Mock In class test

Question 1 of 25

1

The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated. This imposes upon the auditor a duty to:

Select one of the following:

Provide reasonable assurance that material misstatements will be detected.
Be a guarantor of the fairness in the statements.
Be equally responsible with management for the preparation of the financial statements.
Be an insurer of the fairness in the statements.

Explanation

Question 2 of 25

1

When dealing with laws and regulations that do not have a direct effect on the financial statements, the auditor:

Select one of the following:

Should inquire of management about whether the entity is in compliance with such laws and regulations.
Has no responsibility to determine if any violations of these laws has occurred.
Must report all violations, including inconsequential violations, to the audit committee.
Should perform the same procedures as for violations having a direct effect on the financial statements.

Explanation

Question 3 of 25

1

The following stages comprise a typical money laundering process. What is the right sequence of the process ?
Creating layers of financial transactions
2. Breaking up large amounts of cash into smaller sums and placing them into the financial system
3. Integrating the money into the economic system as if it is "clean" and comes from legitimate sources

Select one of the following:

1,2 and 3
1, 3 and 2
2, 1 and 3
3, 1 and 2

Explanation

Question 4 of 25

1

Which of the following considerations of fraud and error by the auditor is not required by ISA 240?

Select one of the following:

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

Explanation

Question 5 of 25

1

If an auditor discovers fraud, an auditor should:

Select one of the following:

Conduct further investigations
Approach the appropriate level of management
Consider withdrawing from the audit if the fraud is significant
All of the above

Explanation

Question 6 of 25

1

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?

Select one of the following:

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

Explanation

Question 7 of 25

1

Which of the following matters is not ordinarily included in a management representation letter?

Select one of the following:

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

Explanation

Question 8 of 25

1

Which of the following would be considered a 'self-interest threat'?

Select one of the following:

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

Explanation

Question 9 of 25

1

Which of the following is not a duty of the audit committee?

Select one of the following:

Special Investigations
Review of internal controls
Monitor the effectiveness of external auditor
Liaison with external controls

Explanation

Question 10 of 25

1

When planning the audit, if the auditor has no reason to believe that illegal acts exist, the auditor should:

Select one of the following:

Include audit procedures which have a strong probability of detecting illegal acts.
Still include some audit procedures designed specifically to uncover illegalities.
Ignore the issue.
Make inquiries of management regarding their policies for detecting and preventing illegal acts and regarding their knowledge of violations, and then rely on normal audit procedures to detect errors, irregularities, and illegalities

Explanation

Question 11 of 25

1

All of the following factors influence the continuance of an existing auditor-client relationship except:

Select one of the following:

The balance of client fees owed
Excessive risk
Pending litigation between client and auditor
Inability to obtain a management representations letter

Explanation

Question 12 of 25

1

Important determinants of audit fees all of the following except:

Select one of the following:

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

Explanation

Question 13 of 25

1

Advertising and promotional material by auditors:

Select one of the following:

Could include exact fees
Should not discredit the services offered by other firms
Could fall short of requirement of UK Advertising Standard Agency
Could be misleading either directly or by implication

Explanation

Question 14 of 25

1

In evaluating engagement risks, the auditor should be aware of items such as:

Select one of the following:

The client's previous year's profits
The client's method of financing growth
The client's liquidity position
All of the above

Explanation

Question 15 of 25

1

Qualitative factors can affect an auditor's assessment of materiality. Which of the following statements is true?
I. Misstatements that are otherwise immaterial may be material if they affect earnings trends.
II. Misstatements that are otherwise minor may be material if there are possible consequences arising from contractual obligations.

Select one of the following:

I only
II only
I and II
neither I nor II

Explanation

Question 16 of 25

1

The three main elements of risk in a business are:

Select one of the following:

Financial risk, Operational risk; Compliance risk
Financial risk, Control, Operational risk,
Control risk, Operational risk, Compliance risk
Control risk, Financial risk, Compliance risk

Explanation

Question 17 of 25

1

The major limitation of using the audit risk model is the:

Select one of the following:

Objective nature of its components
There is no limitation to the model
Application of the model
Subjective nature of its components

Explanation

Question 18 of 25

1

When an auditor calculates the gross margin as a percent of sales and compares it with previous periods, this type of evidence is called

Select one of the following:

Physical examination
Analytical review
Observation
Inquiry

Explanation

Question 19 of 25

1

Quality control policies and procedures that are established to decide whether to accept a new client should provide the audit firm with reasonable assurance that:

Select one of the following:

The audit firm's duty to the public concerning the acceptance of new clients is satisfied.
The likelihood of associating with clients whose management lacks integrity is minimized.
Client-prepared schedules that are necessary for the engagement are completed on a timely
Sufficient corroborating evidence to support the financial statement assertions is available.

Explanation

Question 20 of 25

1

Which of these issues relating to good engagement performance should be addressed in an audit firm's procedures manual

Select one of the following:

Direction
Supervision
Review
All of the above

Explanation

Question 21 of 25

1

When a group auditor uses the work of a component auditor he must document:

Select one of the following:

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

Explanation

Question 22 of 25

1

Procedures to obtain sufficient appropriate audit evidence that the work of the other auditor is adequate is all the consideration necessary

Select one of the following:

A. Direction and supervision of the audit group
B. Provision of essential technical information
C. Participation in the policy making process
All of the above
A and B
A and C
B and C

Explanation

Question 23 of 25

1

In the context of group audit, if a component is significant due to its nature or circumstances, the auditor:

Select one of the following:

Must carry out a full audit of the component using the component materiality
Must carry out an audit of specified account balances related to identified significant risks
Must carry out specified audit procedures related to identified significant risks
All of the above

Explanation

Question 24 of 25

1

What is the type of assurance engagement that has as its subject matter non-historical financial information?

Select one of the following:

Prospective financial information
Review of financial statements
Special purpose engagement
Agreed-upon procedures

Explanation

Question 25 of 25

1

In an agreed-upon procedures engagement what matters generally have to be agreed between auditor and management?

Select one of the following:

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

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Advanced Audit Principles and Practice Mock In class test

Mock In class test

Question 1 of 25

The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated. This imposes upon the auditor a duty to:

Select one of the following:

Explanation

Question 2 of 25

When dealing with laws and regulations that do not have a direct effect on the financial statements, the auditor:

Select one of the following:

Explanation

Question 3 of 25

Select one of the following:

Explanation

Question 4 of 25

Which of the following considerations of fraud and error by the auditor is not required by ISA 240?

Select one of the following:

Explanation

Question 5 of 25

If an auditor discovers fraud, an auditor should:

Select one of the following:

Explanation

Question 6 of 25

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?

Select one of the following:

Explanation

Question 7 of 25

Which of the following matters is not ordinarily included in a management representation letter?

Select one of the following:

Explanation

Question 8 of 25

Which of the following would be considered a 'self-interest threat'?

Select one of the following:

Explanation

Question 9 of 25

Which of the following is not a duty of the audit committee?

Select one of the following:

Explanation

Question 10 of 25

When planning the audit, if the auditor has no reason to believe that illegal acts exist, the auditor should:

Select one of the following:

Explanation

Question 11 of 25

All of the following factors influence the continuance of an existing auditor-client relationship except:

Select one of the following:

Explanation

Question 12 of 25

Important determinants of audit fees all of the following except:

Select one of the following:

Explanation

Question 13 of 25

Advertising and promotional material by auditors:

Select one of the following:

Explanation

Question 14 of 25

In evaluating engagement risks, the auditor should be aware of items such as:

Select one of the following:

Explanation

Question 15 of 25

Select one of the following:

Explanation

Question 16 of 25

The three main elements of risk in a business are:

Select one of the following:

Explanation

Question 17 of 25

The major limitation of using the audit risk model is the:

Select one of the following:

Explanation

Question 18 of 25

When an auditor calculates the gross margin as a percent of sales and compares it with previous periods, this type of evidence is called

Select one of the following:

Explanation

Question 19 of 25

Quality control policies and procedures that are established to decide whether to accept a new client should provide the audit firm with reasonable assurance that:

Select one of the following:

Explanation

Question 20 of 25

Which of these issues relating to good engagement performance should be addressed in an audit firm's procedures manual

Select one of the following:

Explanation