Section A Rote (3) Flashcards
1
Q
Should audit team have staff with experience of public sector audits for auditing a public sector company
A
YES
2
Q
Should government authorities refer to going concern uncertainties
A
Yes, as they are not immune
3
Q
Does compare income by shop and category to the prior year cause income to understate or overstate?
A
Understate
4
Q
Does inspect credit notes issued post-year-end cause income to understate or overstate?
A
Overstate
5
Q
Does agree total on till receipts to detailed sales listing, bank statements and bank ledger account cause income to understate or overstate?
A
Understate
6
Q
Does obtain detailed sales listing and cast to confirm accuracy cause income to understate or overstate?
A
Understate
7
Q
What is the best evidence for a bonus issue of oprdinary share capital?
A
Companies house information
8
Q
What assertion does inspect the independent expert’s report satisfy?
A
Valuation
9
Q
What assertion does match the physical properties to independent expoert’s report and non-current asset register satisfy?
A
Completeness
10
Q
What assertion does recalculate the depreciation on revalued properties satisfy?
A
Valuation
11
Q
Where are movements in equity shown in the financial statements?
A
Statement of changes in equity
12
Q
What is the structure of a completeness assertion?
A
Procedure must start from outside of the accounting records and agreed into the accounting records
13
Q
What assertion does obtain a breakdown of payment to each director, recalculate the total and agree to FSs test?
A
Completeness
14
Q
What assertion does review board minutes for details of bonuses or additional payments to be made to directors test?
A
Completeness
15
Q
What assertion does inspect directors’ service contracts for salaries and trace through to payroll reports for the year test?
A
Completeness
16
Q
Where is the detailed review of audit working papers included?
A
As part of the firm’s quality management procedures
17
Q
Where is reviewing adequacy of the disclosure of accounting policies included?
A
Part of auditor’s overall review of FS
18
Q
What does an increase in proportion of cash sales do to trade receivables collection period?
A
It decreases trade receivables collection period
19
Q
Should name of valuer in a revaluation be disclosed for adequacy?
A
No
20
Q
When can an unmodified opinion still be issued?
A
If a misstatement is immaterial
21
Q
Is 2.2% of profit before tax considered material?
A
NO
22
Q
Should a manager form conclusions on the balances for sample sizes?
A
NO
23
Q
How are sample sizes chosen?
A
Based on judgment of auditor responsible for planning taken into consideration to obtain sufficient appropriate evidence
24
Q
When sample sizes are reduced, what needs to be done?
A
Audit plan should be updated to reflect this
25
Does enquiry provide sufficient appropriate evidence on its own for subsequent events review
No
26
Should a written representation have been obtained from management confirming they have disclosed subsequent events to the auditor for subsequent events review?
Yes
27
Do firms report unprofessional staff to ACCA?
No
28
When is an engagement quality review performed?
On or before the date of the auditor's report
29
Should all working paper be signed by the person who prepared them?
True
30
Should all team members' work should be reviewed by someone more senior than the preparer?
True
31
Does the audit engagement partner review all working papers on audit file before issuing an opinion?
No
32
Could a revenue decrease of 30% have an impact on company going forward?
YES
33
What is the effect on gross profit margin if sales prices charged to customers had increased whilst costs were the same?
It goes up
34
What can cause a decrease in the gross profit margin?
Increase in cost of sales or reduction in sales price
35
Affect on quick ratio if there's more reliance on an overdraft?
It decreases
36
Affect on payables payment period if there are delays in paying suppliers?
it increases
37
What is generally meant when an inventory holding period has increased significantly?
Implies that items are taking longer to sell
38
What provides most reliable evidence that a new business won post-year-end?
Review post-year-end sales orders from new customers
39
What must auditor do in respect of management's going concern assessment?
Request management extend the assessment cover by another year
40
What is a material uncertainty related to going concern section?
A matter of fundamental importance to the user's understandings
41
Does a material uncertainty related to going concern section change the audit opinion?
No, it can remain unmodified
42
When are subsequent events procedures performed?
Between date of FSs and date of the auditor's report
43
Should auditor contact a manager no longer an officer of a company?
NO
44
Appropriate opinion for an unfair dismissal case that is not material?
Unmodified and no additional communica ction
45
What is included in a key audit matters section?
Matters which required significant auditor attention
46
When 7.7% of profit before tax, is it material or immaterial?
It is material
47
When there's a material misstatement, who should auditor contact?
Enquire how management intends to address the matter in FSs when appropriate
48
What auditor do with other information?
Ensure it is consistent with FSs and their knowledge of entity is obtained during the audit
49
Are notes in the financial statements considered part of FSs
Yes, and are subject to audit. Not considered other information
50
Where inconsistency between chair's statement and financial statements be addressed in auditor;s report?
Included in Other Information
51
Should an auditor expose management's incompetence?
No
52
If there's an inconsistency between other information and FSs
It undermines the auditor's report
53
What paragraph in auditor's report is included for restricting liability?
Included in an Other Matter paragraph
54
What is considered material for total assets?
1 to 2% of total assets
55
Issue with inspecting sales invoice and GDN for forming a conclusion as to level of adjustment for receivables balance?
Does not provide evidence of when the balance will be received
56
When a matter is considered material and management refuse to adjust. What opinion is issued?
Qualified
57
When is an emphasis of matter paragraph required in an auditor's report?
If there is a matter disclosed adequately in FS which auditor considers to be fundamentally important
58
When is an other matter paragraph only required?
If matter is not related to FSs but the auditor wishes to bring to attention of the user such as further explanation of auditor's responsibilities
59
Which paragraph would restricting reliance on auditor's report by third parties be included?
Other matter paragraph
60
Which paragraph would conclude that there is material inconsistency between audited financial statements and other info contained in the annual report be included?
Other information
61
Do auditor's make disclosures in financial statements?
FUCK NO
62
Do ratios provide evidence a company is a going concern?
No
63
Does reviewing level of profit made in past provide evidence for going concern?
No, as going concern is future based
64
What opinion is adequate disclosure of going concern uncertainities?
Unmodified opinion with going concern section
65
What opinion is adequate disclosure of going concern uncertainties is not made?
Modified opinion
66
When should a company not prepare financial statements using the break up basis?
Material uncertainties relating to going concern
67
What happens if auditor believes the basis of preparation of FSs is incorrect?
Adverse opinion with basis for adverse opinion
68
Is an 86% effect on profit likely to cause an adverse opinion?
Yes as it is material and pervasive
69
Is an 41% effect on profit likely to cause an adverse opinion?
No, as it material but not pervasive
70
Is a 3% effect on profit considered material?
No
71
What is done in FSs if a legal claim against a company is possible>
A contingent liability disclosure is required
72
When is an unmodified opinipn with no additional communication given?
Matter is correctly treated in FSs
73
What does basis for opinion matter paragraph represent?
Provides a description of professional standards applied during audit to provide confidence to users that report can be relied upon
74
What is the wording for a disclaimer of opinion?
States the auditor does not express an opinion
75
What is the wording for an unmodified opinion?
Means FSs give a true and fair view
76
What is the wording for an adverse opinion?
Means FSs do not give a true and fair view
77
What is the wording for a qualified opinion?
Except for the issue described, FSs give a true and fair view
78
Is 4% of profit before tax material?
No
79
Is 8% of profit before tax material?
Yes
80
When both issues were in existence at year end, are they adjusting events?
Yes
81
If an issue is material but not pervasive, is a qualified opinion required?
Yes
82
Are the responsibilities of both auditors and management included in every auditor's report?
Yes
83
When is key audit matters only compulsory?
For listed companies
84
When a condition causing damage occurred after year end. What sort of event is it?
A non-adjusting event
85
When is a non-adjusting event disclosed of?
If it is material
86
When is a written representation appropriate?
If the matter involves managemetn judgment
87
When is a written representation not appropriate for a receivable balance?
Other procedures can be performed which provide more reliable evidence
88
Issue if directors refuse to provide a written representation to the auditors?
May cast doubt over management integrity and as such reliability of other evidence provided by client may be called into question
89
What opinion is performed if company refuses to provide a written representation letter?
Qualified opinion due to an inability to obtain sufficient appropriate evidence
90
When is a disclaimer of opinion given?
When auditor does not have sufficient appropriate evidence to be able to express an audit opinion
91
Are plans or intentions of management that affect carrying values of assets always included in every written representation?
Not required
92
Are confirmation from management that they have provided the auditor with all info and access to records during the audit always included in every written representation?
Required
93
Are confirmation from management that financial statements are accurate/free from error always included in every written representation?
Not required
94
Are confirmation from management that all transactions have been reflected in FSs always included in every written representation?
Required
95
What must be considered for work performed by the expert (competence)
Must consider competence and objectivity of the experrt
96
What must be considered for work performed by the expert (appropriate)
Must assess expert's work to ensure it is appropriate for audit purposes
97
Does an auditor have to ask management to adjustment financial statements?
YES
98
Does a contingent liability disclosure require an emphasis of matter paragraph?
Yes
99
When defective inventory is included in FSs. Is it adjusting or non-adjusting event?
Adjusting event
100
When an explosion occurred after the year-end. Is it an adjusting or non-adjusting event?
Non-adjusting event
101
In IAS 2, what should inventory be valued at?
The lower of cost and NRV
102
What needs to be obtained in respect of subsequent events?
A written representation
103
When 13.4% of profit before tax?
It is material
104
When 1.4% of revenue?
It is material
105
When something is material, does it require amendment?
Yes
106
Which opinion is included if events are material and require amendments. But misstatements are not pervasive?
A basis for qualified opinion
107
When is key audit matter paragraph not appropriate?
For a non-listed company
108
When is an emphasis of matter paragraph included>
To draw user's attention to a matter correctly disclosed in FSs
109
When is the end of period covered by the subsequent events review?
When auditor's report is signed
110
When is a fire a non-adjusting event?
If it occurred and caused damage after year-end
111
When should certain audit procedures be carried out for a fire at the oil factory?
Could cast on the appropriateness of the use of the going concern basis of accounting
112
When a condition is at year-end (is it an adjusting or non-adjusting event)?
Adjusting
113
When a condition is post-year-end and only creates an obligation at that point (is it an adjusting or non-adjusting event)?
Non-adjusting
114
What should be done if directors do not issue the financial statements?
Take steps to prevent reliance on the existing auditor's report
115
What is the correct opinion if directors have decided to reissue FSs which audit engagement partner has reviewed and confirmed as appropriate>
Unmodified opinion with disclosure in an emphasis of matter paragraph
116
Does provides audit evidence to satisfy the objective of testing evidence positive or negative confirmation?
BOTH
117
Does cannot be used as the sole substantive procedure unless population consists of a large number of small homogeneous balances positive or negative confirmation?
Negative
118
If customer requested to reply, indicating whether they agree or disagree with the balance included in the request positive or negative confirmation?
Positive
119
What should be carried out to determine if prepayment for advertising costs is understated?
Inspect the signed contract and confirm the commencement date and recalculate the contract cost for May 20X5 to January 20X6
120
What can be done to confirm a genuine prepayment?
Inspect cash book/bank ledger for evidence of amount paid to advertising company and agree to the signed contract
121
Should audit engagements always provide reasonable assurance?
True
122
Does a true and fair view mean FSs contain no misstatements?
False
123
Do most non-audit engagements provide reasonable assurance?
False
124
How many prescribed elements are there to an assurance engagement?
Five
125
Disadvantages of outsourcing internal audit?
Creates a self-review threat during external audit and internal audit has less understanding of the business
126
What procedures should be done on financial forecasts?
A comparison and enquire with directors on assumptions made
127
What type of internal audit assignment does review of procedures around sales orders represent?
A financial audit
128
Does a new bank account reduce the reliabiltiy of audit evidence?
NO
129
Which procedure is used to verify accrued interest at the accounting period end>
Recalculate accrued interest based on outstanding loan value, interest rate and accrual period
130
Completeness assertion for bank and cash example?
Agreeing a sample of accounts detailed on the bank confirmation letter to the TB
131
Rights and obligation assertion for bank and cash example?
Reviewing all relevant bank statements to verify that the accounts are held under a company
132
Existence assertion for bank and cash example?
Attend the cash countat the year-end and reperform the count
133
What type of assurance is judgment required to determine appropriate procedures required to obtain this level of assurance?
BOTH
134
What form of conclusion does a limited assurance give?
Negative form
135
Should the materiality of FS amount affected by internal audit service be considered when evaluating significance of any self-review threat?
YES
136
When is audit sampling not considered an inherent limitation?
If it doesn't test 100% of all balances and transactions
137
When is reliability of evidence generated internally increased?
When related controls are effective
138
Is direct or indirect evidence by the auditor more reliable
Direct evidence
139
Best way to address audit engagement partner's concern in relation to share issue?
Inspect consituition docuyments for evidence that share issue is permitted
