Started on Thursday, 14 April 2022, 2:00 PM

State Finished
Completed on Thursday, 14 April 2022, 3:19 PM
Time taken 1 hour 19 mins
Marks 30/50
Grade 6 out of 10 (59%)
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Question  1

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Which of the following audit evidence obtained during the audit of bank and cash would be
considered the most reliable?

Select one:

A.

Bank reconciliation prepared by the financial accountant.

B.

Bank confirmation obtained from the entity's bankers

 C.

Verbal discussions with the Managing Director regarding an increase in the bank overdraft limit

D.

Petty cash count undertaken by the junior and reviewed by yourself

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The correct answer is: Bank confirmation obtained from the entity's bankers

Question  2

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Auditors seek written representations from management to support oral representations that have
been made during the course of the audit. For each of the following in relation to a statutory
audit, select whether a written representation is required or not required.

Whether all deficiencies in internal control of which Answer

management is aware have been communicated to 1
 auditors.

The director has provided the auditor with all relevant

information and access in the term of the audit Answer
engagement 2

The effect of uncorrected misstatement are immaterial,

both individually and in the aggregate, to financial Answer
statements as a whole. 3

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Your answer is correct.

The correct answer is: Whether all deficiencies in internal control of which management is aware
have been communicated to auditors. → Not required, The director has provided the auditor with
all relevant information and access in the term of the audit engagement → Required, The effect of
uncorrected misstatement are immaterial, both individually and in the aggregate, to financial
statements as a whole.  → Not required

Question  3

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Which two of the following constitute sampling?

Select one or more:

 A.

Testing less than 100% of the item in a population

B.

Testing all items with a certain characteristic

C.

Testing 100% of the items in a population

D.

Testing items selected randomly from the population

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Your answer is correct.

The correct answers are: Testing less than 100% of the item in a population, Testing items selected
randomly from the population

Question  4

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Kiama, the auditor of Mwangi Flight Enterprises, performs audit procedures relating to existence of
aeroplanes. Kiama does this by selecting a sample of the aeroplanes and requesting Boeing the
supplier to confirm whether it had sold these planes to the Company. What is the key attribute of
audit evidence that has not been complied with?

Select one:

A.

Sufficiency

B.

Reliability

C.

Relevancy

D.

Reliability, Sufficiency, and Relevancy

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The correct answer is: Relevancy

Question  5

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An auditor traces a sample of electronic time cards before and after the bi-weekly payroll report
and then traces to the payroll master file to determine that payroll transactions are reported in the
correct period. The auditor is gathering evidence for which audit objective?

Select one:

A.

existence

B.

accuracy
 C.

completeness

D.

cut-off

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Your answer is correct.

The correct answer is: cut-off

Question  6

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Assurance providers obtain evidence using procedures set out in ISA 500. For each of the

following tests, select the type of procedure which is being used

Calculate the ratio of cost of goods sold to sales as a test

of overall reasonableness of gross margin relative to the Answer
preceding year 1

Obtain a letter from an insurance company to the CPA Answer

firm stating the amount of the fire insurance coverage on 2
 buildings and equipment.

Watch employees count inventory to determine whether Answer

company procedures are being followed 3

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Your answer is correct.

The correct answer is: Calculate the ratio of cost of goods sold to sales as a test of overall
reasonableness of gross margin relative to the preceding year → Analytical procedures, Obtain a
letter from an insurance company to the CPA firm stating the amount of the fire insurance
coverage on buildings and equipment. → Confirmation, Watch employees count inventory to
determine whether company procedures are being followed → Observation

Question  7

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Ria Electronics is an established organisation that is well known for its innovation. The
management of Ria Electronics have been under extreme pressure from the board to ensure that
they meet the earnings guidelines provided to the market. Management are required to compute
allowance for Warranty provisions, provision for doubtful debts and depreciation method for its
new warehouses located overseas. Which of the below statements is more likely to be correct?

Select one:

A.

The estimation uncertainty for the depreciation method is higher than warranty provisions
 B.

The estimation uncertainty for warranty provisions is higher than that of depreciation method

C.

The estimation uncertainty for both of these accounts is the same

D.

It is the pressure from the board rather than the account balances themselves that will result in
estimation uncertainty

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The correct answer is: The estimation uncertainty for warranty provisions is higher than that of
depreciation method

Question  8

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Question text

ISA (UK) 580, Written Representation deals with the auditor’s responsibility to obtain written
representation form management and, where appropriate, those charged with governance of an
audited entity. Which three of the following are included in the definition of management in the
context?

Select one or more:

A.

Executive members of a governance board

B.

Majority shareholders

C.

Persons with executive responsibility for the conduct of the entity’s operations

D.

An owner-manager

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Your answer is correct.

The correct answers are: Persons with executive responsibility for the conduct of the entity’s
operations, An owner-manager, Executive members of a governance board
Question  9

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Which one of the following statements is correct when describing automated and electronic
working papers?

Select one:

a.

Both electronic and automated working papers always involve automatic calculations.

b.

Electronic working papers do not involve any automatic calculations

c.

Automated working papers do not involve any automatic calculations

 d.

Both Electronic working papers and automated working papers never involve any automatic
calculations.

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The correct answer is: Electronic working papers do not involve any automatic calculations

Question  10

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The process which requires the calculation of an interval and then selects the items based on the
size of the interval is

Select one:

a.

random sample selection.

 b.

computerized sample selection.

c.

statistical sampling.

d.

systematic sample selection.

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The correct answer is: systematic sample selection.

Question  11

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When designing audit procedures, tracing of source documents to the customers subsidiary
ledger and subsequently to the general ledger is done to satisfy what assertion?
 Select one:

A.

valuation

B.

classification

C.

completeness

D.

cutoff

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Your answer is correct.

The correct answer is: completeness

Question  12

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For each of the following statements about audit documentation, select whether they are true or
false.

The assurance provider should not obtain client

permission before showing working paper to third parties. Answer
1
Working paper belong to the client Answer
2
The auditor must be ensure the safe custody of audit
documentation for at least six years form the date of the Answer
auditor’s report 3

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Your answer is partially correct.

You have correctly selected 2.

The correct answer is: The assurance provider should not obtain client permission before showing
working paper to third parties.  → False, Working paper belong to the client → False, The auditor
must be ensure the safe custody of audit documentation for at least six years form the date of the
auditor’s report → False

Question  13

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Failure to record the purchase of goods is a violation of which management assertion?

Select one:

A.

occurrence

B.

authorization

C.

completeness

D.

accuracy

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 Your answer is correct.

The correct answer is: completeness

Question  14

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For each of the following statements concerning written representation letters, select whether they
are true or false.

The written representation letter must include a list of all Answer 1

uncorrected misstatements.
The written representation letter must be be dated before Answer 2
the auditor’s report.
A written representation letter is only required for new Answer 3
clients

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Your answer is partially correct.

You have correctly selected 2.

The correct answer is: The written representation letter must include a list of all uncorrected
misstatements. → True, The written representation letter must be be dated before the auditor’s
report. → True, A written representation letter is only required for new clients → False

Question  15
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When determining a sample size for test of control and test of detail, there are a number of
factors which an auditor should take into account. For each of the following factors, select whether
it would cause the sample size to increase or to decrease.

An increase in the auditor’s desired level of assurance that

tolerable rate of deviation is not exceeded by the actual Answer
rate of deviation in population 1

Stratification of the population when appropriate Answer

2
An increase in the amount of misstatement the auditor
expects to find in population Answer
3

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Your answer is correct.

The correct answer is: An increase in the auditor’s desired level of assurance that tolerable rate of
deviation is not exceeded by the actual rate of deviation in population  → Increase, Stratification of
the population when appropriate → Decrease, An increase in the amount of misstatement the
auditor expects to find in population  → Increase

Question  16

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The auditor of Breknat Ltd processes fictitious transactions through the clients accounting system
to determine whether IT controls are effective. What technique is the auditor using?

Select one:

A.

Audit data analytics

B.

Audit software

C.

Test data

D.

Accounting software

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 Your answer is correct.

The correct answer is: Test data

Question  17

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A letter addressed by management to auditors and that confirms in writing any statements made
by management to the auditors during the course of an audit is commonly referred to as

Select one:

a.

A management representation letter (Written representation).

b.

A management letter.

c.
 An engagement letter.

d.

An audit representation letter.

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The correct answer is: A management representation letter (Written representation).

Question  18

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Which of the following computer-aided audit techniques is not useful for substantive testing of
transactions and balances?

Select one:

a.

Generalised audit software

 b.

Audit Data Analyitcs

c.

Specialised audit software

d.

Test data

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The correct answer is: Test data

Question  19

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What is the most appropriate sampling technique for an auditor who wants to trace physical
inventory on the shelves to the inventory records in the system?
 Select one:

A.

A combination of both systematic and random to ensure that the process is both methodical and
random

B.

Random selection as it will enable the auditor randomly select the items.

C.

Haphazard selection as the auditor will be selection inventory on the shelves

D.

Systematic selection as It will enable the auditor ensure that all the shelves are covered

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The correct answer is: Haphazard selection as the auditor will be selection inventory on the shelves

Question  20

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Which one of the following is the definition of tolerable misstatement?

Select one:

a.

A deviation from prescribed internal control procedures set by the auditor in respect of which the
auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the
auditor is not exceeded by the actual rate of deviation in the population.

b.

A monetary amount set by the auditor in respect of which the auditor seeks to obtain an
appropriate level of assurance that the monetary amount set by the auditor is not exceeded by the
actual misstatement in the population

c.

The maximum deviation in the population that the auditor would be willing to accept

d.

A misstatement that is demonstrably not representative of misstatement in a population

 Feedback

The correct answer is: A monetary amount set by the auditor in respect of which the auditor seeks
to obtain an appropriate level of assurance that the monetary amount set by the auditor is not
exceeded by the actual misstatement in the population

Question  21

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An effective procedure to test for unfilled shipments is to trace from the

Select one:

A.

sales journal to the shipping documents.

B.

sales journal to the accounts receivable ledger.

 C.

sales journal to the general ledger sales account.

D.

shipping documents to the sales journal.

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Your answer is correct.

The correct answer is: shipping documents to the sales journal.

Question  22

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When determining a sample size for test of detail there are a number of factors which an auditor
should take into account. For each of the following factors, select whether it would cause the
sample size to increase or to decrease

A decrease in tolerable misstatement Answer

1
 An increase in auditor’s desired level of assurance that
tolerable misstatement is not exceeded by actual Answer
misstatement in the population 2

A decrease in the auditor’s assessment of the risk of

material misstatement Answer
3

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Your answer is partially correct.

You have correctly selected 1.

The correct answer is: A decrease in tolerable misstatement → Increase, An increase in auditor’s
desired level of assurance that tolerable misstatement is not exceeded by actual misstatement in
the population  → Increase, A decrease in the auditor’s assessment of the risk of material
misstatement → Decrease

Question  23

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What is the key factor that an auditor should consider when assessing the risk of material
misstatement relating to accounting estimates?

Select one:

A.
 The size of the account balance or transaction

B.

The level of assurance being provided i.e. audit or review

C.

The assumptions made regarding the accounting estimate.

D.

The degree of estimation uncertainty associated with the estimate.

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Your answer is correct.

The correct answer is: The degree of estimation uncertainty associated with the estimate.

Question  24

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 Question text

________ is not a transaction-related audit objective for the classes of transactions underlying the
payroll cycle.

Select one:

A.

Existence

B.

Timing

C.

Completeness

D.

Classification

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Your answer is incorrect.

The correct answer is: Existence

25
Question 
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Hayley, an audit junior, has carried out the following tests to verify the valuation of inventory in
the financial statements of Cobham plc.

In each case, select whether the test proves the assertion of valuation or not

Attending the inventory count and carrying out sample Answer 1

counts on a number of items
Comparing cost on a number of inventory items to sales Answer 2
invoices subsequent to the year end

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Your answer is correct.

The correct answer is: Attending the inventory count and carrying out sample counts on a number
of items → Does not prove valuation, Comparing cost on a number of inventory items to sales
invoices subsequent to the year end → Proves valuation

Question  26

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Assurance providers obtain evidence using procedures set out in ISA 500. For each of the

following tests, select the type of procedure which is being used

Calculate the ratio of sales commission expense to sales Answer 1

as a test of sales commissions.
Obtain information about internal control by requesting Answer 2
the client to fill out a questionnaire.
Compare a duplicate sales invoice with the sales journal
for customer name and amount. Answer 3

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Your answer is partially correct.

You have correctly selected 2.

The correct answer is: Calculate the ratio of sales commission expense to sales as a test of sales
commissions. → Analytical procedures, Obtain information about internal control by requesting
the client to fill out a questionnaire. → Inquiry,
Compare a duplicate sales invoice with the sales journal for customer name and amount. →
Inspection of documentation

Question  27

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In relation to a public company listed on the UK Securities Exchange, when should the
management representation letter be dated?

Select one:

A.

At the date when the audited financial statements are lodged with UK Sercurities Exchange.

B.

At balance sheet date

C.

At the date when the audited financial statements are lodged with the UK Sercurities & Investment
Commission

D.

As near as practicable to, but not after, the date of the auditor's report on the financial statements
 Feedback

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The correct answer is: As near as practicable to, but not after, the date of the auditor's report on
the financial statements

Question  28

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Which three of the following should working papers show?

Select one or more:

a.

The subject of the working paper

b.

The initials of the person supervising the work

 c.

The file reference of the working paper

d.

The date the work was planned

e.

Analysis of errors or other significant observations

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The correct answers are: Analysis of errors or other significant observations, The file reference of
the working paper, The subject of the working paper

Question  29

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When testing the computerised controls over payroll using test data, which of the following would
be the most likely outcome?
 Select one:

A.

Confirmation of competent payroll staff

B.

Existence of unclaimed payroll cheques held by the payroll manager

C.

Ineffective program controls relating to the processing of annual leave calculations

D.

Effective physical controls over the terminal containing payroll master files

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The correct answer is: Effective physical controls over the terminal containing payroll master files

Question  30

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Which statement best describes tracing a sample of transactions to test for inventory

completeness?

Select one:

A.

Testing from the underlying assets to the accounting records

B.

Tracing items from the ledger to the stocktake records

C.

Testing from the accounting records to the underlying assets

D.

Tracing items from the physical count of inventory to the underlying assets

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The correct answer is: Testing from the underlying assets to the accounting records

Question  31

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When determining a sample size for test of control there are a number of factors which an auditor
should take into account.

For each of the following factors, select whether it would cause the sample size to increase or to
decrease, or negligible effect

A decrease in the number of sale voices in the Answer 1

population
An increase in the expected rate of deviation of the Answer 2
population to be tested
An increase in the auditor’s required confidence level Answer 3

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Your answer is partially correct.

You have correctly selected 1.

The correct answer is: A decrease in the number of sale voices in the population → Negligible
effect, An increase in the expected rate of deviation of the population to be tested → Increase, An
increase in the auditor’s required confidence level → Increase

Question  32
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One of the causes of non-sampling risk is

Select one:

a.

ineffective audit procedures.

b.

exceptions being found in the sample.

c.

inadequate sample size.

d.
 choosing the wrong sample size.

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The correct answer is: ineffective audit procedures.

Question  33

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In terms of the standard management representation letter provided in connection with audits of
financial statements, which of the following is most likely to be included?

Select one:

a.

A statement from the internal auditor confirming operating effectiveness of controls.

b.

The appointment of a non-executive chairman to the board of directors.

 c.

A statement that all information relating to fraud and suspected fraud has been disclosed

d.

Plans for a wholly - owned takeover of a company.

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The correct answer is: A statement that all information relating to fraud and suspected fraud has
been disclosed

Question  34

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Which of the following statements regarding block sampling is least likely to be true?

Select one:

a.

It is acceptable to use block sampling for tests of transactions only if a reasonable number of
blocks is used.
 b.

Only one block should be selected to increase the probability of a representative sample.

c.

Once the first item in the block is selected, the remainder of the block is chosen automatically.

d.

Block sampling is the selection of several items in sequence.

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The correct answer is: Only one block should be selected to increase the probability of a
representative sample.

Question  35

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Which two of the following statement are correct?

 Select one or more:

a.

Working papers should be kept for the current and previous year only

b.

Working paper should be made available to third parties at the request of the client.

c.

Working paper should not be made available to third parties without client permission

d.

Working papers belong to the assurance provider

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The correct answers are: Working papers belong to the assurance provider, Working paper should
not be made available to third parties without client permission

Question  36

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Which two of the following procedures are most appropriate to confirm the valuation of trade

receivables?

Select one or more:

A.

Review of sales invoices

B.

Review of the receivables ledger

C.

Review of cash paid after date

D.

Direct confirmations with customers

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 Your answer is correct.

The correct answers are: Direct confirmations with customers, Review of cash paid after date

Question  37

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Kiama, the auditor of Mwangi Flight Enterprises, performs audit procedures relating to existence of
aeroplanes. Kiama selects a sample of 15 planes out of the 30510 planes owned by the Company
and carries out the audit procedure.
What is the key attribute of audit evidence that has not been complied with

Select one:

A.

Sufficiency

B.

Relevancy
 C.

Appropriateness

D.

Reliability

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Your answer is correct.

The correct answer is: Sufficiency

Question  38

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Which two of the following misstatement discovered in a sample would not generally be
extrapolated against the total population?

Select one or more:

A.
 A misposting between two customer accounts

B.

An invoice omitted in error

C.

A invoice disputed by a customer

D.

A timing difference between customer records and client records.

E.

A misstatement in invoice value

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Your answer is partially correct.

You have correctly selected 1.

The correct answers are: A misposting between two customer accounts, A timing difference
between customer records and client records.

Question  39

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The auditor traces items from the source documents to the journals in order to accumulate audit
evidence that will satisfy the

Select one:

A.

existence objective.

B.

completeness objective.

C.

valuation objective.

D.
 ownership objective.

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The correct answer is: completeness objective.

Question  40

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Ria Electronics is an established organisation that is well known for its innovation. The
management of Ria Electronics have been under extreme pressure from the board to ensure that
they meet the earnings guidelines provided to the market. What assertion is likely to be at risk of
material misstatement due estimation uncertainty when it comes to its debtors due to doubtful
debts?

Select one:

A.

Accuracy, Valuation and Allocation

B.
 Completeness

C.

Occurrence

D.

Existence

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The correct answer is: Accuracy, Valuation and Allocation

Question  41

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In which of the following audit procedures are ‘existence’ and ‘accuracy, valuation and allocation’
of trade debtors the major assertions of interest?
 Select one:

A.

Agreeing amounts listed on the aged trade debtors trial balance to subsequent receipts

B.

Positive external confirmation of trade debtors

C.

Vouching transactions back to supporting documentation and ensuring that the dollar value is
correctly

D.

Negative external confirmation of trade debtors

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The correct answer is: Agreeing amounts listed on the aged trade debtors trial balance to
subsequent receipts

Question  42

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Which two of the following are reasons why sales are often verified by testing the internal controls
in place over sales?

Select one or more:

A.

Controls over sales in a company are often strong

B.

Because there are so many individual transactions, there is a significant risk that sales are
misstated

C.

Sales constitute a high volume of similar transactions which are suitable for controls testing

D.
 There are usually too many individual transactions to test them individually

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You have correctly selected 1.

The correct answers are: Sales constitute a high volume of similar transactions which are suitable
for controls testing, Controls over sales in a company are often strong

Question  43

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Which of the below is an important factor under ISA (UK) 230 in determining the form, content
and extent of audit documentation of significant matters?

Select one:

A.

The quality control requirements of the firm

B.
 The requirements of external regulators

C.

The audit documentation currently existing in the audit file which supports conclusions reached.

D.

The extent of professional judgement exercised in performing the work and evaluating the results.

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The correct answer is: The extent of professional judgement exercised in performing the work and
evaluating the results.

Question  44

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The accurate recording of sales transactions concerns all of the following except for

Select one:
 A.

accurately billing for the amount of goods shipped.

B.

proper credit authorization.

C.

accurately recording the amount billed in the accounting records.

D.

shipping the amount of goods ordered.

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The correct answer is: proper credit authorization.

Question  45

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The auditor is performing substantive tests of balances for accounts payable. What documentation
would provide the best evidence for the ending balance?

Select one:

A.

receiving reports

B.

purchase orders

C.

vendors' invoices

D.

vendors' statements

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 Your answer is correct.

The correct answer is: vendors' statements

Question  46

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Kiama, the auditor of Mwangi Flight Enterprises, performs audit procedures relating to its debtors.
Kiama does this by confirming that the accounting system ages the balances correctly and also
checks for subsequent receipts from debtors. Kiama also sends debtors confirmation letters to a
number of customers. One significant debtor however
disputes the balance indicated in the letter (per the client’s records). Kiama concludes that the
balance as per the client’s system is correct as there is no evidence that controls within the
debtor’s organization are effective.
What is the key attribute of audit evidence that has not been complied with?

Select one:

A.

Sufficiency, Relevancy, and Reliability

B.

Sufficiency
 C.

Relevancy

D.

Reliability

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The correct answer is: Reliability

Question  47

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Which of the following is most reliable for verifying the correct balance of accounts payable?

Select one:
 A.

vendors' statements

B.

bills of lading

C.

confirmations

D.

vendors' invoices

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Your answer is incorrect.

The correct answer is: confirmations

Question  48

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Which of the following would not be considered a substantive audit procedure?

Select one:

a.

Obtaining a letter from the bank confirming an account balance

b.

Using audit software to identify all trade debtors over 90 days outstanding

c.

Using CAATs to assess whether credit notes over $5,000 have an electronic date stamp and
approval signature.

d.

Multiplying the number of employees on each pay scale by the yearly pay rate to determine an
estimate of payroll expense

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The correct answer is: Using CAATs to assess whether credit notes over $5,000 have an electronic
date stamp and approval signature.
Question  49

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An underlying feature of random-based selection of items is that each

Select one:

a.

Item in the accounting population be randomly ordered.

b.

Item must be systematically selected using replacement.

c.

Stratum of the accounting population be given equal representation in the sample.

 d.

Item in the accounting population should have an opportunity to be selected.

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The correct answer is: Item in the accounting population should have an opportunity to be
selected.

Question  50

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Question text

Many auditors use two types of audit file: a current audit file and a permanent audit file. For each
of the following documents, select whether it is most likely to be included in the current audit file,
permanent audit file or in both.

Detail of test of control and test of detail Answer 1

Accounting system notes Answer 2

A Summary of unadjusted errors Answer 3

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Your answer is correct.

The correct answer is: Detail of test of control and test of detail → Current audit file, Accounting
system notes → Permanent audit file, A Summary of unadjusted errors → Current audit file
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