You are the audit manager in the firm of Wright & Co, a large accountancy firm with 30 offices. It is January 20X6, and a new intake of graduates and apprentices has recently started work at the Audit department after completing their first ACCA exams. Julie, one of the new recruits, has been allocated to the audit of Wilbur Co, your audit client, for the year ended 31 December 20X5. You are responsible for providing guidance to her on her first audit. After the audit planning meeting, Julie approached you with this query:

'I know that as auditors, we have to collect audit evidence in order to support our audit opinion. But how can we tell how much audit evidence we need to get?'

a. Which of the below factors influence the auditor's judgement regarding the sufficiency of the evidence obtained?

(1) The materiality of the account

(2) The size of the account

(3) The source and quality of the evidence available

(4) The amount of time allocated to the audit

A. 1 and 3

B.2 and 4

C.2 and 3

D.1 and 4

ANSWER:

b. It was decided that analytical procedures should be used at the planning stage of the audit of Wilbur Co. Julie is unsure what analytical procedures mean.

Which of the following assertions are examples of analytical procedures?

(1) Comparing the actual revenue for the year with the forecast revenue from the yearly budget

(2) Cast and cross-cast the aged trial balance of accounts payable before selecting any sample to test

(3) Comparing the gross profit margin calculated from the 20X5 draft financial statements with the gross profit margin for 20X4

(4) Calculating the average salary per employee by dividing total payroll costs by the number of employees in Wilbur Co's workforce, and comparing this with the industry average

A. 1, 2 and 3

B. 1, 3 and 4

C. 2, 3 and 4

D. 1, 2, 3 and 4

ANSWER:

c. At which of the following stages of the audit MUST analytical procedures be used?

(1) Interim audit

(2) Audit planning

(3) Audit fieldwork

(4) Final review

A.2 only

B.2 and 3

C. 2 and 4

D. 1 2 3 and 4

ANSWER:

d. The audit team has started to perform audit fieldwork on Wilbur Co. In order to gain assurance over the company's bank balance, you have asked Julie to arrange for a bank confirmation letter to be sent to Wilbur Co's bank.

Which of the following summarizes the steps to take in preparing the bank confirmation letter?

1. Written on the audit firm's headed paper; information requested to be sent directly to the auditor

2. Written on the audit firm's headed paper; information requested to be sent directly to the client

3. Written on the client's headed paper; information requested to be sent directly to the auditor

4. Written on the client's headed paper; information requested to be sent directly to the client

ANSWER:

e. The audit fieldwork is drawing to a close. Julie has seen that the audit checklist used by your firm states that written representations need to be sought from management, but is unsure about what these include.

Which of the following written representations MUST the auditor obtain, in order to comply with the requirements of ISA 580?

1.The selection and application of accounting policies are appropriate

2.All transactions have been recorded and are reflected in the financial statements

3.Significant assumptions used in making accounting estimates are reasonable

4.Management has provided the auditor with all relevant information agreed in the terms of the audit engagement

A. 1 and 4

B. 2 and 4

C. 1 2 and 3

D. 1 2 3 and 4

ANSWER: