Question 1 4 Points Which of the following is not a purpose served by the application of analytical procedures? A As part of audit review to determine that all significant abnormalities have been resolved to the auditor's satisfaction To provide a basis for lowering the materiality thresholds where significant increase in earnings inflation is indicated To determine the effectiveness of the internal control system As part of audit planning to assist in locating significant changes in revenues and expenses 4 Poin Points Question 2 Which of the following can produce audit evidence? () Observation (1) Re-performance Maximum points Question 2 4 Points Which of the following can produce audit evidence? Observation (!) Re-performance Cilt Confirmation OM) Inspection (w). (H) & (1) B) C) & () C 0... () D ... v) Question 3 4 Points Jane Robinson is the auditor of BH Ltd for the year ended 31 December 2020. During the final audit jane discovered several invoices totalling 400,000 which is 13 of the draft pre-tax profit for the year from a German company for management consultancy services. John Dow, the managing director of BH Ltd, who also owns 45% of the shares in BH Ltd, could not provide a satisfactory explanation as to why they needed consultancy services from the German company Consequently, Jane informed Me Dow that the audit report will tely be qualified. Mr Dow did not like this news and told her that she will be dismissed unless she agreed to issue a clean audit report Which of the following statements are correct? The com cannot demisine before the end of her term of office Question 3 4 Points Jane Robinson is the auditor of BH Ltd for the year ended 31 December 2020. During the final audit, jane discovered several Invoices totalling 400,000 which is 13% of the draft pre-tax profit for the year from a German company for management consultancy services, John Dow, the managing director of BH Ltd, who also owns 45% of the shares in BH Ltd, could not provide a satisfactory explanation as to why they needed consultancy services from the German company. Consequently, Jane informed Me Dow that the audit report will likely be qualified Mr Dow did not like this news and told her that she will be dismissed unless she agreed to issue a clean audit report 1 Which of the following statements are correct? The company cannot dismiss Jane before the end of her term of office () Jane has a legal right to access records, and receive satisfactory explanations necessary to carry out the audit (ii) Jane is entitled to her fees for the work carried out (v) Jane has a legal right to make reasonable representation to shareholders at the AGM concerning the circumstances of her dismissal (1). (1), & (11) B (0).(), & (iv 6) only D) (1). (H), & (iv) Question 4 4 Points Which of the following statement is incorrect? A Written evidence is more reliable than oral evidence Third party evidence is reliable but may still require corroborating evidence Internally generated documents are unreliable audit evidence because they lack independence D Auditor generated evidence is the most reliable source of audit evidence Question 5 4 Points In planning the audit of a company's financial statements, an auditor Detection risk is set independent of the auditor's assessment of inherent risk and control risk 8) Assesses the inherent risk and control risk, and then sets the detection risk C Sets the inherent risk, control risk, and assesses the detection risk Assesses the inherent risk, control risk, and detection risk Question 6 4 Points The risk that an auditor's procedures leading to the conclusion that a material misstatement does not exist in an account balance when, in fact, such error does exist is referred to as: Detection risk B Contro risk Inherent risk Prevention risk Question 7 4 Points Which of the following statement is incorrect? Internal controls are put in place to safeguard the entity's assets Management are responsible for reviewing and updating the internal control systems whenever required Internal controls are designed and implemented by management to reduce the impact of inherent risks Internal controls are designed and implemented by management to eliminate business risks 4 Points 4 Points There are several reasons why a commercial entity which is not legally required to have its financial accounts audited may still choose to do so. These include: When applying for a bank loan 06) To help revaluation of the business assets OM) Help avoiding disputes () Giving more creditability to the accounts 6). (), (i), & (iv) B (1). (1), 8 (111) () (1), & (iv) (it). (1), & (iv) Question 9 4 Points The relationship between theauditor, client company, and their shareholders is The auditor is appointed by the shareholders and reports to the shareholders The auditor is appointed by the directors and reports to the company The auditor is appointed by the directors and reports to the shareholders The auditor is appointed by the company and reports to the shareholders Question 10 4 Point Sampling risk is: The result of the sampling may not be correctly interpreted B The sample may not represent the population The risk that insufficient sample may be selected All of the above Question 11 4 Points For a given level of audit risk, which of the following statement is correct? Detection risk increases as the control risk increases B Control risk falls as the inherent risk increases None of the above Detection risk falls as the control risk increases 4 Points Question 12 Last sove Question 12 4 Points To determine the number of items to be selected in a sample for a particular substantive test of details, the auditor does not need to consider: Required confidence level B Tolerable error rate Standard deviation of the population Expected error rate 4 Points Question 13 During the compliance testing, when the results from the initial sample do not support the planned level of control risk, the auditor A Stops the audit work until the client has fixed the control deficiencies B Will conclude that the control system is wholly Ineffective and cannot be relied on May select additional sample for further testing D None of the above Last saved 13. 59 minutes remaining Question 12 a Polines 4 Points To determine the number of items to be selected in a sample for a particular substantive test of details, the auditor does not need to consider Required confidence level B) Tolerable error rate C Standard deviation of the population D) Expected error rate 4 Points Question 13 During the compliance testing when the results from the initial sample do not support the planned level of control risk the auditor Stops the audit work until the dient has fixed the control deficiencies will conclude that the control system is wholly ineffective and cannot be relied on May select additional sample for further testing None of the above Last 19 Submit 59 minutes remaining Question 14 4 Points In the context of internal control system, which of the following are classified as control activities: Signing off a purchase invoice to authorise payment Assessing a new client for credit worthiness on Using a password to access the company computers 1 Carrying out monthly bank reconciliation () & M , 800 BH & M D) ... liv Question 15 4 Point Which of the following statements is incorrect? A Internal audit department is responsible for eliminating all business and operational risks It is not the responsibility of internal auditors to design and implement the internal control system Internal audit department is responsible for assessing and managing its own risk Internal auditors normally report the findings to the audit committee or to the senior management if there is no audit Committee 2 Submit assoved TIM Sow and love 4.30100311/courselda_81753_1 Question 16 a Points 4 Points An auditor obtains knowledge about a new client's business and its industry to A Better understand the events and transactions that may have an effect on the client's financial statements Develop an attitude of professional scepticism concerning management's financial statement assertions Make constructive suggestions concerning improvements in the client's internal control system Evaluate whether the total of known misstatements causes the financial statements taken as a whole to be filterially misstated Question 17 4 Points ISA530 Audit Sampling considers five sampling methods Block sampling ) Random sampling Haphazard sampling Monetary unit sampling Systematic sampling Which of these sampling methods are considered as statistical sampling methods A) ((H) & (v) B OLIN & e.Rural course_81753_outlinsessment_3215073_overvienfattempt/_361003L 17courseld_81753.1 Question 18 X 4 Points Which of the following statement is incorrect? A inherent risk affects both audit risk and business risk Sampling risk is the risk that sample does not represent the population Control risk is the risk that cannot be reduced through audit procedures Audit risk is the risk that audit procedures do not reveal material statements in the financial statements Question 19 4 Points Regents a form of certified accountants and registered auditors, has four offices with a total fee income of (435M. largest office in London accounts for 161M of the firm's total fee income pic is an audit client of the London office of Regents LLP incurring regularly annual fees for audit and non audit serdices of around 447.000. With reference to Ethical Standard es, what steps, day, should the audit firm take in relation to this chent A) Give up the client Disclosure to those charged with governance Carry out a hot review of audit, and disclosure to those charged with governance (D No action is necessary det Question 20 4 Points Auditors have a duty to express an opinion on Whether the accounts have been prepared in accordance to applicable accounting standards og Whether the accounts have been prepared in accordance with the applicable law Whether the accounts give a true and fairview whether the accounts have been prepared accurately AO () B) 0.00 & 10 (10) D) 0.00) & 4 Points Question 21 in the context of the aude of financial statements A) Overall materiality is the sum of audit materiality and performance materiality Performance materiality is the same as audit materiality Performance materiality is lower than the audit materiality D Performance materiality is higher than the audit materiality Submit Save and Cose Loved 1839 Question 24 4 Points In deciding the audit sample size, the auditor considers several factors including expected error rate, tolerable error rate, and confidence level. Which of the following statement is correct? Tolerable error rate is always lower than expected error rate, and both are lower than confidence level B There is no relationship between sampling risk and the confidence level set by the auditor Expected error rate is lower than tolerable error rate, and both are always lower than sampling risk Tolerable error rate is always higher than expected error rate, and both are lower than the confidence level Question 25 4 Points Which of the following statements is correct? The directors' report need not be reported on by the auditor B The directors may not intentionally lie to the auditor, but they are allowed to withhold the facts if not directly asked for them The notes to the accounts form part of the accounts subject to audit For a public company, the auditor's term of office runs from one accounting year end to the next 17 courseld_0173331 X Question 22 Caponta 4 Points Which of the following statement is incorrect? A An item which is small in value can never be considered as material in the context of statutory financial audit B Audit materiality is set by the auditor during the audit process Materiality level is usually set in relation to revenue total assets, and profit An item is considered material if its misstatement or omission causes the economic decision of the users of the audited financial statements to change Question 23 4 Points in relation to the inherent risk, which of the following statements is incorrect? Unusual transactions at year end is an inherent risk factor at account balance level inherent risk at entity level includes high degree of judgement required to value Inventory C Quality of accounting system is an inherent risk factor at account balance level D High rate of business failures in the industry in which the company operates is an inherent risk factor at entity level Question 24 4 Points Save and Cloud Submit