25 Which of the following controls helps to ensure that payroll payments are only made to bona fide employees? (1) Personnel records maintained for all employees (2) Comparison of bank transfer listing with payroll (3) Segregation of duties between staff involved in human resources and payroll functions (4) Re-performance of the calculation of a sample of payroll deductions A(1) and (2) B(1) and (3) C(2) and (4) D(3) and (4) 26 B Ltd maintains perpetual inventory records. Which of the following control activities would contribute to the auditor's confidence that inventory recorded in the financial statements exists? (1) Procedures to identify obsolete and damaged inventory (2) Physical safeguards to protect inventory from theft (3) Sequential numbering of goods dispatched notes (4) Reconciliation of inventory records to results of inventory counts A(1) and (2) B(1) and (3) C(2) and (3) D(2) and (4) 27 Which control objective would be satisfied by the authorisation of capital expenditure by the board? A To ensure that investment in non-current assets is made for valid business purposes B To ensure that expenditure is correctly classified as capital expenditure C To ensure that all non-current assets are recognised in the non-current asset register D To ensure that non-current assets are valued correctly 28 Which of the following is not a test of control? A Inspection of purchase order documentation to confirm that it has been authorised B Review of monthly bank reconciliations performed by the audit clicnt C Examination of purchase invoices for evidence of mathematical accuracy checks D Agreement of the cost of non-current asset additions to purchase documentation 29. The external auditor has identified a deficiency in the internal controls of SCo. Which of the following factors would indicate that the deficiency is a significant deficiency in accordance with ISA 265 Communicating deficiencies in internal control to those charged with governance and management? (1) The likelihood of the deficiency leading to material misstatement is low (2) There is a risk of fraud (3) The number of transactions affected by the deficiency is low (4) The deficiency interacts with other deficiencies identified A(1) and (2) B(1) and (3) C(2) and (4) D (3) and (4) 30 Which of the following statements is true regarding the controls in a small company? (1) The external auditor will never be able to rely on the controls in a small company (2) Segregation of duties may be inadequate due to staff numbers (3) Evidence of the operation of controls is more likely to be available in documentary form (4) The external auditor will assess the attitudes, awareness and actions of management A(1) and (3) B(1) and (4) C(2) and (3) D(2) and (4) 31 The draft financial statements of T Co show the following information: What is the receivables collection period? A 139 days B 175 days C 758 days D 958 days 32XLid has an internal audit function. The external auditor has concluded that the internal audit function does not apply a systematic and disciplined approach to its work. How does this affect the extent to which the external auditor can rely on the work of the internal audit function? A The external auditor must not use the work of the internal audit function B The external auditor can use the work of the internal audit function provided the individuals have been assessed as competent . C The external auditor can use the work of the internal audit function provided the organisational status of the function supports its objectivity D The extemal auditor can use work performed by the internal audit function which relates to low risk areas of the external audit only 33 The auditor of GCo is performing audit procedures to confirm the company's ownership of motor vehicles. Which of the following would provide the most persuasive evidence of this? A Physical inspection of the motor vehicles B Inspection of vehicle registration documents C Checking that the motor vehicles are recorded in the non-current asset register D Review of vehicle insurance documentation 34 Which of the following audit procedures would provide the auditor with evidence of completeness of inventery? A Tracing test counts performed at the inventory count to the detailed inventory listing B Reviewing the physical condition of inventory when attending the inventory count C Casting the inventory listing D Vouching the cost of a sample of inventory items to suppliers? invoices 35 The auditor of Q Co has performed purchases cut-off procedures and has identified that in two material instances goods reecived prior to the inventory count have not been included on the schedale of 'goods received not invoiced'. At the period end purchase imvoices have not been received - What is the auditor's conclusion based on this evidence? A Inventory is overstated B Trade payables are understated C Inventory is understated D Trade payables are overstated 36 Which of the following statements is/are true regarding direct confirmation of accounts receivable? (1) Responses from the customer must be returned directly to the client (2) Under the positive method the customer only replies if the amount stated is agrees with the customer's records A (1) only B (2) only C(1) and (2) D Neither (1) nor (2) 37 The key audit risk associated with trade payables is understatement. Which of the following procedures would provide the mest reliable evidence of the completeness of amounts due? A Tracing of amounts due per the payables ledger to purchase invoices B Matching of purchase invoices to goods received notes C Reconciliation of year-end supplier statements D Reconciliation of the payables kedger with the payables ledger control account 38 The auditor of M Lid has agreed a sample of non-current assets selected by physical inspection back to the non-current asset register. For which of the following assertions does this test provide assurance? A Completeness B Existence C Rights and obligations D Accuracy and valuation 39 Which of the following assertions about classes of transactions and events for the period under audit is defined below: "Amounts and other data relating to recerded transactions and events have been recorded appropriately. A Cut-off B Accuracy C Occurrence D Classification 40 As the audit senior on the year end audit of Z Ltd, you have instructed the audit junior to obtain and inspect supporting sales contracts for large sales transactions. Which of the following assertions are you seeking to test with this audit procedure? A Cut-off B Accuracy C Occurrenee D Completeness 41 Which of the follewing procedures will be performed by the auditor as part of a subsequent events review? (1) Request for written representations from management (2) Review of minutes of board mectings held after the date of the financial statements A (1) only B (2) only C(1) and (2) D Neither (1) nor (2) 42 The auditor of S Lid has concluded that the use of the going concern assumption is appropriate and that the material uncertainty has been adequately disclosed. What is the impact of this conclusion on the audit report? A Adverse opinion B Modified opinion C Unmodified opinion without an emphasis of matner paragraph D Unmodified opinion with an emphasis of matter paragraph 43 The auditor of Y Lid has concluded that Y Lid is not a going concern. The financial statements have been prepared on a going concert basis and management has refused to change them. What form of audit opinion will be issued by the auditor? A An unmodified opinion B A modified opinion due to material misstatement C A modified opinion due to insufficient appropriate audit evidence D An adverse opinion 44 For which of the following matters must written representations be sought? (1) That management has fulfilled its resportsibility for the preparation of the financial statements (2) That management has provided the auditor with all the information relevant to the audit (3) That accounts receivable are recoverable (4) That inventory is correctly valued at the lower of cost and net realisable value A(1) and (2) B(1) and (3) C (2) and (4) D (3) and (4) 45 ISA 700 Forming an opixion and reporting on financial statements sets out the basic elements of an auditor's report. Which of the following is not included in an unmodified auditor's report? A Management's responsibility for the financial statements B Auditors' responsibilities C Audit opinion, D Deficiencies of iniemalicontrals 46 The auditor of Q Ltd has completed the audit and has concluded that sufficient appropriate evidence has been obtained, which confirms that the financial statements are not materially misstated. Which form of audit opinion will the auditor issue? A Adverse opinion B Qualified opinion C Unmodified opinion D A disclaimer of opinion 47 ISA 705 Modification to the opinion in the independent auditor's report identifies three possible types of modification. In which of the following circumstances would a disclaimer of opinion be issued? A The auditor concludes that the financial statements include misstatements which are material but not pervasive to the financial statements B The auditor concludes that the financial statements include misstatements which are both material and pervasive to the financial statements C The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion but has concluded that the possible effeets of any undetected misstatements could be material but not pervasive D The auditor has not been able to obtain sufficient appropriate audit evidence on which to base an opinion and has concluded that the possible effects of any undetected misstatements could be both material and not pervasive 48 The financial statements of Z Ltd include a receivables balance of GHS20,000 which the auditors do not believe will be recovered. Materiality has been set at GHS100,000. There are no other unadjusted misstatements. What form of audit opinion would be issued by the auditor? A Adverse opinion B Unmodified opinion C Disclaimer of opinion D Qualified opinion due to overstatement of receivables 49P Co is being sued by a customer for the supply of faulty products. At the year end the outcome of the legal case is still uncertain. The directors have fully disclosed the matter as a contingent liability and the auditors are satisfied with the treatment and the level of disclosure. The auditors have concluded that the uncertainty is fundamental to the understanding of the financial statements. What form of audit opinion would the auditor give? A Disclaimer B Unmodified opinion with an emphasis of matter paragraph C Unmodified opinion without an emphasis of matter paragraph D Qualified opinion 50 The auditor may wish to draw the users' attention to a matter which is not presented or disclosed in the financial statements but which is relevant to the users' understanding of the auditor's report. How would this affect the auditor's report? A An emphasis of matter paragraph would be included B The audit opinion would be qualified C An other matters paragraph would be included D The auditor's report would not be affected as the auditor's report ouly refers to matters presented or disclosed in the financial statements 51 Which of the following bodies regulates audit practice in Ghana? A Ghana Audit Service B Internal Audit Agency C International Audit and Assurance Board D Institute of Chartered Accountants (Ghana) \$2 The audit partner responsible for the audit of Letham, a limited liability company, has completed the overall review of the financial statements and discussed all significant matters arising with the directors. Her conclusions are as follows. 1. The company cannot continue in operational existence for the foresecable future. 2. Full disclosure of the company's trading difficulties has been made in the notes to the financial statements. 3. The financial statements have been prepared on the going concert basis. 4. The directors have refused to make any further adjustments to the financial statements and the break-up value of the assets would be significantly lower than their carrying amount. What type of auditor's report should be issued? A Unmodified as full disclosure has been given B Unmodified opinion but with an emphasis of matter paragraph explaining the trading difficulties C Disclaimer of opinion on the grounds of uncertainty D Adverse opinion 53. Which of the following relationahips is unlikely to impair the independence of a non-executive director? A Being an executive director of another company, which trodes with the company B Holding ordinary shares in the company C Having once been an operational manager of the company nine years ago D Entering into a GHS 2m construction contract with the company five years ago in a previous employment E Being the husband of the finance director 54 What is a 'Statement of Circumstances' and when should it be produced? A Details of all frauds and errors identified by the auditor during the course of audit work. Produced at the end of the audit process B List of all internal control deficiencies identified by the auditor. Produced and included in the management letter C List of all circumstances that the auditor believes should be brought to the attention of shareholders and creditors. Produced only on resignation as auditor