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MCQ2

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Advanced Audit Principles and Practice
clara.azurmendi
Quiz by clara.azurmendi, updated more than 1 year ago
clara.azurmendi
Created by clara.azurmendi over 8 years ago
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Resource summary

Question 1

Question
Which of the following is not one of the major categories of auditor's services?
Answer
  • Assurance engagements dealing with subject matters other than historical financial information
  • Related service engagements
  • Compilation engagement
  • The audit or review of historical financial information

Question 2

Question
Which of the following is not one of five elements exhibited by all assurance engagements?
Answer
  • Suitable criteria
  • A multi-party relationship involving a practitioner, a responsible party, those in charge of governance and the intended users
  • A subject matter
  • Evidence

Question 3

Question
Which of the following is one of the basic elements required to be included in the assurance report according to International Standards on Assurance Engagements 2000?
Answer
  • A paragraph explaining the intention to the engagement
  • Summarization of work undertaken
  • Identification of the intended user
  • The results of the internal control tests

Question 4

Question
What is the type of assurance engagement that has as its subject matter non-historical financial information?
Answer
  • Prospective financial information
  • Review of financial statements
  • Special purpose engagement
  • Agreed-upon procedures

Question 5

Question
Under what circumstances will a company get a qualified opinion in a review engagement?
Answer
  • If matters that impair a true and fair view have come to the auditor's attention
  • If the auditor can only offer limited assurance
  • If matters that impair a true and fair view have not come to the auditor's attention
  • When the effect of the matter is so material and pervasive to the financial statements that a qualification is not adequate

Question 6

Question
How does the related services framework differ from the assurance framework?
Answer
  • Related services claim compliance with ISAEs
  • Related services engagements do not result in an opinion
  • Related services enhance the degree of confidence intended users can have
  • Related services claim compliance with ISAs

Question 7

Question
In an agreed-upon procedures engagement what matters generally have to be agreed between auditor and management?
Answer
  • Nature, timing and extent of the specific procedures to be applied
  • Identification of the corporate governance framework
  • The skills of the audit team
  • The intended user of the report

Question 8

Question
An auditor makes inquiries of inventory control and sales personnel concerning possible obsolete or slow moving inventory to support management's financial statement assertion:
Answer
  • Rights and obligations
  • Valuation
  • Occurrence
  • Existence

Question 9

Question
Which of the following considerations of fraud and error by the auditor is not required by ISA 240?
Answer
  • When the auditor encounters circumstances that may indicate that there is a material misstatement in the financial statements resulting from fraud or error, the auditor should inform regulatory institutions
  • Based on the risk assessment the auditor should design audit procedures to obtain reasonable assurance that material misstatements arising from fraud and error are detected
  • The auditor should be satisfied that those charged with governance have been informed of any material weaknesses in internal control related to the prevention and detection of fraud
  • The auditor should communicate to management any material weaknesses in internal control related to the prevention or detection of fraud and error

Question 10

Question
Which of the following is not a benefit of international auditing standards?
Answer
  • Foreign investors are more likely to channel funds into a developing country
  • Encourage and assist developing nations to adopt national standards
  • Financial statement disclosure is more consistent
  • Investors can more readily comprehend a set of financial statements drawn up in another country

Question 11

Question
Which of the following standards are not issued by the International Auditing and Assurance Standards Board?
Answer
  • International Standards on Quality Control
  • International Auditing Practice Statements
  • International Standard on Assurance Engagements
  • International Financial Reporting Standards

Question 12

Question
Financial involvement with a client will affect independence and may lead a reasonable observer to conclude that independence has been impaired. Which of the following is not a form of financial involvement with a client?
Answer
  • Loans to or from the client
  • Financial interest resulting from being an administrator of any trust with a financial interest in the client
  • Financial interest in a joint venture with a client
  • Fees paid for audit engagement

Question 13

Question
Which of the following might be a commonly used guideline related to a financial statement materiality base?
Answer
  • 2 % to 4 % of net income before taxes
  • 15 % to 20% of current assets
  • 5 % to 10% of long-term liabilities
  • 1/2 % to 2% of total assets

Question 14

Question
The auditor with the responsibility for reporting is:
Answer
  • The external auditor
  • The internal auditor
  • The group auditor
  • The other auditor

Question 15

Question
All of the following factors influence the continuance of an existing auditor-client relationship except:
Answer
  • The balance of client fees owed
  • Excessive risk
  • Pending litigation between client and auditor
  • Inability to obtain a management representations letter

Question 16

Question
Which of the following matters is not ordinarily included in a management representation letter?
Answer
  • Amount of potential loss from litigation, including court costs
  • Management's acknowledgment of its responsibility for the fair presentation of financial statements
  • Disclosure of compensating balances and other arrangements involving restrictions on cash balances
  • Plans or intentions that may affect the carrying value or classification of assets

Question 17

Question
When a principal auditor uses the work of another auditor he must document:
Answer
  • The professional qualifications, independence and professional competence of the other auditor
  • Procedures to obtain sufficient appropriate audit evidence that the work of the other auditor is adequate is all the consideration necessary
  • The impact of internal controls on the work of the other auditor
  • The audit area in which the work was performed by the other auditor

Question 18

Question
Which of the following would be considered a 'self-interest threat'?
Answer
  • Potential employment with an assurance client
  • Acting as the client's advocate in a legal proceeding
  • When a member of the assurance team was previously a director or officer of the assurance client
  • A member of the assurance team has a close family member who is a director or officer of the assurance client

Question 19

Question
Financial involvement with a client will affect independence and may lead a reasonable observer to conclude that independence has been impaired. Which of the following is not a form of financial involvement with a client?
Answer
  • Loans to or from the client
  • Financial interest resulting from being an administrator of any trust with a financial interest in the client
  • Financial interest in a joint venture with a client
  • Fees paid for audit engagement

Question 20

Question
Important determinants of audit fees all of the following except:
Answer
  • The size of the audit firm
  • The type of client - whether the auditee is an existing client or not
  • The size of the auditee and the geographical dispersion
  • The quality of the auditee's internal control system

Question 21

Question
According to the profession's ethical standards, an auditor would be considered independent in which of the following instances?
Answer
  • The auditor's savings account, which is fully insured by the Financial Services Compensation Scheme (FSCS), is held at a client financial institution
  • The auditor is also the lawyer who advises the client as its general counsel.
  • An employee of the auditor serves as treasurer of a charitable organization that is a client.
  • The client owes the auditor fees for two consecutive annual audits.

Question 22

Question
The risk that audit evidence for a segment will fail to detect misstatements exceeding performance materiality levels is:
Answer
  • Audit risk.
  • Control risk.
  • Inherent risk.
  • Planned detection risk

Question 23

Question
In an assurance engagement, the responsible party can also be an intended user.
Answer
  • Never
  • If there is more than one intended user
  • If there are more than ten intended users
  • In exceptional circumstances

Question 24

Question
Which of the following is NOT a duty of the audit committee?
Answer
  • Special Investigations
  • Review of internal controls
  • Monitor the effectiveness of external auditor
  • Liaison with external controls

Question 25

Question
It is the responsibility of the………..to ensure a client’s operations are conducted in accordance with laws and regulations
Answer
  • The external auditor
  • Management
  • Audit committee members
  • The component auditor

Question 26

Question
The materiality level for a component is determined by
Answer
  • The internal auditor
  • The component auditor
  • The group engagement team
  • The external auditor

Question 27

Question
The group engagement partner is responsible for the:
Answer
  • A. Direction and supervision of the audit group
  • B. Provision of essential technical information
  • C. Participation in the policy making process
  • A and B
  • A and C
  • B and C
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