In planning to obtain sufficient appropriate audit evidence in respect of classes of transactions and account balances, the auditor must consider the relevant financial statement assertions. Which of the following assertions is NOT relevant to the audit of payroll transactions?

1. Completeness
2. Cut-off
3. Classification
4. Existence

To what standard does ISA 230 Audit Documentation require audit documentation to be prepared?

1. Sufficient to assist the audit partner to discharge their review responsibilities
2. Sufficient to enable an experienced auditor, having no connection with the audit, to understand the audit evidence obtained
3. Sufficient to comply with the audit firm's quality control policy and enable the conduct of quality control reviews
4. Sufficient to enable future audits to be efficiently planned and performed

The notes to the financial statements of Kindred Co disclose that the company has only operated profitably as a result of a significant amount of trading with its parent company, and the auditor considers the disclosure appropriate. The financial statements have been prepared using the going concern basis of accounting. What should the audit opinion on the financial statements of Kindred Co be?

1. Unmodified
2. Unmodified with a Material Uncertainty
3. Related to Going Concern paragraph
4. Qualified

Maddy Co is a new audit client of your firm. You have been planning the audit, and have concluded that due to unstable market conditions and a poor control environment, the risk of material misstatement is high. What would be an appropriate response in order to minimise audit risk?

1. Increase reliance on client-generated audit evidence
2. Perform audit procedures at the interim date rather than the year end
3. Reduce the level of preliminary materiality
4. Reduce sample sizes for tests of detail

During the year, the directors of Eastern Co decided to increase sales volume by offering attractive credit terms to new customers. As a result, sales have increased but so have irrecoverable trade receivables ('bad debts'). Which of the following internal control procedures is most likely to prevent irrecoverable receivables? Writing off a debt as irrecoverable requires the sales director's approval The credit controller suspends sales to customers who exceed their credit limits

1. All new
2. Writing off a debt as irrecoverable requires the sales director's approval
3. The credit controller suspends sales to customers who exceed their credit limits
4. All new customer are vetted for credit worthiness before sales orders are approved
5. The credit controller reviews an aged analysis of customers' balances

Pastrami operates four Italian "take away" shops. Inventory amounts to 15% of the company's total assets at the reporting date. Management performed a full year-end inventory count but did not allow the auditor to attend. The auditor has been unable to perform alternative procedures regarding the completeness and existence of inventory. Which of the following audit opinions should be issued?

Disclaimer of opinion as the matter is pervasive

Unmodified with an emphasis of matter paragraph

Qualified 'except for' a material misstatement

Qualified 'except for' an inability to obtain sufficient evidence

Which of the following, if performed by the internal audit function of an audited entity, could provide evidence relating to assessing the strength of the entity's control environment?

Authorising capital expenditure requisitions exceeding than $5,000

Review of the implementation of corporate policies devised by the management board Preparation of weekly payroll reconciliations

Performing a value for money audit on procurement

An error that arises from an isolated event and is therefore not representative of errors in the population as a whole is which type of error, according to ISA 530 "audit sampling"?

Tolerable error

Anomalous error

Sampling error

Stratification error

Which of the following factors would not usually affect an auditor's planned sample size for an external confirmation of trade accounts receivable?

The number of customer accounts in the receivables ledger

The risk accepted that the sample selected omits a material receivable balance

The expected error or deviation rate

The stratification of the receivables ledger

The management of Tremor has discovered that the credit controller has been perpetrating a fraud for the last two years. Which of the following control deficiencies may have contributed to this fraud remaining undetected for so long?

Failure to take up references when recruiting accounting personnel

No independent review of receivables ledger control account reconciliations

Lack of authorisation of journal adjustments

Absence of adequate fidelity insurance

In a file of audit planning working papers, which of the following would NOT usually be included in the overall audit strategy?

Calculation of performance materiality

Ratios calculated on the draft financial statements

Information on the extent to which internal audit may assist in obtaining evidence

A detailed audit programme for a provision

At the planning stage of an audit for a new client, the level of materiality needs to be set. Which of the following pieces of information will allow the auditor to increase the level of materiality?

The company operates in a highly competitive environment.

The company's management structure has changed during the year.

The company has a stable structure with a strong internal control environment.

The company does not have an internal audit function.

ISA 330 The Auditor's Responses to Assessed Risks requires which of the following audit procedures related to the financial statement closing process?

(i) Agreeing information in the financial statements to the underlying accounting records

(ii) Agreeing the correction of all errors discovered during the course of the audit

(iii) Examining material journal entries and other adjustments made in the preparation of the financial statements

(i) and (ii) only

(i) and (iii) only

(ii) and (iii)

Homeland Co's external auditors are relying on the work of the company's internal audit function with respect to part of the audit of inventory, which is material to Homeland Co's financial statements.

Which of the following is a correct statement with respect to this situation?

The external auditor is required to reperform some of the internal auditors' work

The audit report should refer to the work performed by the internal auditors in the "scope of the audit" paragraph

The external auditor does not need to consider the objectivity of the internal auditors

The external auditor can ask internal audit to make significant judgments in the audit of inventories

ISA 315 "identifying and assessing the risks of material misstatement through understanding the entity and its environment" requires the auditor to obtain an understanding of which one of the following areas of internal control?

Internal control relevant to the audit

Only new internal controls set up in the year

Internal control considered to be ineffective

Internal control considered to be effective

Which of the following methods of obtaining auditing evidence is least likely to form part of a test of control?

External confirmation procedures

Inspection of documents

Reperformance of a reconciliation

Observation

Which of the following are subsequent events in accordance with ISA 560 Subsequent Events?

(i) Events during the reporting period that are material to the prior period's financial statements

(ii) All events that provide evidence of conditions that existed at the reporting date

(iii) Events occurring between the reporting date and the date of the auditor's report

(iv) Facts that become known after the date of the auditor's report

(i) and (ii)

(i) and (iv)

(ii) and (iii)

(iii) and (iv)

Audit materiality and evaluation of misstatements (ISAs 320 and 450)

Audit materiality

Audit conduct

Planning materiality

Evaluation of misstatements.