Question 1. 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?

Unmodified

Unmodified with a Material

Uncertainty

Related to Going Concern paragrap

Question 2. Weedy Co is your audit client, and you are drafting the audit opinion on its financial statements. You have concluded that revenue is overstated by $50,000, due to a fraud which was discovered operating during the year. Management has refused to adjust for the error. The materiality level has been set at $175,000.

What is the most likely impact of this on the auditor's opinion?

Adverse opinion

Unmodified opinion

Disclaimer of opinion

Qualified due to material misstateme

Question 3. Which of the following procedures would be most effective in meeting the audit objective "to ensure that the payroll expense is not overstated"?

Agreeing authorisation of overtime and calculations of pay for a sample of clockcards

Recalculating a sample of payments and agreeing hours worked to related clockcards

Selecting employees from the payroll and confirming that independent records are maintained by the personnel department

Confirming that monthly payroll reconciliati

Question 5. According to ISA 265 "communicating deficiencies in internal control to those charged with governance and management", to whom should the auditor report significant deficiencies in internal control?

The audit committee.

The chief executive officer or chief financial officer.

The internal audit department.

The manager directly responsible for the area in which the deficiencies are found.

Question 6. Which of the following statements in respect of materiality is NOT true?

Performance materiality is lower in value than preliminary materiality.

In determining materiality the auditor should assume that users are willing to study the information in the financial statements with reasonable diligence.

Materiality is fixed for the audit at the planning stage.

Preliminary materiality is determined at the planning stage.

Question 7. A company is being sued by an ex-employee for unfair dismissal. The amount involved is likely to be material to the financial statements, and the auditor has written to the company's lawyers to obtain evidence on the matter.

However, the lawyers have stated that they cannot comment on the case.

Which of the following would not be an appropriate response by the auditor in this situation?

Obtain evidence from reading correspondence between the company and the lawyers

Include an O

Question 8. 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

Question 9. In which of the following circumstances would an external confirmation of accounts receivable balances be most likely to take the form of a negative confirmation request?

The total trade receivables balance is immaterial

A large number of small balances is involved and control risk is low

The majority of customers are located overseas

There is a tight timetable for the completion of the audit

Question 10. Maple Co's auditors were appointed 10 years ago, during which time the same audit partner and audit manager have worked on the audit.

Which of the following general principles in relation to the conduct of Maple Co's audit is at risk?

(i) Objectivity

(ii) Professional competence

(iii) Professional skepticism

(i) and (ii)

(ii) and (iii)

(i) and (iii)

(i), (ii) and (iii)

Question 11. The following are examples of documents related to an audit. Which is not regulated by an ISA?

External confirmation of a trade receivables balance

An audit strategy

An audit proposal (tender document)

A summary of matters to discuss with those charged with governance

Question 13. Which of the following would reduce detection risk in the audit of inventory?

(i) Selecting smaller sample sizes to perform test counts at the inventory count

(ii) Inspecting sales invoices immediately after the reporting date

(iii) Confirming high value items to the inventory valuation report

(i) and (ii) only

(i) and (iii) only

(ii) and (iii) only

(i), (ii) and (iii)

Question 14. 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

Question 18. Which of the following is least likely to be referred to in a written representation from management?

Acknowledgement by management of its responsibility for the financial statements

Acknowledgement of management's responsibility for the prevention and detection of fraud and errors

Confirmation that inventory quantities were accurately ascertained by a physical count

Confirmation that there have been no events subsequent to period end which require amendment to the financi

Question 15. The following errors, which all affect profit, have been identified by the auditor:

(1) Inventory overvalued by $100,000

(2) Property, plant and equipment overvalued by $350,000

(3) Trade payables overstated by $65,000

If materiality for the evaluation of misstatements is $200,000, what is the minimum amount of adjustment required in order to conclude that the financial statements are not materially misstated?

$185,000

$265,000

$385,000

$515,000

Question 19. Which of the following internal control procedures would help to ensure that goods are received before a liability is recorded?

Goods inward records are regularly reviewed for items in respect of which no invoices have been received

A file of unfulfilled purchase orders is maintained and reviewed regularly by a responsible official

Periodic purchase ledger reconciliations are performed by personnel independent of the goods inwards department

Invoices are matched with goods

Question 20. 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)

(ii

Question 21. Which of the following are examples of audit documentation?

(i) Written representation from management

(ii) Calculation of preliminary materiality

(iii) A superseded trial balance

(iv) Results of two audit procedures which contradict each other

(i), (ii) and (iii)

(ii), (iii) and (iv)

(i), (iii) and (iv)

(i), (ii) and (iv)

Question 22. What is defined as "an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical evaluation of audit evidence"?

Professional independence

Professional judgment

Professional competence

Professional scepticism

Question 23. 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

Question 24. Which of the following would be a test of control in the audit of trade receivables?

Reviewing an aged receivables list obtained from the audit client to identify potential irrecoverable debts

A walk-through test of the sales system

Agreeing a sample of trade receivables balances to cash received after the year end

Confirming that a sample of discounts offered to credit customers have been approved

Question 26. In which of the following situations may testing 100% of transactions and balances be efficient?

Control risk is assessed as low

There is a high volume of similar transactions

There is no suspicion of irregularities

There is a small number of large value transactions

Question 28. 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

Question 29. Which of the following boards was established with the specific aim of increasing investor confidence in IFAC's activities and pronouncements?

International Auditing and Assurance Standards Board (IAASB)

International Ethics Standards Board for Accountants(IESBA)

Public Interest Oversight Board

International Accounting Education Standards Board (IAESB)