AAT L4 Audit & Assurance 3

Question 1

Under ISA 520, analytical procedures used as substantive procedures involve:

Accepted Answer

Comparing recorded figures against expectations developed from independent sources or prior periods to identify unusual fluctuations

Answer

Substantive analytical procedures compare recorded amounts against independently developed expectations; unexplained significant differences indicate a risk of misstatement, requiring additional investigation.

Question 2

Which assertion for income statement items relates to whether the amounts have been correctly calculated?

Accepted Answer

Accuracy

Answer

The accuracy assertion for transactions and events asserts that recorded amounts and other data relating to transactions have been recorded appropriately — the calculations are correct and amounts are proper.

Question 3

Under ISA 560, events occurring after the balance sheet date but before the auditor's report is signed are called:

Accepted Answer

Subsequent events — which may be adjusting or non-adjusting depending on their nature

Answer

Subsequent events are events occurring after the reporting date but before the auditor's report is signed. ISA 560 categorises them as adjusting (confirming conditions at year end) or non-adjusting (indicating conditions arising after year end).

Question 4

The auditor's report on a set of financial statements is addressed to:

Accepted Answer

The shareholders (members) of the company

Answer

The auditor's report is addressed to the shareholders (members) of the company — reflecting the fact that shareholders appoint the auditor to provide assurance on their behalf on the accounts prepared by management/directors.

Question 5

Audit documentation (working papers) must be retained for at least:

Accepted Answer

5 years

Answer

Under ISA 230 and regulatory requirements (ISQM 1), audit documentation must be retained for at least 5 years from the date of the auditor's report, enabling subsequent review of the audit quality.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Audit & Assurance 3