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Which of the following is not one of the major categories of auditor's services?
Assurance engagements dealing with subject matters other than historical financial information
Related service engagements
Compilation engagement
The audit or review of historical financial information
Planning means developing a general strategy and a detailed approach for the expected:
Audit opinion and reports to regulators
Report to the audit committee
Audit working papers' documentation
Nature, timing and extent of the audit
Materiality and risk are_________ related.
Inversely
Directly
Equally
None of the above
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?
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
If an auditor believes the financial statements of a client are not fairly presented then the auditor should:
Notify users through an auditor report
Report the findings to the government
Notify the external users by advertising its findings
All of the above
_____________ uses comparison and relationship to assess whether account balances or other data appear reasonable.
Test of details
Internal details
Analytical procedures
Walk through tests
In evaluating engagement risks, the auditor should be aware of items such as:
The client's previous year's profits
The client's method of financing growth
The client's liquidity position
___________ smoothing is a form of earning management in which revenues and expenses are shifted between periods to reduce fluctuations in earnings.
Expense
Equity
Revenue
Income
Fraudulent financial reporting may contribute to:
External Performance Pressures
Lack of Segregation of Duties
Internal Performance Pressures
If an auditor discovers fraud, an auditor should:
Conduct further investigations
Approach the appropriate level of management
Consider withdrawing from the audit if the fraud is significant
The following stages comprise a typical money laundering process. What is the right sequence of the process ? Creating layers of financial transactions Breaking up large amounts of cash into smaller sums and placing them into the financial system Integrating the money into the economic system as if it is "clean" and comes from legitimate sources
1,2 and 3
1, 3 and 2
2, 1 and 3
3, 1 and 2
An auditor makes inquiries of inventory control and sales personnel concerning possible obsolete or slow moving inventory to verify:
Rights and obligations
Valuation
Occurrence
Existence
Which of the following is not correct about independence of mind?
It allows an individual to act with integrity
It is the exercise of objectivity and professional scepticism
It permits the provision of an opinion without being affected by influences that compromise professional judgment
It is the state of mind that creates confidence in the auditor
The auditor with the responsibility for reporting is:
The external auditor
The group auditor
The internal auditor
The other auditor
The terms of the engagement include consideration of what is to be done (the objective, scope and report of the audit), by whom and:
What is the estimated period of time for the audit
What employees will participate in the audit
What experience the auditors have
For how much
All of the following are audit procedures in the audit of Accounts Payable and Accruals except:
Review liabilities recorded after the end of the period and review subsequent cash payments
Value inventory
Vouch claims for credit from suppliers (e.g. receivables from suppliers) to supporting documents
Review classification and description of accounts (e.g. debit balance, current/non-current trade, related parties)
Which of the following standards are not issued by the International Auditing and Assurance Standards Board?
International Standards on Quality Control
International Auditing Practice Statements
International Standard on Assurance Engagements
International Financial Reporting Standards
The standards given in 'Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement', (ISA 315) emphasise:
Reports to regulating bodies
Obtaining an understanding of business risks and significant risks
Obtaining an understanding of control risk
Procedures for sampling audit tests
How does the related services framework differ from the assurance framework?
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 ISAEs
Related services claim compliance with ISAs
In an agreed-upon procedures engagement what matters generally have to be agreed between auditor and management?
Nature, timing and extent of the specific procedures to be applied
The intended user of the report
The skills of the audit team
Identification of the corporate governance framework
A Letter of Representation includes all the following matters except:
matters which are material to the financial statements
matters for which the auditors cannot obtain independent corroborative evidence and thus have to rely on directors as the primary source
matters which are routine
matters where management alone have knowledge and matters of judgement and opinion
Which of the following matters is not ordinarily included in a management representations letter?
Acknowledgement of the directors' responsibilities for preparing financial statements in accordance with the appropriate financial reporting framework
Disclosure of compensating balances and other arrangements involving restrictions on cash balances
Amount of potential loss from litigation, including court costs
Management's acknowledgment of its responsibility for the fair presentation of financial statements
Which of the following is not a procedure to obtain an understanding of risk in the planning stage (described in ISA 315):
Inquiries of management
Observation and inspection
If an auditor discovers fraud, an auditor should
Fraudulent financial reporting may be caused by:
In cases when a new auditor will replace an existing auditor, the code of ethics advises the new auditor to:
Communicate with the existing auditor
Report the change to the SEC
Communicate with the audit committee
Present a change of auditor plan to the audit client
All of the following factors influence the continuance of an existing auditor-client relationship except:
Pending litigation between client and auditor
Excessive risk
Inability to obtain a management representation letter
The balance of client fees owed
Which of the following might be a commonly used guideline related to a financial statement materiality base?
15 % to 20% of current assets
2 % to 4 % of net income before taxes
5 % to 10% of long-term liabilities
1/2 % to 2% of total assets
Which of the following papers would normally be retained on the permanent file maintained for a limited company audit client?
Completed checklist of statutory disclosure provisions.
Extracts of minutes of meetings of the directors.
Written representations from management.
Copy of the company’s legal constitution
