Series: NOV 2012

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AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries

This question tests knowledge of reserves that may or may not be reviewed during the audit of a non-life insurance company.

Question

Regarding the audit of a non-life insurance company, which of the following reserves may NOT be reviewed?
A. Reserve for unexpired risks
B. Reserve for outstanding claims
C. Contingent reserve
D. External reserve
E. Statutory reserve

Answer

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Tags: Audit, Non-Life Insurance, Reserves, Specialized Industries
Level: Level 3

Topic: Audit of Specialized Industries
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance

This question identifies assignments that qualify as continuous audit functions.

Question

Which of the following assignments can be regarded as a continuous audit function?
A. Examining the effectiveness, efficiency, and economy of a cement project
B. Evaluating the adequacy of the security and control measures of the information technology
C. Ascertaining the fairness of the annual financial statements and notes to the accounts
D. Reviewing the internal control procedures before commencing the audit
E. Reviewing the company’s compliance with relevant guidance and release of financial information periodically

Answer

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Tags: Compliance, Continuous Audit, Financial Reporting, Internal Control
Level: Level 3

Topic: Internal Audit and Corporate Governance
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting

This question assesses knowledge of the main users of financial reports that auditors focus on.

Question

The main users of financial reports that auditors need to be primarily concerned about are:
A. Management and directors of the company
B. The general public
C. Banks and other financial institutions that provide working capital
D. Suppliers
E. Shareholders of the company

Answer

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Level: Level 3

Topic: Audit Reporting
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

Question

Yakubu Chukwu & Co was sued by one of its clients who alleged that the firm failed to satisfy the auditing standards in identifying substandard and obsolete inventory while attending end-of-year stock take. Which of the following is the firm’s best defence?
A. It is quite impossible to expect the firm to identify substandard and obsolete inventory due to the special nature of the inventory
B. Yakubu Chukwu & Co has to prove that its audit has been carried out with reasonable skill, care, and diligence
C. Auditing standards are not legislated, therefore, the client has no right to sue the firm
D. The contributory negligence of the client
E. Identification of substandard and obsolete stock requires an expert opinion

Answer

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Tags: Audit Standards, Auditor Liability, Defence, Obsolete Inventory
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q16 – Group Audits

This question assesses the appropriate audit procedure for verifying a subsidiary’s accounts before consolidation.

Question

When a client has control over a subsidiary, what is the most appropriate audit procedure to obtain evidence to verify subsidiary accounts before consolidation?
A. Arrange for independent valuation of the assets and liabilities of the subsidiary
B. Be involved in the appointment of the subsidiary auditors
C. Rely on additional work carried out by the internal auditors
D. Send a template of your expectation to subsidiary auditors
E. Provide audit program for the subsidiary auditors

Answer

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Tags: Audit Procedure, Consolidation, Group Audits, Subsidiary Accounts
Level: Level 3

Topic: Group audit
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q15 – Audit Reporting

This question assesses the primary purpose of sending a letter of enquiry to a legal firm regarding client litigation.

Question

The main reasons why auditors send a letter of enquiry to the legal firm handling litigation or claims on behalf of their client is to provide:
A. Auditors with weak position in client litigation and claims
B. Auditors with written submission and statement of claims to the court
C. Information concerning the progress of outstanding cases to date
D. Auditors with corroborative audit evidence
E. Auditors with impact of legal opinion on financial statements

Answer

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Tags: Audit evidence, Legal claims, Letter of Enquiry, Litigation
Level: Level 3

Topic: Audit Reporting
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q14 – Regulatory Framework and Professional Standards

This question assesses knowledge of factors that weaken local auditing standards and identifies an unrelated factor.

Question

Factors that contribute to the weaknesses of local auditing standards include the following EXCEPT:
A. Standard setters being subject to political pressures
B. Having inadequate resources
C. Being insufficiently timed in response to market needs
D. Loss of investment by stakeholders
E. Having sources of fund which raise questions about their independence

Answer

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Tags: Audit Standards, Independence, Local Auditing Standards, Regulatory Framework
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q13 – Environmental and Sustainability Audits

This question assesses the scope of social audit and identifies an area it does not cover.

Question

Social audit has to do with the extent to which a company gets involved and interacts with the society in which it operates. This means that social audit does not extend to ONE of the following:
A. Corporate code of conduct and business ethics
B. Pricing policy, product safety, and quality control
C. Transaction audit
D. Employee health and safety
E. Environmental pollution

Answer

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Tags: Business Ethics, Corporate Responsibility, Environmental audit, Social Audit
Level: Level 3

Topic: Environmental and Sustainability Audits
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q12 – Advanced Audit Planning and Strategy

This question assesses the primary purpose of understanding a client’s internal control system.

Question

Which of the following is the primary purpose for obtaining an understanding of client’s internal control?
A. Provide a basis for making constructive suggestions in a management letter
B. Determine the nature, timing and extent of tests to be performed in the audit
C. Obtain sufficient and competent evidential matter to afford a reasonable basis for an opinion on the financial statements under examination
D. Provide information for communication of internal control related matters to management
E. Obtain sufficient evidence to afford a basis for an opinion on the financial statements

Answer

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Tags: Audit Planning, Audit strategy, Internal Control
Level: Level 3

Topic: Advanced Audit Planning and Strategy
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q11 – Advanced Audit Planning and Strategy

This question tests knowledge of analytical procedures used to produce audit evidence.

Question

Which of the following is an analytical procedure generally used to produce audit evidence?
A. Confirmations mailed directly to the auditor by the client’s customers
B. Physical observation of inventories
C. Relationship among current financial balances and prior balances, forecasts, and non-financial data
D. Detailed examination of external and internal documents
E. Circularisation letters to debtors and creditors of the company

Answer

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Tags: Analytical procedures, Audit evidence, Audit Techniques
Level: Level 3

Topic: Advanced Audit Planning and Strategy
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q39 – Elements of Financial Statements

Calculate equity shareholder fund from given financial data.

Question

Calculate the company’s equity?

Answer

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Tags: Equity, Financial Statements, Shareholder Fund
Level: Level 1

Topic: Elements of Financial Statements
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q38 – Accounting for Incomplete Records

Identify the use of the Branch Inventory Adjustment Account in branch accounting.

Question

Where goods are invoiced by a head office to its branch at cost-plus, the Branch Inventory Adjustment Account is used to determine?

Answer

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Tags: Branch Accounting, Cost-plus Accounting, Inventory Adjustment
Level: Level 1

Topic: Accounting from Incomplete Records
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

Question

The offer of shares of a company to a group of selected persons is called?

Answer

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Tags: Equity, Private placement, Shares
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q36 – Accounts of Not-for-Profit Entities

Identify the statement showing the performance of a not-for-profit organization under accruals accounting.

Question

Where a not-for-profit organization prepares the accounts using accruals basis of reporting, the statement showing the performance of the organization is the?

Answer

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Tags: Financial Statements, Income and Expenditure, Non-Profit Accounting
Level: Level 1

Topic: Accounts of Not-for-Profit Entities
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q35 – Correction of Errors

Determine the effect of inventory understatement on profits for two years.

Question

In preparing a company’s financial statements for the year ended 30 September 2012, it was discovered that the company’s closing inventory was understated by N450,000. If the error remains uncorrected, the effect of this on the profits for 2012 and 2013 will be?

Answer

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Tags: Error Correction, Inventory, Profit
Level: Level 1

Topic: Correction of errors
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q34 – Accounting Concepts

Recognize the accounting concept for sales revenue recognition.

Question

The accounting concept which states that sales revenue should be recognized when goods and services have been received is known as?

Answer

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Tags: Accounting Concepts, Revenue, Sales
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q33 – Bank Reconciliation

Identify items required for cash book adjustment during bank reconciliation.

Question

When preparing a company’s bank reconciliation statement at 31 October 2012, it was discovered that the following items caused the difference between the cash book balance and the bank statement balance:

A. Bank charges N5,005
B. Cheque of N105,000 incorrectly debited by the bank to the account
C. Cheque paid in by the company but dishonoured amounted to N55,500
D. Uncredited lodgement N62,800

Which TWO of the items above will be required for cash book adjustment?

Answer

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Tags: Bank Reconciliation, Cash Book Adjustments, Financial Statements
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q32 – Financial Statements Preparation

Calculate turnover based on the cost of goods sold and profit margin.

Question

If the cost of goods sold is N315,060 and the profit margin is 25%, what is the turnover?

Answer

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Tags: Cost of Goods Sold, Profit margin, Revenue, Turnover
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q31 – Partnership Accounts

Classify the figure in the statement of financial position as current liabilities or otherwise.

Question

The balances extracted from the accounting records of Disney Social Club in respect of its subscriptions are as follows:

Balance b/f 1 January 2011: N40,000
Balance b/f 1 January 2011: (N30,000)
Subscriptions received during the year: N160,000
Balance c/f 31 December 2011: N60,000
Balance c/f 31 December 2011: (N50,000)

How would the figure in brackets at 31 December 2011 be classified in the Statement of Financial Position?

Answer

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Tags: Classification, Financial Statements, Statement of Financial Position, Subscription
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2012

FA – Nov 2012 – L1 – SA – Q30 – Accounts of Not-for-Profit Entities

Determining the amount of subscriptions to be included in the income and expenditure account.

Question

The balances extracted from the accounting records of Disney Social Club in respect of its subscriptions are as follows:

Balance b/f 1 January 2011: N40,000
Balance b/f 1 January 2011: (N30,000)
Subscriptions received during the year: N160,000
Balance c/f 31 December 2011: N60,000
Balance c/f 31 December 2011: (N50,000)

What is the amount of subscriptions to be included in the income and expenditure account for the year ended 31 December 2011?

Answer

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Tags: Financial Statements, Income, Subscriptions
Level: Level 1

Topic: Accounts of Not-for-Profit Entities
Series: NOV 2012

Series: NOV 2012

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AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries

This question tests knowledge of reserves that may or may not be reviewed during the audit of a non-life insurance company.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries"

AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance

This question identifies assignments that qualify as continuous audit functions.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance"

AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting

This question assesses knowledge of the main users of financial reports that auditors focus on.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting"

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability"

AAA – Nov 2013 – L3 – A – Q16 – Group Audits

This question assesses the appropriate audit procedure for verifying a subsidiary’s accounts before consolidation.

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AAA – Nov 2013 – L3 – A – Q15 – Audit Reporting

This question assesses the primary purpose of sending a letter of enquiry to a legal firm regarding client litigation.

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AAA – Nov 2013 – L3 – A – Q14 – Regulatory Framework and Professional Standards

This question assesses knowledge of factors that weaken local auditing standards and identifies an unrelated factor.

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AAA – Nov 2013 – L3 – A – Q13 – Environmental and Sustainability Audits

This question assesses the scope of social audit and identifies an area it does not cover.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q13 – Environmental and Sustainability Audits"

AAA – Nov 2013 – L3 – A – Q12 – Advanced Audit Planning and Strategy

This question assesses the primary purpose of understanding a client’s internal control system.

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AAA – Nov 2013 – L3 – A – Q11 – Advanced Audit Planning and Strategy

This question tests knowledge of analytical procedures used to produce audit evidence.

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FA – Nov 2012 – L1 – SB – Q39 – Elements of Financial Statements

Calculate equity shareholder fund from given financial data.

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FA – Nov 2012 – L1 – SB – Q38 – Accounting for Incomplete Records

Identify the use of the Branch Inventory Adjustment Account in branch accounting.

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FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

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FA – Nov 2012 – L1 – SB – Q36 – Accounts of Not-for-Profit Entities

Identify the statement showing the performance of a not-for-profit organization under accruals accounting.

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FA – Nov 2012 – L1 – SB – Q35 – Correction of Errors

Determine the effect of inventory understatement on profits for two years.

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FA – Nov 2012 – L1 – SB – Q34 – Accounting Concepts

Recognize the accounting concept for sales revenue recognition.

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FA – Nov 2012 – L1 – SB – Q33 – Bank Reconciliation

Identify items required for cash book adjustment during bank reconciliation.

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FA – Nov 2012 – L1 – SB – Q32 – Financial Statements Preparation

Calculate turnover based on the cost of goods sold and profit margin.

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FA – Nov 2012 – L1 – SB – Q31 – Partnership Accounts

Classify the figure in the statement of financial position as current liabilities or otherwise.

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FA – Nov 2012 – L1 – SA – Q30 – Accounts of Not-for-Profit Entities

Determining the amount of subscriptions to be included in the income and expenditure account.

You're reporting an error for "FA – Nov 2012 – L1 – SA – Q30 – Accounts of Not-for-Profit Entities"

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