ICAG – Page 2 – Knowsia

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

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

AAA – L3 – SA – Q2.9 – Profit Estimates

Term for conditional profit estimate.

Question

An estimate of what the profit is likely to be if certain conditions occur or certain events happen is called:

A a profit forecast

B a profit projection

C budgeted profit

D target profit

Answer

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Tags: Audit Services, Financial Estimates, ICAG, Profit Projection
Level: Level 3

Topic: Audit-Related Services

AAA – L3 – SA – Q2.8 – Subsequent Events

Auditor’s responsibility for subsequent events.

Question

Before the issue of the auditor’s report, what is the responsibility of the auditor with regard to significant events after the date of the financial statements?

A The auditor must actively look for significant subsequent events.

B The auditor should consider subsequent events only if they come to his attention.

C The auditor should consider only those subsequent events brought to his attention by the client’s management.

D The auditor must actively look for significant adjusting subsequent events but should consider subsequent non-adjusting events only if they come to his attention.

Answer

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Tags: Auditor Responsibility, Financial Statements, ICAG, Subsequent events
Level: Level 3

Topic: Evaluation and review

AAA – L3 – SA – Q2.7 – Auditor’s Working Papers

Incorrect statement about auditor’s working papers.

Question

Which of the following statements about the auditor’s working papers is INCORRECT?

A They record the audit evidence that supports the audit opinion

B They enable the audit partner to assess the progress of an audit

C They assist in the efficiency of an audit

D The client can have access to them

Answer

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Tags: Audit Evidence, Client Access, ICAG, Working Papers
Level: Level 3

Topic: Audit Evidence

AAA – L3 – SA – Q2.6 – Materiality Benchmarks

Accepted benchmark for materiality.

Question

Which of the following is an accepted benchmark for materiality?

A 1-2% of pre-tax profit

B 1-2% of operating profit

C 5-10% of revenue

D 1-2% of total assets

Answer

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Tags: Audit Planning, Financial Benchmarks, ICAG, Materiality
Level: Level 3

Topic: Planning

AAA – L3 – SA – Q2.5 – Audit Strategies

Identifying non-audit strategy.

Question

Which of the following is NOT an audit strategy?
A Substantive approach
B Directional testing approach
C Statement of financial position approach
D Business risk approach

Answer

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Tags: Audit Strategy, Business Risk, ICAG, Substantive Approach
Level: Level 3

Topic: The audit approach

AAA – L3 – SA – Q2.3 – Audit Committee Functions

Function of audit committee per 2020 Code.

Question

According to the Code of Corporate Governance for Listed Companies 2020, which ONE of the following is a function of the audit committee:

A To make recommendations to the Board with respect to the effectiveness of internal controls

B To review the risks facing the company

C To make recommendations on induction and training to the Board

D To recommend a remuneration policy for directors to the Board.

Answer

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Tags: Audit committee, Corporate Governance, ICAG, Internal controls
Level: Level 3

Topic: The regulatory environment

AAA – L3 – SA – Q2.2 – Confidential Information Disclosure

Permissible disclosure of client confidential information.

Question

In which of the following circumstances would it be permissible for an auditor to disclose confidential information about a client?

A To assist the firm with the audit of another client in the same industry

B To inform shareholders when disclosure is in the public interest

C To protect the interests of the shareholders

D To defend the firm against an official accusation of professional negligence.

Answer

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Tags: Confidentiality, Disclosure, ICAG, Professional Ethics
Level: Level 3

Topic: Rules of Professional Conduct

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

Incorrect statement about conflict of interest.

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.

AAA – L3 – SA – Q2.9 – Profit Estimates

Term for conditional profit estimate.

AAA – L3 – SA – Q2.8 – Subsequent Events

Auditor’s responsibility for subsequent events.

AAA – L3 – SA – Q2.7 – Auditor’s Working Papers

Incorrect statement about auditor’s working papers.

AAA – L3 – SA – Q2.6 – Materiality Benchmarks

Accepted benchmark for materiality.

AAA – L3 – SA – Q2.5 – Audit Strategies

Identifying non-audit strategy.

AAA – L3 – SA – Q2.3 – Audit Committee Functions

Function of audit committee per 2020 Code.

AAA – L3 – SA – Q2.2 – Confidential Information Disclosure

Permissible disclosure of client confidential information.

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Incorrect statement about conflict of interest.

You're reporting an error for "AAA – L3 – SA – Q3.2 – Conflict of Interest"

Non-role of the audit committee.

You're reporting an error for "AAA – L3 – SA – Q3.1 – Audit Committee Role"

Implication of ‘true and fair’ in financial statements.

You're reporting an error for "AAA – L3 – SA – Q2.10 – True and Fair"

Term for conditional profit estimate.

You're reporting an error for "AAA – L3 – SA – Q2.9 – Profit Estimates"

Auditor’s responsibility for subsequent events.

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Incorrect statement about auditor’s working papers.

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Accepted benchmark for materiality.

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Identifying non-audit strategy.

You're reporting an error for "AAA – L3 – SA – Q2.5 – Audit Strategies"

Function of audit committee per 2020 Code.

You're reporting an error for "AAA – L3 – SA – Q2.3 – Audit Committee Functions"

Permissible disclosure of client confidential information.

You're reporting an error for "AAA – L3 – SA – Q2.2 – Confidential Information Disclosure"

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