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
The overall audit strategy is a document that:
Answer: Establishes the scope, timing, and direction of the audit and provides the framework for developing the detailed audit plan
The overall audit strategy (required by ISA 300) identifies the characteristics of the engagement, reporting objectives and deadlines, significant factors affecting the entity, and the nature, timing, and extent of planned resources.
Confirmation of trade receivables via external circularisation provides evidence primarily about which assertion?
Answer: Existence — that the recorded receivables actually exist and are owed by the customers
External confirmation (circularisation) asks customers to confirm their balance directly to the auditor — providing independent, third-party evidence primarily for the existence assertion (the receivable genuinely exists and is owed).
Which of the following is an example of a substantive test of details?
Answer: Recalculating depreciation on a sample of non-current assets
Substantive tests of details examine individual transactions or balances — recalculating depreciation on sampled assets tests the accuracy assertion by re-performing the calculation and comparing to the recorded figure.
Under ISA 620, if the auditor uses the work of an auditor's expert, the responsibility for the audit opinion:
Answer: Remains solely with the auditor
ISA 620 is clear: using an expert does not reduce the auditor's responsibility for the audit opinion. The auditor must evaluate the expert's work and satisfy themselves that it is adequate and appropriate for audit purposes.
What is the purpose of management representations (letters of representation) in an audit?
Answer: To confirm management's responsibilities and provide written support for oral statements made to the auditor, as required by ISA 580
The letter of representation documents management's acknowledgement of their responsibilities, confirms oral representations, and covers specific areas where sufficient evidence from other sources is not available — but it does not replace other audit evidence.
The scope of an audit may be limited, resulting in a qualified opinion, if:
Answer: The auditor is unable to obtain sufficient appropriate audit evidence on a material matter (limitation of scope)
A scope limitation arises when the auditor cannot obtain sufficient appropriate evidence on a material matter — for example, inventory records are missing or management refuses access to information. This results in a qualified or disclaimer of opinion depending on pervasiveness.