ACA Audit and Assurance 2

Question 1

Which of the following is an example of a substantive procedure?

Accepted Answer

Sending confirmation letters to trade receivables

Answer

Testing whether purchase orders are properly authorised

Answer

Observing whether duties are properly segregated

Answer

Reviewing the entity's code of conduct

Question 2

Under ISA (UK) 520, what is the primary purpose of analytical procedures performed at the planning stage of an audit?

Accepted Answer

To identify areas of potential risk and focus the audit effort

Answer

To provide substantive evidence about account balances

Answer

To confirm the accuracy of the prior year's audit

Answer

To satisfy the requirement for a final analytical review

Question 3

Under UK company law, for how long must audit working papers be retained?

Accepted Answer

6 years

Answer

3 years

Answer

Indefinitely

Answer

1 year

Question 4

What does the concept of 'audit materiality' represent?

Accepted Answer

The threshold above which misstatements could influence the economic decisions of users of the financial statements

Answer

The total value of assets on the balance sheet

Answer

The minimum fee the auditor will charge

Answer

The level of detail required in audit documentation

Question 5

Which of the following situations would most likely require the auditor to issue a disclaimer of opinion?

Accepted Answer

The auditor is unable to obtain sufficient appropriate evidence due to a pervasive limitation on the scope of the audit

Answer

A minor disagreement over an accounting policy

Answer

A material but isolated misstatement in inventory

Answer

The entity has changed its depreciation method

Question 6

Under ISA (UK) 240, which of the following is TRUE regarding the auditor's responsibility for fraud?

Accepted Answer

The auditor must obtain reasonable assurance that the financial statements are free from material misstatement due to fraud

Answer

The auditor is responsible for preventing all fraud

Answer

The auditor has no responsibility regarding fraud

Answer

The auditor must report all fraud directly to the police