Liability of a minor misrepresenting age to borrow money.

AAA – L3 – SA – Q3.1 – Audit Committee Role

Non-role of the audit committee.

AAA – L3 – SA – Q2.10 – True and Fair

Implication of ‘true and fair’ in financial statements.

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Professional Body (SQ): ICA (Ghana)

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Focus of directional testing in auditing.

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True statements about auditor’s expert valuation.

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Identifying internal business risk.

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Effect of fraudulent misrepresentation in a contract document.

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Non-component of audit firm’s quality management.

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First step when suspecting fraud by senior management.

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Liability of a minor misrepresenting age to borrow money.

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