Question
Flag question Information text You are an audit senior of BEUKES & Co and have worked on the external audit of Angus and Agwa(A&A), an
Flag question
Information text
You are an audit senior of BEUKES & Co and have worked on the external audit of Angus and Agwa(A&A), an unlisted company, since your firm was appointed external auditor two years ago.
A&A owns a chain of nine restaurants and is a successful company. A&A has always been subject to national hygiene regulations, especially in relation to the food preparation process. Non-compliance can result in a large fine or closure of the restaurant concerned.
The board of A&A has recently notified you that the national hygiene regulations have been updated and are now much more stringent and onerous than before.
With this in mind, the board has asked your firm to conduct a review of A&A's compliance with hygiene regulations, in order to allow the board to assess whether the appropriate processes have been implemented at each of the nine restaurants. The review is not expected to include the provision of accounting advice or the preparation of figures in the financial statements.
The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement.
Question11
Not yet answered
Marked out of 2
Flag question
Question text
Despite running a successful company, A&A's board has often needed to be reminded of some fundamental principles and you often have to explain key concepts.
Which of the following statements best defines the external audit?
a.
The external audit is an exercise carried out by auditors in order to give an opinion on whether the financial statements of a company are fairly presented.
b.
The external audit provides negative assurance on the truth and fairness of a company's financial statements.
c.
The external audit is an exercise carried out in order to give an opinion on the effectiveness of a company's internal control system.
d.
The purpose of the external audit is to identify areas of deficiency within a company and to make recommendations to mitigate those deficiencies.
Clear my choice
Question12
Not yet answered
Marked out of 2
Flag question
Question text
The board has also struggled to differentiate between its responsibilities and those of the external auditor in circumstances such as the prevention and detection of fraud and error, and compliance with regulations.
Which of the following statements best describes BEUKES & Co's responsibility regarding A&A's compliance with hygiene regulations, in line with ISA 250 (Revised)Consideration of Laws and Regulations in an Audit of Financial Statements?
a.
BEUKES & Co does not have any responsibility as the hygiene regulations do not have a direct effect on the financial statements.
b.
BEUKES & Co should actively prevent and detect non-compliance with the regulations.
c.
BEUKES & Co should obtain sufficient appropriate audit evidence about A&A's compliance with the regulations as they have a direct effect on the financial statements.
d.
BEUKES & Co should perform specific audit procedures to identify possible non-compliance.
Clear my choice
Question13
Not yet answered
Marked out of 2
Flag question
Question text
The partner responsible for the review of hygiene compliance has informed you that the engagement is an assurance engagement.
Which of the following wouldNOThave been relevant to the partner in forming this opinion?
a.
The existence of suitable criteria
b.
The existence of a three-party relationship
c.
The determination of materiality
d.
The subject matter
Clear my choice
Question14
Not yet answered
Marked out of 2
Flag question
Question text
The partner responsible for the review engagement has asked you to tell him what level of assurance you believe BEUKES & Co should provide, and also what type of opinion the firm should give.
What is thelevel of assurance and type of opinionthat can be provided on this review engagement?
Level of assurance&Report wording
a.
ReasonablePositive
b.
ReasonableNegative
c.
LimitedPositive
d.
LimitedNegative
Clear my choice
Question15
Not yet answered
Marked out of 2
Flag question
Question text
The audit engagement partner has told you that the independence threats arising from BEUKES & Co performing the review engagement should be monitored carefully.
Which of the following is likely to cause the audit engagement partner most concern?
a.
The review engagement is likely to give rise to a self-review threat, as the outcomes of the review could form the basis of the financial statements which the audit team will audit.
b.
The lucrative nature of the review engagement may make the external audit team less inclined to require management to make adjustments or to issue a modified audit opinion, for fear of losing the review engagement.
c.
If the new review engagement causes BEUKES & Co's fee income from A&A to exceed 15% of the firm's total fees, the SAICACode of Conductstates that the new engagement must be turned down.
d.
According to the SAICACode of Conduct, BEUKES & Co is prohibited from providing other assurance services to an audit client.
Information
Flag question
Information text
Ambunda designs and manufactures luxury outdoor furnitures. It is not a listed company, but its board has recently decided that it would like to improve itscorporate governancein order to apply best practice. Ambunda's shares are held equally by six shareholders, four of whom are also executive directors. The remaining two shareholders are not involved with Ambunda, other than as shareholders.
Ambunda has an internal audit department which is managed by Adrian Shilongo, the chief internal auditor. Adrian frequently comments that Ambunda's board does not understand his reports and does not provide sufficient support for his department and for the company's internal control systems. DWK & Co, Ambunda's external auditors, have also expressed concern in this area.
Adrian has submitted a proposal to the board to establish an audit committee, and this is currently under consideration. The proposed membership of the audit committee is:
Adrian Shilongo (chief internal auditor)
Penny Amupanda (existing executive director with some financial expertise)
Sharon Apindi (proposed new non-executive director)
Fredrick Amukungu (proposed new non-executive director)
The board is also considering a significant expansion of the company. However, the company's bank is concerned by the standard of financial reporting as Ambunda's finance director recently left the company. The board is delaying providing the bank with financial information until a new finance director has been appointed.
As part of its commitment to the effectiveness of the external audit process, the chair of Ambunda's audit committee, Leslie Schiff, is keen to ensure that the external audit makes use of the latest auditing techniques. She has heard about data analytics routines but is unsure exactly what they entail.
Question16
Not yet answered
Marked out of 2
Flag question
Question text
Ambunda's internal audit department is currently not well understood or supported by the board. Which TWO of the following statements describe the main advantages of establishing an audit committee?
a)The position of the internal audit department will be strengthened within the organisation.
b)Corporate governance will be enhanced as the board of directors will report to the audit committee.
c)The effectiveness of the internal audit department will be improved as the audit committee will monitor and review its performance on a regular basis.
d)The workload of the internal audit department will be better managed as the audit committee will be able to minimise the extent to which the external auditors rely on the work of the internal auditors.
a.
a & c
b.
c & d
c.
a & d
d.
a & b
e.
b & d
f.
b & c
Clear my choice
Question17
Not yet answered
Marked out of 2
Flag question
Question text
Once established, the audit committee will have many objectives.
Which of the following doesNOTform part of the audit committee's objectives?
a.
Monitoring the independence of the external auditor
b.
Appointing the external auditor
c.
Implementing a policy on the supply of non-audit services by the external auditor
d.
Safeguarding the privacy of whistleblowers
Clear my choice
Question18
Not yet answered
Marked out of 2
Flag question
Question text
In relation to the proposed membership of the audit committee, statewhich of the proposeddirectors should be included in the audit committee
Proposed member
a)Adrian Shilongo
b)Penny Amupanda
c)Sharon Apindi
d)Fredrick Amukungu
a.
c only
b.
d only
c.
a only
d.
a & c
e.
a & d
f.
none of them
g.
all of them
h.
c & d
i.
a & b
j.
b & d
k.
b & c
l.
b only
Clear my choice
Question19
Not yet answered
Marked out of 2
Flag question
Question text
Which of the following statements best describes why having an audit committee could help Ambunda raise additional finance by addressing the concerns of the bank?
a.
The audit committee will review all the available evidence to substantiate information in financial reporting, thus improving the credibility of the financial statements.
b.
The audit committee will have at least one member who has relevant financial experience, so that they can monitor the integrity of the financial statements.
c.
The audit committee will have at least one member who has relevant financial experience. This person will be able to stand in as Ambunda's finance director before a new finance director is appointed.
d.
The independent non-executive members of the audit committee can provide guarantees to the bank concerning Ambunda's financial viability.
Clear my choice
Question20
Not yet answered
Marked out of 2
Flag question
Question text
The following statements concern the auditor's use of data analytics routines. Which of the statements or statement is true
a)A key drawback of data analytics software is that it is difficult to tailor to each particular audit client
b)Data analytics routines enable auditors to examine complex data using simple visualisation techniques
c)Although powerful, data analytics routines must be applied to strictly limited quantities of data so as to extrapolate correctly from a sample
a.
c only
b.
none of them
c.
a & c
d.
a & b
e.
a only
f.
b only
g.
all of them
h.
b & c
Information
Flag question
Information text
You are the audit manager of Haikoli & Co and you are planning the audit of Mobile Connections Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones covers and protectors.
During the planning stage of the audit you have obtained the following information. The employees of Mobile Connections Co are entitled to purchase smartphones covers and protectors at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.
During the year the financial controller of Mobile Connections was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a qualified audit senior of Haikoli & Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from Mobile Connections was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).
From a review of the correspondence files you note 20% of last year's audit fee is still outstanding. Based on the information above you have summarised some of the potential risks to independence in the audit of Mobile Connections as follows.
(1) The audit team has been offered a discount on luxury phones covers and protectors.
(2) The audit senior was seconded to MOBILE Connections to cover for the financial controller.
(3) Total fees from MOBILE connections risk over 15% of the total fees of the firm for the second consecutive year.
(4) Fees are overdue in respect of last year's audit.
Question21
Not yet answered
Marked out of 2
Flag question
Question text
Which of the following options best identifies the validself-interestpotential threats to independence in the audit of Mobile Connections ?
a.
1,3 & 4
b.
1 $ 2
c.
2 & 3
d.
1, 2 & 3
e.
2 & 4
f.
3 & 4
g.
1 & 4
h.
2,3 & 4
i.
2 only
j.
1 only
k.
1$ 3
Clear my choice
Question22
Not yet answered
Marked out of 2
Flag question
Question text
Which of the following options best identifies the valid self-review potential threats to independence in the audit of Mobile Connections ?
a.
3 only
b.
4 only
c.
2 & 4
d.
1 only
e.
1 & 3
f.
3 & 4
g.
2 & 3
h.
1 & 4
i.
2 only
j.
1 & 2
Clear my choice
Question23
Not yet answered
Marked out of 2
Flag question
Question text
You have also discovered that the audit engagement partner and the finance director have known each other socially for many years, and in fact went on holiday together last summer with their families to the finance director's villa.
What safeguards should be applied to theTWOthreats to independencecaused by the situation?
a.
Haikoli & Co to resign as auditors
b.
Rotation of audit engagement partner
c.
Rotation of audit engagement partner
d.
Haikoli & Co to resign as auditors
Clear my choice
Question24
Not yet answered
Marked out of 2
Flag question
Question text
You have also discovered that the audit engagement partner and the finance director have known each other socially for many years, and in fact went on holiday together last summer with their families to the finance director's villa.
WhichTWOthreats to independence are raised by this relationship ?
a.
Familiarity and self-interest
b.
Self-review and intimidation
c.
Self-review and intimidation
d.
Familiarity and self-interest
Clear my choice
Question25
Not yet answered
Marked out of 2
Flag question
Question text
In relation to the audit team being offered a 10% discount on mobile phones covers and protectors: Indicate whether the following statements are true, in accordance with SAICA'sCode of Conduct.
1)The audit team can accept the discount as it is on the same terms as that offered to staff
2)Junior members of the audit team are allowed to accept the discount, but the audit manager and audit engagement partner should not
3)Unless the value of the discount is trivial and inconsequential to the audit team members, the offer should be declined
4)The audit team is only allowed to accept a discount of up to 5%
a.
2 only
b.
1 & 2
c.
2& 4
d.
1 & 4
e.
3 & 4
f.
None of them
g.
3 only
h.
4 only
i.
2 & 3
j.
1 only
k.
1 & 3
Clear my choice
Question26
Not yet answered
Marked out of 2
Flag question
Question text
Which of the following steps must Haikoli & Co take, as the fees from MOBILE connections have exceeded 15% for the last two years?
(1) Resign from the audit
(2) Disclose the matter to those charged with governance
(3) Arrange for a pre- or post-issuance review
a.
1 & 2
b.
1 & 3
c.
2 only
d.
3 only
e.
1 only
f.
2 & 3
g.
None of them
h.
All of them
Clear my choice
Question27
Not yet answered
Marked out of 2
Flag question
Question text
The finance director of MOBILE connections has made some enquiries about the other services that Haikoli & Co may be able to assist with.which of the following services can Haikoli & Cobe able to provide .
1)Design and implementation of IT systems over financial reporting
2)Assistance with preparation of tax return
3)Accounting services
4)Recruiting service for the position of credit controller
a.
1 & 4
b.
2 only
c.
1 & 2
d.
3 only
e.
3 & 4
f.
1 only
g.
4 only
h.
2 & 4
i.
2 & 3
j.
none of them
k.
1 & 3
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started