1.Which of the following audit activities is undertaken at the finalisation and reporting stage of an audit?

a)Prepare engagement letter detailing terms of the audit engagement.

b)Undertake further tests of controls in relation to controls where weaknesses were previously identified.

c)Assign appropriate staff to the engagement to communicate with those charged with governance as necessary.

d)Formulate an opinion based on the results of the audit.

2. Which of the following statements LEAST accurately describes the auditor's determination of planning materiality?

a)There is an inverse relationship between the level of assessed risk and materiality.

b)The ownership structure of the client entity is irrelevant in determining planning materiality.

c)The stability of the base must be considering in determining planning materiality.

d)There is usually only one planning materiality for an engagement.

3.Which of the following is a test of control?

a)Reviewing patterns of debt collections to assess adequacy of provision for doubtful debts.

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)Reviewing calculations on sales invoice by comparing to shipping documents and selling prices.

The following information applies to questions 4 and 5.

The following treemap visualisation represents total sales of your client, GJ Ltd's (GJ's) inventory by category and product lines for the financial year ending 30 June 2018.

Women's wear

Minnki Palsii

Le Baby Dress

Jumping Jack Dress

Sportswear

Feiss wear

Tennis suit

Ye shoes

TS

Men's wear

Samba socks

Bowtie

OMan

4. Based on the above visualisation, which of the following would you be LEAST concerned with in the audit of GJ?

a)The risk that GJ offers a product line that is too narrow for the company to be competitive.

b)The risk that GJ's men's wear line is potentially overstated.

c)The risk that sales of the Minnki Palsii line is potentially overstated.

d)The risk that that TS product line is obsolete.

5. Which of the following would be the LEAST appropriate procedure to undertake in testing sales of the Minnki Palsii product line?

a)Select a sample of Minnki Palsii sales to verify that appropriate prices were used by reference to the authorised price list as of the date of each sale.

b)Review forward orders on Minnki Palsii for which payments have been received but that have yet to be delivered to customers and ensure that they are excluded from sales.

c)Physically inspect a sample of Minnki Palsii at each location where GJ stores the product line and verify the same number of items are recorded in the company's inventory records.

d)Select a sample of Minnki Palsii sales and match to shipping documents to ensure that the appropriate quantities of goods were recorded for each sale.

6. You are the auditor of Muthi Pty Ltd (Muthi). You have noted that during the year, Muthi's management has implemented a bonus incentive scheme for salesmen based on achievement of individual sales targets. Which of the following account and assertion would be LEAST likely to represent a risk in the audit of Muthi?

a)Sales: Cutoff.

b)Accounts receivable: Completeness.

c)Sales: Accuracy.

d)Accounts receivable: Existence.

The following information relates to questions 7 and 8.

You are the auditor for Pri Ltd (Pri) for the year ended 30 June 2018. In July 2018, one of Pri's largest customers, Tech Pty Ltd (Tech), went into bankruptcy after the court upheld a large penalty against the company for engaging in misleading conduct. Pri's accounts receivable includes an amount of $8 million owing from Tech, of which only 10% is now expected to be collectible.

7.Which of the following actions would you require Pri's management to undertake?

a)Take no action in 2018 and release 2018 financial report as prepared, recording $7.2 million loss in the 2019 financial report.

b)Report $7.2 million loss in relation to uncollectible debts in the events after balance date note to the 2018 financial report.

c)Record $3.6 million loss in relation to uncollectible debts in each of the 2018 and 2019 financial reports.

d)Adjust the 2018 financial report to record the $7.2 million loss and bring down the amount owing from Tech accordingly.

8.If the amount in question is material and Pri's management do not take the required course of action you have requested, which of the following audit opinion would be most appropriate for the audit of Pri for the financial year ending 30 June 2018?

a)Unmodified opinion.

b)Unmodified opinion with emphasis of matter paragraph.

c)Qualified opinion.

d)Disclaimer of opinion.

The following information relates to questions 9 and 10.

You are the auditor for Moped Pty Ltd (Moped), a property development company. Moped has experienced rapid growth in recent years, leading to an increase in the levels of work in progress and receivables. Moped's current ratio has been deteriorating as the company has had significant delays across several projects, resulting in the company being unable to collect large portions of payments as specified in the respective project contracts. Moped 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. At the end of the year, the amount overdrawn was $1.5m against an amount originally agreed with the bank of $1m. You are also aware that the bank may not be willing to renew the existing overdraft facility as Moped has exceeded the original agreed balance and lenders have become generally more cautious in extending unsecured finance in the current regulatory environment and credit crunch.

9. Which of the following procedures are you LEAST likely to undertake in response to the above risk in relation to Moped?

a)Discuss with management the potential for Moped to restructure the company and divest of nonperforming parts of the business.

b)Investigate the availability of technological advancements available in the market that may facilitate Moped's expedited completion of work in progress.

c)Investigate the bank's intentions in respect of the renewal of the current overdraft facility by contacting the bank directly.

d)Investigate the potential for Moped to pursue alternative financing arrangements, including additional contributions from its founder.

10. Following your investigations, you have determined that Moped has exhausted all lines of credit and that the company will be unlikely to be able to meet its debts as they fall due within seven months. Moped's management disagrees with this view and has continued to use the going concern basis in preparing the company's 2018 financial report. Which of the following would be the most appropriate audit opinion for the Moped engagement?

a)Unmodified opinion with material uncertainty related to going concern section.

b)Disclaimer of opinion.

c)Adverse opinion.

d)Qualified opinion with emphasis of matter paragraph.

11.You are the auditor of Noah Limited (Noah) for the financial year ending 30 June 2018. Noah carries various financial assets including negotiable instruments and derivatives on its balance sheet. The company has not recorded any impairment in respect of its financial assets for the 2018 financial year (vs. $3.8 million in 2017). Your work indicates that there should be an impairment charge of $10,000 in respect of one of the financial assets held by Noah. Noah's management refuses to record this impairment on the basis that the amount is immaterial, which you agree with. Which of the following is the most likely opinion you will issue for the Noah audit?

a)Unmodified.

b)Unmodified with emphasis of matter paragraph.

c)Qualified.

d)Adverse.

12.During the final review of a client's annual report, you have noted that the 'Management Commentary' 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 'Management Commentary' section. They have declined and subsequently amended the financial report to be consistent with the information in the 'Management Commentary' section. If the matter is material, the most appropriate course of action would be to:

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

b)Issue an unmodified opinion and include the matter in the letter to the client's audit committee.

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.

13.Which of the following is NOT an example of a performance audit in the public sector?

a)Reporting to the minister on the outcomes of programs to support equitable access to education in regional areas.

b)Reporting to the minister on the extent to which the corrections department has prevented the supply and use of drugs in prisons.

c)Reporting to the minister on how well health services are managing occupational health and safety risks for their workforce.

d)Reporting to the minister as to whether the state infrastructure department has followed the government procurement guidelines.