Assurance & Audit Flashcards

Due professional care in auditing requires the auditor to:

Answer: Exercise the skill and care of a reasonably competent auditor

Due professional care requires auditors to apply the skill, knowledge, and diligence expected of a competent professional; it does not require perfection or guarantee all errors are found.

Which of the following is NOT a component of audit risk?

Answer: Business risk

Audit risk = inherent risk × control risk × detection risk. Business risk relates to the entity's strategic risks and is not a direct component of the audit risk model, though it informs inherent risk.

Under ISA 550, the auditor's primary concern with related party transactions is:

Answer: Whether they have been conducted at arm's length and properly disclosed

ISA 550 requires the auditor to consider whether related party transactions have been conducted at arm's length and whether they are properly identified, accounted for, and disclosed in the financial statements.

A letter of representation from management serves to:

Answer: Confirm management's responsibilities and provide written support for oral representations

Under ISA 580, a written representation letter documents management's acknowledgement of their responsibilities and provides evidence of representations made, but does not replace other audit evidence.

Under ISA 450, misstatements accumulated during the audit should be communicated to:

Answer: Management and those charged with governance

ISA 450 requires accumulated uncorrected misstatements to be communicated to management and, where appropriate, those charged with governance, so they can decide whether to correct them.

Which audit procedure tests the completeness assertion for trade payables?

Answer: Reviewing invoices received after the year end

Reviewing invoices and delivery notes received after the year end and checking whether they relate to pre-year-end transactions tests whether all liabilities have been recorded (completeness).