Audit In Swing

Question 1

Tests of controls

TERROR

Answer 1

T = test data, test sequential numbering of docs
E = enquire
R = reperform reconciliations
R = recalculate
O = observe procedures/authorisations/physical controls
R = review docs to see if authorised/if another doc is attached

Question 2

Audit evidence should be…

Answer 2

SUFFICIENT
• judgemental
• as risk increases, need for evidence increases

APPROPRIATE
• relevant > must cover one or more of assertions
• reliable > more risk, more need for reliability
written > oral
external > internal
auditor generated > other

Question 3

ASSERTIONS: SoFP (4)

Answer 3

• existence
• completeness
• rights & obligations
• valuation

Question 4

ASSERTIONS: IS/SoPL (5)

Answer 4

• occurence
• completeness
• accuracy
• cut-off
• classification

Question 5

Audit reports: explicit opinions (3)

Answer 5

• whether f-s’s give true and fair view (UK and int)
• whether they have been properly prepared (UK and int)
• whether info given in directors’ report is consistent with f-s’s (UK only)

Question 6

Audit reports: implied opinions (6)

Answer 6

• adequate accounting records kept
• adequate returns from branches not visited
• accounts agree with accounting records
• all info and explanations received
• details of directors’ emoluments disclosed
• particulars of loans and other transactions with directors disclosed

Question 7

Audit report includes… (6)

Answer 7

• responsibilities of auditors and directors
• scope of audit
• opinion
• introduction: what’s been audited (pages x-y)
• independent audit report to shareholders
• signed by senior statutory auditor (not just firm)

Question 8

Working papers should be kept for…

Answer 8

6 years from end of accounting period

Question 9

Analytical procedures (5)

Answer 9

• used at all stages of audit: planning, reviewing, evidence
• planning: used to understand business and assess risk
• analysis of significant fluctuations from expected results
• comparison of absolute figures and ratios
• highlight figures with high % mvt or above materiality threshold

Question 10

Evidence and sampling: procedures (6)

Answer 10

• inspection
• observation
• inquiery
• confirmation
• reperformance/recalculation
• analytical procedures > used at all stages

Question 11

Accounting estimates

Method and effectiveness

Answer 11

Testing provisions: see how much of provision was used last year (bad debts etc.)

2 types of effectiveness of controls:

• design effectiveness
> is it a good control/well-designed?

• operating effectiveness
> is it carried out/operated properly by appropriate level of management?

Question 12

Audit tests: AEIOU

Answer 12

Should all have an action

A = analyse
E = enquire
I = inspect
O = observe
U = calcUlate

Question 13

Representation letter must include…

Answer 13

Management has…

• fulfilled responsibility for prep of f-s’s
• provided auditor with all relevant info and access
• recorded and reflected all transactions in f-s’s

All as agreed in terms of audit engagement