Audit & Assurance Flashcards
6 cards from real AAT L4 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Audit & Assurance flashcards as text
Professional scepticism in an audit context means the auditor:
Answer: Maintains a questioning mind and critically assesses evidence, regardless of prior experience with the client
Professional scepticism is an attitude requiring a questioning mind, alertness to conditions suggesting misstatement, and critical assessment of audit evidence — not assuming honesty or dishonesty, but always requiring sufficient appropriate evidence.
ISA 240 deals with the auditor's responsibilities relating to fraud. The primary responsibility for preventing and detecting fraud rests with:
Answer: Management and those charged with governance
ISA 240 clarifies that management (with oversight from those charged with governance) bears the primary responsibility for prevention and detection of fraud; the auditor obtains reasonable assurance but cannot guarantee all fraud is found.
The audit risk model shows: Audit Risk = Inherent Risk × Control Risk × Detection Risk. If inherent risk and control risk are both assessed as high, the auditor should:
Answer: Reduce detection risk by performing more extensive and targeted audit procedures
If inherent and control risk are high, detection risk must be kept very low to maintain an acceptable level of overall audit risk; the auditor achieves this by performing more extensive, targeted substantive procedures.
Under ISA 265, a significant deficiency in internal control must be communicated to:
Answer: Those charged with governance in writing
ISA 265 requires the auditor to communicate significant deficiencies in internal control identified during the audit to those charged with governance (e.g., the audit committee) in writing on a timely basis.
Which of the following audit procedures provides the most reliable evidence about the completeness of trade payables?
Answer: Examining invoices received after the year end to identify goods received before year end but not recorded
Reviewing post-year-end invoices and delivery notes for goods received before year end tests whether all liabilities were recorded — this directly tests the completeness assertion for payables.
The engagement partner is responsible for:
Answer: The overall quality of each audit engagement and compliance with professional standards
Under ISQM 1 and ISA 220, the engagement partner takes ultimate responsibility for the overall quality of the audit, including ensuring compliance with standards, ethics, and the quality management system.