Audit and Assurance – Page 3

AA – L2 – SA – Q3.9 – Existence Evidence

Audit procedure for existence evidence.

Question

Which of the following audit procedures is primarily intended to provide audit evidence as to existence?

A Matching sales invoices to goods dispatch notes

B Casting the sales ledger

C Confirming receivables balances with customers

D Checking the dating of outstanding cheques

Answer

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Tags: Audit Evidence, Existence, ICAG, Receivables Confirmation
Level: Level 2

Topic: Audit and Assurance Evidence

AA – L2 – SA – Q3.8 – Substantive Test for Inventories

Non-substantive test for inventory audit.

Question

Which of the following is NOT a substantive test for the audit of inventories?

A Test the updating of all inventory count differences to inventory records

B Test the accuracy of net realizable value through the review of post year-end sales

C Have satisfactory explanations been explained for all material inventory count differences

D Check that all administrative overheads have been correctly accrued for in the valuation of inventories

Answer

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Tags: ICAG, Inventories, Substantive Test, Valuation
Level: Level 2

Topic: Audit and Assurance Evidence

AA – L2 – SA – Q3.7 – Evidence Reliability

Most reliable type of audit evidence.

Question

Which one of the following types of evidence is the most reliable?
A The client’s sales invoices
B Report obtained from a client’s bank confirming balances
C The written representation letter
D Confirmation during a telephone call with the Managing Director that there are no loans outstanding

Answer

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Tags: Audit Evidence, Bank Confirmation, ICAG, Reliability
Level: Level 2

Topic: Audit and Assurance Evidence

AA – L2 – SA – Q3.6 – Revenue System Deficiencies

Consequences of revenue system shortcomings.

Question

The following shortcomings have been identified in Apex Ltd’s revenue system. For each deficiency select the most likely consequence.
Invoices are not checked for arithmetic accuracy before being issued to customers
A Company may process loss-making sales orders
B Cash receipts are not recorded correctly in the cashbook
C Increased risk of client dissatisfaction
Sales discounts are not authorized prior to being given
D Company may process loss-making sales orders
E Cash receipts are not recorded correctly in the cashbook
F Increased risk of client dissatisfaction

Answer

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Tags: Client Dissatisfaction, ICAG, Internal controls, Revenue System
Level: Level 2

Topic: Audit and Assurance Evidence

AA – L2 – SA – Q3.5 – Audit Documentation Reasons

True/false on reasons for audit documentation.

Question

Regarding the reasons for preparing audit documentation, select whether each of the following statements are true or false.

To retain a record of matters of continuing significance to future audits
A True
B False
To provide evidence of audit work carried out in the event of a legal dispute
C True
D False
To enable an experienced auditor to carry out engagement quality reviews
E True
F False

Answer

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Tags: Audit Documentation, Evidence, ICAG, Quality Review
Level: Level 2

Topic: Audit and Assurance Evidence

AA – L2 – SA – Q3.4 – Audit Risk Definition

Best description of audit risk.

Question

Which of the following best describes audit risk?

A That the audit will not be completed in time

B That the client will wish to propose the removal of the auditor

C That the auditor will not have sufficient senior staff available

D That the auditor will give the wrong opinion in his report

Answer

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Tags: Audit Documentation, Evidence, ICAG, Quality Review
Level: Level 2

Topic: Audit and Assurance Evidence

AA – L2 – SA – Q3.3 – IESBA Ethical Principles

Non-fundamental principle in IESBA Code of Ethics.

Question

Which of the following is not one of the stated fundamental principles of the IESBA International Code of Ethics for Professional Accountants?

A Professional care

B Confidentiality

C Integrity

D Objectivity

Answer

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Tags: Ethical Principles, ICAG, IESBA, Professional Ethics
Level: Level 2

Topic: Professional and Ethical Considerations

AA – L2 – SA – Q3.2 – ISSAI Issuer

Organization that issues ISSAIs.

Question

ISSAIs are issued by the:

A PEFA

B International Public Sector Accounting Standards Board

C International Organization of Supreme Audit Institutions

D Westland Audit Service

Answer

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Tags: ICAG, ISSAI, Public Sector Auditing, Standard-Setting
Level: Level 2

Topic: Institutional Regulation and Standard-Setting

AA – L2 – SA – Q3.1 – Material Items Focus

Why auditors focus on material items in financial statements.

Question

Why do auditors concentrate their efforts on material items in the financial statements?

A Because they are easier to audit

B Because it reduces the audit time

C Because the risk to the financial statements of being materially misstated is greater

D Because the directors have asked for it

Answer

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Tags: Audit Risk, Financial Statements, ICAG, Materiality
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements

AA – L2 – SA – Q2.10 – Directors’ Responsibilities

Identify non-responsibility of directors.

Question

Which of the following is NOT a responsibility of the directors in practice?

A Establishment of internal controls

B The supply of information and explanations to the auditor

C Drafting a written representation letter, if needed

D Safeguarding of a company’s assets

Answer

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Tags: Directors Responsibilities, ICAG, Internal controls, Written Representation
Level: Level 2

Topic: Regulatory Framework and Audit Responsibilities

Subject (SQ): Audit and Assurance

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AA – L2 – SA – Q3.9 – Existence Evidence

Audit procedure for existence evidence.

AA – L2 – SA – Q3.8 – Substantive Test for Inventories

Non-substantive test for inventory audit.

AA – L2 – SA – Q3.7 – Evidence Reliability

Most reliable type of audit evidence.

AA – L2 – SA – Q3.6 – Revenue System Deficiencies

Consequences of revenue system shortcomings.

AA – L2 – SA – Q3.5 – Audit Documentation Reasons

True/false on reasons for audit documentation.

AA – L2 – SA – Q3.4 – Audit Risk Definition

Best description of audit risk.

AA – L2 – SA – Q3.3 – IESBA Ethical Principles

Non-fundamental principle in IESBA Code of Ethics.

AA – L2 – SA – Q3.2 – ISSAI Issuer

Organization that issues ISSAIs.

AA – L2 – SA – Q3.1 – Material Items Focus

Why auditors focus on material items in financial statements.

AA – L2 – SA – Q2.10 – Directors’ Responsibilities

Identify non-responsibility of directors.

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AA – L2 – SA – Q3.9 – Existence Evidence

Audit procedure for existence evidence.

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AA – L2 – SA – Q3.8 – Substantive Test for Inventories

Non-substantive test for inventory audit.

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AA – L2 – SA – Q3.7 – Evidence Reliability

Most reliable type of audit evidence.

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AA – L2 – SA – Q3.6 – Revenue System Deficiencies

Consequences of revenue system shortcomings.

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AA – L2 – SA – Q3.5 – Audit Documentation Reasons

True/false on reasons for audit documentation.

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AA – L2 – SA – Q3.4 – Audit Risk Definition

Best description of audit risk.

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AA – L2 – SA – Q3.3 – IESBA Ethical Principles

Non-fundamental principle in IESBA Code of Ethics.

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AA – L2 – SA – Q3.2 – ISSAI Issuer

Organization that issues ISSAIs.

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AA – L2 – SA – Q3.1 – Material Items Focus

Why auditors focus on material items in financial statements.

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AA – L2 – SA – Q2.10 – Directors’ Responsibilities

Identify non-responsibility of directors.

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