ACA Assurance & Audit 3

Question 1

Under ISA 570, if material uncertainty about going concern exists, the auditor must:

Accepted Answer

Include an Emphasis of Matter paragraph if the disclosure is adequate

Answer

ISA 570 requires the auditor to include an Emphasis of Matter paragraph drawing attention to the going concern note when management's disclosure is adequate; a modified opinion is issued if disclosure is inadequate.

Question 2

Which of the following best describes inherent risk in the audit risk model?

Accepted Answer

The risk of a material misstatement existing before considering internal controls

Answer

Inherent risk is the susceptibility of an assertion to a material misstatement, assuming no related controls; it arises from the nature of the item, the industry, or the entity's circumstances.

Question 3

Under ISA 600, a group auditor who places reliance on a component auditor must:

Accepted Answer

Be involved in the risk assessment and review sufficient appropriate evidence

Answer

ISA 600 requires the group engagement team to be involved in the component auditor's risk assessment and to evaluate whether sufficient appropriate audit evidence has been obtained.

Question 4

An assurance engagement provides the practitioner's conclusion on a subject matter. Which level of assurance results in a 'nothing has come to our attention' conclusion?

Accepted Answer

Limited assurance

Answer

Limited (or moderate) assurance results in negative assurance — 'nothing has come to our attention to suggest...' — whereas reasonable assurance results in a positive conclusion.

Question 5

Under ISA 402, when a client uses a service organisation, the auditor should:

Accepted Answer

Obtain an understanding of the services provided and controls at the service organisation

Answer

ISA 402 requires the auditor to understand the services provided by the service organisation and their effect on the client's controls, possibly relying on a service auditor's report (SOC report).

ACA ICAEW Practice Test

ACA ICAEW Practice Test

ACA Assurance & Audit 3