ADVANCED AUDIT AND ASSURANCE – Page 6

AAA – L3 – SA – Q1.3 – IESBA Code

Correct statement about IESBA Code.

Question

Which of the following statements is correct with regards to the IESBA Code?

A A key audit partner of a listed company shall be rotated after seven years serving as the key audit partner.

B non-audit work from a client must not exceed in amount 100% of the income obtained from audit work for the client.

C Accountancy work shall not be carried out for an unlisted company client.

D Overdue fees from a client are permissible provided that this arrangement has been agreed between the audit firm and the client.

Answer

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Tags: Auditor Rotation, ICAG, IESBA Code, Non-Audit Work
Level: Level 3

Topic: Rules of Professional Conduct

AAA – L3 – SA – Q1.2 – Audit Committee Advantages

Advantages of having an audit committee.

Question

Which of the following are potential advantages of having an audit committee?

1 Conflict between the auditor and the executive directors is reduced

2 Responsibility for internal control is given to independent non-executive directors and so becomes more effective

3 Costs of internal control and the external audit are reduced

4 It provides additional reassurance to shareholders about the reliability of the financial statements

A 1 and 4 only

B 2 and 3 only

C 1 and 3 only

D 2 and 4 only

Answer

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Tags: Audit committee, Auditor Independence, Corporate Governance, ICAG

Topic: The regulatory environment

AAA – L3 – Q73b – Public sector audit

Explain economy, efficiency, and effectiveness in performance auditing for CES.

Question

The Zamibia Audit Service is planning a performance audit of the Countrywide Emergency Service (CES). The Countrywide Emergency Service consists of ambulances and ambulance stations which are located in all regional districts. Last year, the CES purchased 200 extra new ambulances in addition to the current fleet.

Required:

(a) Compare and contrast a performance audit and an audit of financial statements.

(b) Explain the terms economy, efficiency and effectiveness with regards to performance auditing.

(c) For each of the terms economy, efficiency and effectiveness, suggest one audit objective in relation to the purchase of 200 new ambulances by the CES

Answer

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Tags: Audit comparison, CES, Financial statements audit, Performance audit, Public Sector, Zamibia
Level: Level 3

Topic: Public sector audit

AAA – L3 – Q72 – Public sector audit

Define cooperative audit, explain its reasons, types, and challenges for Nigeria Audit Service in a health program audit.

Question

The Nigeria Audit Service has been asked to perform a cooperative audit of funds from a donor that have been used in a women’s health education programme in schools. The program has been implemented across six countries in West Africa and aims to raise awareness of women’s health issues.

Required

(a) Define the term cooperative audit and explain reasons why this type of audit might be performed.

(b) Identify and explain the three types of cooperative audit as defined in GUID 9000 Cooperative Audits between SAIs.

(c) Discuss the difficulties the Nigeria Audit Service might encounter when performing the cooperative audit of donor funds used in the women’s health education programme.

Answer

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Tags: Audit Challenges, cooperative audit, donor funds, GUID 9000, supreme audit institutions
Level: Level 3

Topic: Public sector audit

AAA – L3 – Q71 – Public sector audit

Explain the role and powers of the Auditor-General in Nigeria per the Constitution.

Question

The Office of the Auditor-General was established by the 1999 Constitution of Nigeria.

Answer

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Tags: audit rights, Auditor-General, constitutional roles, government auditing, Public Sector Audit
Level: Level 3

Topic: Public sector audit

AAA – L3 – Q70 – Sustainability

Prepare notes for a presentation on developments in sustainability reporting and assurance standards.

Question

Wilson is a partner at Gyan & Co, a medium-sized firm of chartered accountants. He has been asked to give a presentation about recent developments in reporting and auditing sustainability.
Required:
Prepare notes for Wilson to use in the presentation. These should cover the following matters:

Development of a regulatory board for sustainability reporting
Developments in sustainability reporting standards
Developments in assurance standards on sustainability reporting

Answer

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Tags: Assurance, IFRS S1, IFRS S2, ISSB, Regulatory Board, Reporting, Standards, Sustainability
Level: Level 3

Topic: Current Issues

AAA – L3 – Q69 – Audit-related services

Discuss the view that small businesses are unauditable due to their nature versus the benefits of auditor involvement.

Question

There is a view held by some, that small businesses are unauditable by their very nature. However, others would say that because the auditor of a small business is much more closely involved with his client, his knowledge of that client is extensive and he is therefore better placed to audit it, whereas larger audits are much more mechanical.

Required

Discuss.

Answer

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Tags: Audit, Audit Challenges, Audit-related services, Auditor involvement, Small businesses
Level: Level 3

Topic: Audit-Related Services

AAA – L3 – Q68 – Non-audit Services

Discuss how non-audit services by audit firms may compromise audit integrity and its impact on management, considering client size and listed status.

Question

The current practice of many audit firms offering substantial non-audit services to their audit clients compromises the integrity of the auditing profession and is not in the interests of management.

Required

Discuss the above, indicating whether factors such as client size and listed status would make any difference to your opinion.

Answer

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Tags: Audit Independence, Client Relationships, Corporate Governance, Non-Audit Services, Professional Ethics
Level: Level 3

Topic: Current Issues

AAA – L3 – Q67 – Environmental Issues

Discuss the impact of environmental issues on companies and their financial statements, and the auditor's role in addressing these.

Question

In recent years, many commentators have been placing increasing emphasis on the importance of the environment. Perhaps as a consequence of this, companies have begun to recognise their environmental responsibilities and environmental issues now often have important implications for companies. Such implications cannot be ignored by company auditors. The profession needs to show an awareness of the possible impact of environmental issues on clients’ financial statements.

Required

Discuss.

Answer

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Tags: Audit Implications, Corporate Responsibility, Environmental Issues, Financial Statements, Sustainability
Level: Level 3

Topic: Current Issues

AAA – L3 – Q66 – Reporting

Define and explain the use of Emphasis of Matter and Other Matter paragraphs in an auditor's report for Kweku Medical Co.

Question

You are the partner responsible for the audit of Kweku Medical Co, for the year ended 30th April 2014. The final audit has been completed and you have asked the audit manager to draft the auditor’s report. The manager is aware that there is guidance for auditors relating to the auditor’s report in ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report. The manager has asked for your assistance in this matter.

Required:
(i) Define an “Emphasis of Matter paragraph” and explain, providing examples, the use of such a paragraph.
(ii) Define an “Other Matter paragraph” and explain, providing examples, the use of such a paragraph.

Note: You are not required to produce draft paragraphs.

Answer

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Tags: Audit opinion, Auditor’s Report, Emphasis of Matter, Financial Statements, ISA 706, Other Matter
Level: Level 3

Topic: Reporting

Subject (SQ): ADVANCED AUDIT AND ASSURANCE

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AAA – L3 – SA – Q1.3 – IESBA Code

Correct statement about IESBA Code.

AAA – L3 – SA – Q1.2 – Audit Committee Advantages

Advantages of having an audit committee.

AAA – L3 – Q73b – Public sector audit

Explain economy, efficiency, and effectiveness in performance auditing for CES.

AAA – L3 – Q72 – Public sector audit

Define cooperative audit, explain its reasons, types, and challenges for Nigeria Audit Service in a health program audit.

AAA – L3 – Q71 – Public sector audit

Explain the role and powers of the Auditor-General in Nigeria per the Constitution.

AAA – L3 – Q70 – Sustainability

Prepare notes for a presentation on developments in sustainability reporting and assurance standards.

AAA – L3 – Q69 – Audit-related services

Discuss the view that small businesses are unauditable due to their nature versus the benefits of auditor involvement.

AAA – L3 – Q68 – Non-audit Services

Discuss how non-audit services by audit firms may compromise audit integrity and its impact on management, considering client size and listed status.

AAA – L3 – Q67 – Environmental Issues

Discuss the impact of environmental issues on companies and their financial statements, and the auditor's role in addressing these.

AAA – L3 – Q66 – Reporting

Define and explain the use of Emphasis of Matter and Other Matter paragraphs in an auditor's report for Kweku Medical Co.

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Subject (SQ): ADVANCED AUDIT AND ASSURANCE

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Correct statement about IESBA Code.

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Advantages of having an audit committee.

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Explain economy, efficiency, and effectiveness in performance auditing for CES.

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Define cooperative audit, explain its reasons, types, and challenges for Nigeria Audit Service in a health program audit.

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Explain the role and powers of the Auditor-General in Nigeria per the Constitution.

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Prepare notes for a presentation on developments in sustainability reporting and assurance standards.

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Discuss the view that small businesses are unauditable due to their nature versus the benefits of auditor involvement.

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Discuss how non-audit services by audit firms may compromise audit integrity and its impact on management, considering client size and listed status.

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Discuss the impact of environmental issues on companies and their financial statements, and the auditor's role in addressing these.

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Define and explain the use of Emphasis of Matter and Other Matter paragraphs in an auditor's report for Kweku Medical Co.

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