1.The directors of an audit client have requested your audit firm to undertake an additional assurance engagement to examine and issue a report on the company's compliance with the NIST Cybersecurity Framework. What is the highest level of assurance you would be able to provide for this engagement?

a)Reasonable assurance.

b)Absolute assurance.

c)Limited assurance.

d)No assurance.

2.Which of the following statements MOST accurately describes the auditor's determination of performance materiality?

a)There is a positive relationship between the level of assessed risk and performance materiality.

b)Performance materiality is set for the financial report as a whole and referred to throughout the audit.

c)A relevant base must first be selected in determining performance materiality.

d)Performance materiality is set at less than the planning materiality level for a client.

3.Which of the following is NOT a test of control?

a)Inspecting relevant documentation showing background checks of new customers that inform the setting of credit limits and terms.

b)Reviewing evidence of monthly reconciliations of customer accounts by relevant manager.

c)Reviewing responses to external confirmation of a sample of the client's customers.

d)Inspecting relevant documentation indicating that matching of purchase orders, goods received notes and supplier invoices have been undertaken.

4. Which of the following procedures would be MOST appropriate for the auditor to undertake in addressing the risk of potential understatement of a client's plant and equipment account?

a)Physically sighting a sample of plant and equipment from the fixed assets register.

b)Verifying all revenue generated using plant and equipment during the year.

c)Vouching purchases of plant and equipment to original supporting purchase documents.

d)Analysing the plant and equipment repairs and maintenance accounts.

The following information relates to questions 5 to 7.

You are the auditor of Razzo Pty Limited (Razzo), a large manufacturing company, for the financial year ending 30 June 2019. Razzo has a loan secured on one of its manufacturing facilities that was extended based on a revaluation of the facility carried out in January 2018. A loan covenant specifies that the maximum loan to value ratio (LVR) on balance date should not exceed 60% of the net book value of the facility as reported in the audited financial report. The loan is currently 50% of the facility's net book value. Your research indicates that that comparable manufacturing facilities have declined by 15% in value on average over the last year. Razzo continues to record the carrying value of the property based on last year's revaluation.

It is your opinion that a new valuation of the facility should be undertaken in line with requirements under AASB 136, although this may result in a breach of the LVR loan covenant, which would trigger a significant portion of the loan becoming immediately repayable to the lender. Razzo's directors have notified you that they will not be undertaking a revaluation of the facility this year.

5.Which of the following accounts and assertions is MOST likely to represent a risk in the audit of Razzo?

a)Property, plant and equipment: Rights and obligations

b)Provision for revaluation: Occurrence

c)Loan payable: Existence

d)Impairment loss: Completeness

6.If the amount in question is material and Razzo's management do not take the required course of action you have requested, which of the following audit opinions would be most appropriate for the audit of Razzo for the financial year ending 30 June 2019?

a)Unmodified opinion.

b)Qualified opinion.

c)Adverse opinion.

d)Disclaimer of opinion.

7.Razzo's management ultimately decide to engage an experienced external valuer to undertake a revaluation of the facility at the request of the audit and risk committee. The valuer's report indicates that the facility's value has declined marginally, taking the LVR to 52%. The amount in question is not material, and on this basis, Razzo's management refuses to reflect the change in the financial report. Which of the following would be the MOST appropriate audit opinion for the Razzo engagement if you are satisfied in all other respects with the exception of this matter?

a)Unmodified opinion.

b)Qualified opinion.

c)Adverse opinion.

d)Disclaimer of opinion.

8.You are the auditor of Leon Pty Ltd (Leon), a property development company. Leon was initially funded by a shareholder's loan that its founder provided. Further growth has been financed by a bank overdraft facility that is repayable on demand. Leon's current ratio has been deteriorating due to significant delays across a number of large projects. As a result of the delays, Leon has been unable to collect significant portions of payments as specified in the respective project contracts. Leon exceeded its overdraft facility of $1m on a number of occasions during the year, incurring significant interest charges. You have reviewed Leon's correspondence with the bank noting that the available overdraft balance will be increased to $1.5m. You believe this will substantially improve Leon's cash flow. Leon's management have appropriately disclosed this information in the financial report. If you are satisfied in all other material respects, which of the following would be the MOST appropriate audit opinion to be issued for the engagement?

a)Unmodified opinion.

b)Unmodified opinion with material uncertainty related to going concern section drawing attention to relevant management disclosure on the issue.

c)Qualified audit opinion with basis for qualified audit opinion paragraph drawing attention to relevant management disclosure on the issue.

d)Adverse opinion.

9.Which of the following procedures is an auditor LEAST likely to undertake in determining whether or not a material uncertainty related to going concern exists for a client?

a)Reviewing the terms of the client's loan agreements and assessing if any have been breached.

b)Analysing and discussing with management the entity's cash flow, profits and relevant forecasts.

c)Obtaining and reviewing reports of pending regulatory actions.

d)Making enquiries of the company's suppliers to assess the pattern of settlement of the company's payables.

10.You are the auditor of Suthie Limited (Suthie), a dairy products manufacturer, for the financial year ending 30 June 2018. On 21 July 2018, you learn that Suthie has initiated a recall of a new product line of cheeses as a result of a notification by the NSW Food Authority that these products were in breach of product labelling requirements. Suthie had manufactured a significant stockpile of these cheeses prior to their sales launch on 1 July 2018. Which of the following would be the MOST appropriate action, if any, in relation to Suthie's financial report?

a)Adjust the 30 June 2018 financial report.

b)Disclose the information in the subsequent events note in the 30 June 2018 financial report.

c)Request Suthie's management to issue revised 30 June 2018 financial report.

d)No action would be required.

11.You are the auditor for Jimmi Ltd (Jimmi). When undertaking the final review of Jimmi's annual report, you note that the sustainability overview section of the annual report contains information that is materially inconsistent with the audited financial report. You have asked management to address the matter and change the relevant information in the sustainability overview section. They have declined on the basis that the sustainability overview section has a different audience to the financial report. If you are satisfied with the financial report in all material respects, the MOST appropriate course of action in relation to the audit report for Jimmi would be to:

a)Issue an adverse opinion with an other matter paragraph describing the situation.

b)Issue a disclaimer of opinion and include the matter in the basis for disclaimer of opinion paragraph.

c)Issue a qualified opinion and include the matter in the basis for qualified opinion paragraph.

d)Issue an unmodified opinion with an other information section outlining the matter.