AUDITING & ASSURANCE M/C:

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 Sportswear Minnki Palsii Le Baby Dress Feiss wear Tennis suit Ye shoes T-S Jumping Jack Dress Men's wear Samba socks Bowtie | O-Man 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 GI'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 d) The risk that that T-S product line is obsolete. 5.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