ADVANCED AUDIT AND ASSURANCE – Page 3

AAA – L3 – SA – Q4.4 – Practice management

What is the definition of low-balling in the context of auditing?

Question

What is low-balling?

A Giving an unqualified audit opinion to preserve retention as the auditor

B Ignoring requests from the secondary auditor

C Ignoring reporting by exception

D Attempting to win the audit by submitting an unrealistically low fee

Answer

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Tags: Audit Appointment, Audit fees, Client acquisition, Low-balling, Professional Ethics
Level: Level 3

Topic: Practice management

AAA – L3 – SA – Q4.3 – Professional responsibility and liability

Who is primarily responsible for detecting fraud in a company?

Question

Who has the main responsibility for detecting fraud in a company?

A Senior management

B The external auditors

C The police authorities

D The internal auditors

Answer

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Tags: Auditors, External Audit, Fraud Detection, Internal Audit, Management, Professional Ethics, Responsibility
Level: Level 3

Topic: Professional responsibility and liability

AAA – L3 – SA – Q4.1 – International Standards on Auditing

True statement about ISAs.

Question

Which of the following is true about ISAs?

A They are statutory

B An auditor shall follow them in the conduct of his audit

C An auditor does not have to follow all ISAs

D If uncertain about interpretation, the auditor should contact the IAASB

Answer

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Tags: Audit Standards, Auditor Compliance, ICAG, ISAs
Level: Level 3

Topic: The regulatory environment

AAA – L3 – SA – Q3.10 – Auditor’s Responsibilities Section

Non-allowable position for responsibilities section.

Question

Which of the following is NOT an allowable position for the Auditor’s Responsibilities for the Financial Statements section of the auditor’s report?

A On a website of an appropriate authority and this website is referenced within the auditor’s report

B Within the body of the auditor’s report

C In an appendix to the auditor’s report that is referenced within the report itself

D In an introductory paragraph at the start of the report

Answer

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Tags: Audit Standards, Auditor’s Report, ICAG, Responsibilities Section
Level: Level 3

Topic: Reporting

AAA – L3 – SA – Q3.9 – Assurance Engagements Standards

Standards for non-audit/review assurance engagements.

Question

Assurance engagements other than audits or reviews of historical financial information are subject to principles and procedures specified in:

A ISAEs and ISQMs

B ISREs and ISAEs

C ISAs and ISQMs

D ISAs and ISREs

Answer

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Tags: Assurance engagements, ICAG, ISAEs, ISQMs
Level: Level 3

Topic: Assurance Services

AAA – L3 – SA – Q3.8 – Group Audit Opinion

Opinion when component auditor’s work is unreliable.

Question

If a group auditor decides that the work of a component auditor is unreliable in relation to a material matter, the group audit opinion shall be:

A Unqualified but with an emphasis of matter paragraph

B Unqualified with no need for an emphasis of matter paragraph

C Qualified due to an inability to obtain sufficient appropriate audit evidence

D Qualified due to material misstatement

Answer

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Tags: Audit opinion, Component Auditor, Group Audit, ICAG

Topic: Group audits

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

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

Subject (SQ): ADVANCED AUDIT AND ASSURANCE

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AAA – L3 – SA – Q4.4 – Practice management

What is the definition of low-balling in the context of auditing?

AAA – L3 – SA – Q4.3 – Professional responsibility and liability

Who is primarily responsible for detecting fraud in a company?

AAA – L3 – SA – Q4.1 – International Standards on Auditing

True statement about ISAs.

AAA – L3 – SA – Q3.10 – Auditor’s Responsibilities Section

Non-allowable position for responsibilities section.

AAA – L3 – SA – Q3.9 – Assurance Engagements Standards

Standards for non-audit/review assurance engagements.

AAA – L3 – SA – Q3.8 – Group Audit Opinion

Opinion when component auditor’s work is unreliable.

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.

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

Non-component of audit firm’s quality management.

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What is the definition of low-balling in the context of auditing?

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Who is primarily responsible for detecting fraud in a company?

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True statement about ISAs.

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Opinion when component auditor’s work is unreliable.

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