Auditing and Assurance (ACC3AUD)

. 1

Performance reviews

are not relevant to internal controls

are only applicable to the chief executive officer in an organisation

are part of control activities

can include financial data only

none of the alternatives

Q. 1

For purchasing inventory transactions, an example of a risk arises:

goods that have been sold and invoiced are included in the inventory on hand

the wrong quantities are recorded during stocktake

the wrong labour costs are added to the cost of the individual inventory item

the wrong amount is paid against an invoice

none of the alternatives

Q. 11

Which of the following is NOT a method of collecting evidence?

observation

enquiry

disclosure

analytical procedure

Re-calculation

Q. 13

A letter sent directly by the auditor to a third party asking the third party to respond whether they agree with the information in the auditor's letter is a:

negative confirmation letter

representation letter

external confirmation

positive confirmation letter

none of the alternatives

Q. 15

Which of the following relates to the audit assertion of cut-off?

all sales that have occurred have been included in the current period

all transactions relating to sales and sales adjustments have been recorded appropriately

sales from next income year are not included in the current period

all sales transactions have been recorded in the proper accounts

none of the alternatives

Q. 19

When an auditor uses the work of an expert, who has the responsibility for arriving at an overall conclusion regarding the truth and fairness of a client's financial report?

the auditor

the expert

the client's management

the client's audit committee

board of directors

Q 2

Which of the following is not an assertion used for transaction and events?

cut-off

existence

classification

occurrence

none of the alternatives

Q. 20

When testing for accuracy, an auditor searches for evidence:

to verify that a recorded transaction or event took place and relates to the entity

that all disclosures that should have been included in the financial report have been included

that transactions and events have been recorded at appropriate amounts

to verify that recorded assets are owned by the entity

none of the alternatives

Q. 4

Which of the following factors is most important in determining the appropriateness of audit evidence?

the reliability of the evidence in meeting the audit objective

the sampling method used by the auditor

the quantity of the evidence obtained

the objectivity of the auditor gathering the evidence

none of the alternatives

Q. 6

Which of the following is an example of a situation where an auditor may use the work of an expert?

a geologist engaged to evaluate the quantity and quality of mineral deposits

an actuary engaged to verify insurance premiums

a registered engaged to provide an opinion on the value of a client's property

a vintner engaged to assess the quality and value of wine stocks

all of the alternatives

Q. 7

Which of the following is NOT a financial report assertion?

inspection

rights and obligations

valuation and allocation

existence

cut-off

Q. 8

The first stage when an auditor considers the use of an expert is:

assessing the objectivity of the expert

assessing the need to use an expert

assessing the expert's report

determining the scope of the work to be carried out

none of the alternatives

Q. 9

If controls are in place to ensure that transactions are recorded in the correct accounting period, this satisfies which internal control objective?

timely

real

valued

posted

none of the alternatives

Q. 12

The occurrence assertion means that all transactions, events, assets, liabilities and equity items that should have been recorded have been recorded.

True

False

Q. 14

If the auditor believes that the client's system of internal control is not operating effectively they will adopt a lower assessed level of control risk approach.

True

False

Q. 16

The concept that no one employee should be in a position both to perpetrate and hide errors or fraud in the normal course of their duties is known as segregation of incompatible duties.

True

False

Q. 17

Checklist and preformatted questionnaires are particularly helpfulin industries that the auditor may not personally be familiar with auditing.

True

False

Q. 18

The internal control objective of 'real' refers to controls in place to ensure that fictitious or duplicate transactions are not included in the books and records of the organisation.

True

False