Advance Audit & Assurance CPA
Advance Audit & Assurance CPA
1. The quantity of audit working papers complied on engagement would most affected by;
a) Management’s integrity
b) Auditor’s experience & professional judgment
c) To gather sufficient appropriate evidence
d) To assess audit risk
5. When auditor evaluate the effect of a change in accounting principle, the materiality of
the change should be evaluated based
a) On the prior years presented
b) On the current year effect of the change
c) On whatever basis auditor considers the appropriate
d) On the effect on total assets
a) Determining whether recorded information properly reflects the economic events that
occurred during the accounting period.
b) Determining if fraud has occurred.
c) Determining if taxable income has been calculated correctly
d) Analyzing the financial information to be sure that it complies with government requirements
9. Which of the following should an auditor obtain from the predecessor auditor prior to
accepting an audit engagement?
(a) Analysis of balance sheet accounts.
(b) Analysis of income statement accounts.
(c) All matters of continuing accounting significance.
(d) Facts that might bear on the integrity of management.
10. A company has changed its method of inventory valuation from an unacceptable one to
one in conformity with generally accepted accounting principles. The auditor’s report
on the financial statements of the year of the change should include
(a) $1,000
(b) $2,000
(c) $4,000
(d) $5,000
12. When a client company does not maintain its own stock records, the auditor should
obtain written confirmation from the transfer agent and registrar concerning
14. Which of the following matters would an auditor most likely include in a management
representation letter?
(a) Communications with the audit committee concerning weaknesses in internal control.
(b) The completeness and availability of minutes of stockholders ‘and directors’ meetings.
(c) Plans to acquire or merge with other entities in the subsequent year.
(d) Management’s acknowledgment of its responsibility for the detection of employee fraud.
15. When control risk is assessed as low for assertions related to payroll, substantive
procedures of payroll balances most likely would be limited to applying analytical
procedures and
a) Error of omission
b) Error of commission
c) Compensating error
d) Error of principle
17. When issuing unqualified opinion, the auditor who evaluates the audit findings should
be satisfied that the
a) Amount of known misstatement is documented in working papers
b) Estimates of the total likely misstatement is less than materiality level
c) Estimate of the total likely misstatement is more than materially level
d) Estimates of the total likely misstatement cannot be made
18. During the planning stages of the final audit, the auditor believes that the
probability of giving an inappropriate audit opinion is too high. How should the
auditor amend the audit plan to resolve this issue?
19. The audit engagement letter, generally should include a reference to each of the
following, except
a) limitations of auditing
b) responsibilities of management with respect to audit work
c) expectation of receiving a written management representation letter.
d) a description of the auditor’s method of sample selection.
20. The date of the management representation letter should coincide with the date of
the
a) Balance sheet.
b) Latest interim financial information.
c) Auditor’s report.
d) Latest related-party transaction.
21. A significant circumstance-caused scope limitation in a Sarbanes/Oxley 404
internal control audit is more likely to result in a(n)
a) Adverse opinion.
b) Qualified opinion.
c) Unmodified (unqualified) opinion with an emphasis-of matter paragraph.
d) Scope reduction opinion
a) Because of inherent limitations, internal control over financial reporting may not prevent
or detect misstatements.
b) In our opinion, [company name] maintained, in all material respects, effective internal
control over financial reporting.
c) Our audit included obtaining an understanding of internal control over financial reporting.
d) The [company name] management and audit committee is responsible for
maintaining effective internal control over financial reporting.
23. Which of the following information should a successor auditor obtain during the
inquiry of the predecessor auditor before accepting engagement?
a) 1&2
b) 2&3
c) 1, 2 & 3
d) 1&3
24. An emphasis of matter paragraph is used in an audit report to draw attention to matter
affecting the financial statements.
Which two of the following are correct in relation to an emphasis of matter paragraph in
the auditor’s report?
I. It is used where there is a significant uncertainty
II. It constitutes a qualified audit opinion
III. The audit report is referred to as an unmodified report
IV. The matter is deemed to be fundamental to the users understanding of the financial
statements.
a) 1&2
b) 1&4
c) 1&3
d) 2&4
25. Which of the following procedures is not likely to be a fraud risk factor relating to
management’s characteristics?
a) Tax evasion
b) Failure to correct known weakness in internal control system
c) Adoption of conservative accounting principles
d) High management turnover
26. Auditing standards differ from audit procedures in that procedures relate
to
a) Audit assumptions
b) Acts to be performed
c) Quality criterion
d) Methods of work
27. The most difficult type of misstatement to detect fraud is based on:
29. The quantity of audit working papers complied on engagement would most
by affected by
a) Management’s integrity
b) Auditor’s experience and professional judgment
c) To gather sufficient appropriate evidence
d) To assess audit risk
a) The reliability of audit evidence and its relevance in meeting the audit
objective
b) The objectivity and integrity of the auditor
c) The quantity of audit evidence
d) The independence of the source of evidence
a) No, because the internal audit activity is skilled in assessing controls and the
insurance control concepts are not distinctly different from other control
concepts.
b) No, because it is a normal audit function to assess risk; this audit
engagement is therefore not unique.
c) Yes, because an actuarial consultant is essential to determine whether the
health-care costs are reasonable.
d) Yes, because an actuarial consultant has skills, not usually found in the
internal audit activity, to identify and quantify self-insurance risks
a) Scheduling periodic meetings with individual auditors, during which the chief
audit executive provides counsel regarding each auditor's performance and
professional career development.
b) Establishing an internal review team to assess the auditors' and audit
department's compliance with standards, level of audit effectiveness,
and compliance with departmental policy.
c) Developing specific job descriptions for audit staff, audit managers, and other
auditing positions.
d) Establishing in-house training programs and requiring continuing education
for audit staff.
35. ISA 315 Identifying and Assessing the Risks of Material Misstatement
through Understanding the Entity and Its Environment sets out the five
components of internal control.
Which of the following is NOT set out as a component of internal control within
ISA 315?
a) Control environment
b) The information system relevant to financial reporting
c) Human resource policies and practices
a) 1 and 2
b) 1 and 4
c) 1 and 3
d) 2 and 4
37. Professional skepticism requires that the auditor assume that management
is
a) Reasonably honest
b) Neither honest nor dishonest
c) Not necessarily honest
d) Dishonest unless proved otherwise
38. Gabriel Co operates a large department store and have a large internal
audit department in place. The management of Gabriel Co is keen to
increase the range of assignments that internal audit undertake.
Which of the following assignments could the internal audit department of
Gabriel Co be asked to perform by management?
a) 1 and 4
b) 1 and 3
c) 2 and 4
d) 2 and 3
40. Internal auditors can evaluate the effectiveness of internal controls over
the purchasing function by reviewing:
41. Which of the following factors likely to be identified as a fraud factor by the
auditor?
42. Which of the following is not likely to be a fraud risk factor relating to
management’s characteristics?
a) tax evasion
b) failure to correct known weakness in internal control system
c) adoption of conservative accounting principles
d) high management turnover
46. Which of the following statements is not true about continuous audit?
a) helps to determine the nature, timing and extent of other audit procedures
b) directs attention to potential risk areas
c) indicates important aspects of business
d) All of the above
a) Assets
b) Liabilities
c) Income and expense accounts where appropriate
d) All of the above
50. Auditors usually carry out their audit work at different stages known as the
interim audit and the final audit.
Which of the following statements, if any, is/are correct?
1 Carrying out tests of control on the company’s sales day books would
normally be undertaken during an interim audit.
1 Review of aged receivables ledger to identify balances requiring write down or
allowance would normally be undertaken during a final audit.
a) Neither 1 nor 2
b) 2 only
c) 1 only
d) Both 1 and 2