Acca - Aa Mock Exam 1
Acca - Aa Mock Exam 1
Time allowed:
3 hours
Section A
These 15 questions are compulsory and MUST be attempted
1 Corporate governance is the system by which companies are directed and controlled.
Which of the following is correct in relation to corporate governance?
A A strong system of corporate governance gives credibility to financial statements.
B All companies are required to have a mixture of executive and non-executive directors.
C A nominations committee appoints auditors and sets their remuneration.
D An audit committee liaises with the external auditor to plan the external audit (2 marks)
2 You have identified a number of aspects of corporate governance at Serena VDW relating to the
directors:
1 Serena VDW has non-executive directors
2 The finance director performs the final review of the financial statements
3 Directors have specific areas of responsibility
4 Daniel Brown is the chairman and the chief executive
Which of the following options correctly allocates the above as weaknesses or strengths of
the system?
Weakness Strength
A 1, 2 3, 4
B 3, 4 1, 2
C 2, 3 1, 4
D 2, 4 1, 3 (2 marks)
ACCA AA Tuition examination questions 3
3 In line with generally accepted corporate governance requirements, which of the following
items is a weakness in relation to the audit committee at Serena VDW?
A The non-executive directors sit on the committee
B The Chairman sits on the committee
C It does not propose executive remuneration
D It does not nominate directors to the board (2 marks)
4 Which of the following recommendations would MOST strengthen the corporate governance
arrangements at Serena VDW?
A Employ more executive directors.
B Appoint one of the non-executive directors as Chairman.
C Employ an internal audit department.
D Discontinue performance related pay for executive directors (2 marks)
5 You have identified four tasks which the board should undertake as part of its corporate
governance arrangements:
1 Suggest new directors to the board
2 Set executive pay and benefits
3 Review the financial statements
4 Monitor the control environment of the company
Which of the following options correctly identifies the sub-committee of the board that
should be responsible for each task?
Remuneration Nomination Audit
A (1), (2) (4) (3)
B (2) (1) (3), (4)
C (2), (3) (1), (4) (1)
D (4) (1), (2) (3) (2 marks)
4 Tuition Examination questions ACCA AA
6 The auditor is required to gain an understanding of internal control relevant to the audit.
Which TWO of the following are reasons why that understanding is obtained in relation to a
private company?
1 To help identify risks of material misstatements.
2 To express an opinion that the internal controls are effective.
3 To meet corporate governance requirements.
4 To gain an impression if the control system is capable of producing financial statements.
A 1 and 2
B 1 and 4
C 2 and 3
D 2 and 4 (2 marks)
7 Your audit assistant has compiled a list of features of the system at Blake Co:
1 Payroll department compares hours worked to hours being paid
2 Authorisation code word is well known in the payroll department
3 Payroll system calculates gross pay, deductions and net pay
4 Payroll payments authorised by accounts clerk
Which of the following options correctly identifies these features as STRENGTHS and
DEFICIENCIES in the system?
Strengths Deficiencies
A 1, 3 2, 4
B 1, 2, 3, 4 -
C 1, 2 3, 4
D 1, 4 2, 3 (2 marks)
ACCA AA Tuition examination questions 5
8 You have identified as a deficiency in the system the fact that the total amount of net wages
transferred to employees is not agreed to the total of the list of wages produced by the payroll
department. This means that accounts department staff could add false employees to the net
pay list after the payroll has been run.
Which of the following recommendations would NOT improve this deficiency?
A Accounts clerk should reconcile net pay list with payroll totals.
B Financial controller should periodically compare the payroll per management accounts
with the payroll totals for the year.
C The net pay list should be authorised by the head of HR and the accounts clerk prior to
payment being made.
D Accounts clerk should cross check net pay list with list of employees in accounts
department. (2 marks)
Termination of employees
Occasionally, employees leave Blake. When this happens, the HR department sends an e-mail to the
payroll department detailing the employee’s termination date and any unclaimed holiday pay.
10 Which of the following is NOT a suitable test of controls designed to ensure employees are
not paid after they have left the company?
A Ask the employee
B Review sent mail of payroll department and inbox of accounts clerk for leavers emails
C Observe accounts clerk verify the net pay list to current employee files before payment
D Review payroll (2 marks)
6 Tuition Examination questions ACCA AA
11 Your audit assistant has made a list of factors which might indicate that Mercury is not a going
concern:
1 Mercury has seven main customers
2 Suppliers are demanding cash on delivery
3 A key supplier is threatening legal action
4 A possible change in legislation would result in Mercury’s top product becoming obsolete
Which of the following options correctly identifies the indicators of going concern and which
of them will be relevant to this year’s audit?
Going concern indicators Relevant in current audit
A 1, 2, 3, 4 1, 2, 3
B 3, 4 2, 3
C 2, 3, 4 2, 3, 4
D 3 3 (2 marks)
12 Your audit assistant has asked you to clarify responsibilities in respect of the going concern basis
of financial statements.
Which of the following statements in relation to going concern responsibilities is TRUE?
A Management is responsible for ensuring that the company is a going concern and
preparing financial statements accordingly.
B Auditors must be sure that the going concern basis is appropriate before signing the
auditor’s report.
C If management believe the company may not be a going concern but don’t want to alert
customers and suppliers it is reasonable to give the company the benefit of the doubt for
twelve months.
D Auditors will draw attention to uncertainties about going concern appropriately disclosed
in the financial statements by using a going concern paragraph titled ‘material
uncertainty related to going concern’. (2 marks)
ACCA AA Tuition examination questions 7
13 You have compiled the following list of audit procedures to carry out in relation to going
concern:
1 Review management forecasts in light of auditor knowledge and perform sensitivity
analysis on them to ensure they are reasonable.
2 Inquire with company’s legal advisers whether any legal action has been taken against
the company.
3 Review payments to suppliers in post year-end period to ensure that suppliers are being
paid on time.
4 Discuss the proposed legislation with the directors to consider its impact and monitor the
progress of the legislation to see if it becomes law before the auditor’s report is signed.
Which of the following statements concerning these procedures is NOT TRUE?
A Performing all the listed procedures will enable the auditors to conclude whether the
basis for the financial statements is appropriate but not any related disclosures.
B The tests are insufficient because they do not include a review of the financial statements
for relevant disclosures concerning going concern.
C Management should be asked to extend the forecasts until 31 September 20X6 and
should extend testing to cover the extra months of forecasting.
D The auditors should also test the director’s plans for future action by reading board
minutes and obtaining written representations from the directors. (2 marks)
After carrying out audit procedures you have concluded that the forecasts support the directors view
that the company can continue as a going concern but that the potential change in the legislation
creates uncertainty.
14 Which TWO of the following statements concerning this uncertainty are correct?
A The auditors should not sign the auditor’s report while there is uncertainty over the
company’s going concern status.
B Management must disclose any uncertainty about going concern in the financial
statements.
C If management discloses the uncertainty, the audit opinion will be unmodified.
D If there is uncertainty over going concern at Mercury, the auditor’s report should contain
a paragraph highlighting that fact. (2 marks)
(30 marks)
8 Tuition Examination questions ACCA AA
Section B
All THREE questions to be attempted
(30 marks)
ACCA AA Tuition examination questions 9
(20 marks)
10 T u i t i o n E x a m i n a t i o n q u e s t i o n s ACCA AA
(20 marks)