ACCA - Association of Chartered Certified Accountants Audit and Assurance Principles Questions and Answers

Question 1

An auditor is reviewing the non-current assets of a manufacturing company. To verify the 'existence' assertion for the machinery, which of the following audit procedures would be the MOST appropriate?

Accepted Answer

Physically inspecting the machines on the factory floor and agreeing them to the non-current asset register.

Answer

Reviewing the depreciation calculation for a sample of machines.

Answer

Inspecting the supplier invoices for machines purchased during the year.

Answer

Enquiring with the production manager about the operational status of the machines.

Question 2

According to the ACCA's Code of Ethics and Conduct, which fundamental principle requires a professional accountant to be straightforward and honest in all professional and business relationships?

Accepted Answer

Integrity

Answer

Objectivity

Answer

Professional Competence and Due Care

Answer

Confidentiality

Question 3

In the context of audit risk, what is 'detection risk'?

Accepted Answer

The risk that the auditor's procedures will not detect a material misstatement that exists.

Answer

The risk that the entity's internal controls will fail to prevent or detect a material misstatement.

Answer

The susceptibility of an assertion to a misstatement that could be material, before consideration of any related controls.

Answer

The risk that the financial statements are materially misstated prior to the audit.

Question 4

A junior auditor has been asked to gather evidence regarding the valuation of inventory. Which of the following sources of audit evidence would generally be considered the MOST reliable?

Accepted Answer

A direct written confirmation from a third-party storage facility holding some of the company's inventory.

Answer

A verbal confirmation from the warehouse manager regarding the condition of the inventory.

Answer

A schedule of inventory costs prepared by the company's management accountant.

Answer

Photocopies of supplier invoices for raw material purchases provided by the accounts payable clerk.

Question 5

During the planning stage of an audit, the auditor uses analytical procedures to identify unusual fluctuations or relationships. Which of the following is a primary purpose of using analytical procedures at this stage?

Accepted Answer

To assist in understanding the business and in identifying areas of potential risk.

Answer

To obtain sufficient appropriate audit evidence to support the audit opinion.

Answer

To evaluate the overall presentation of the financial statements.

Answer

To test the operating effectiveness of internal controls.

Question 6

Which of the following situations creates a 'self-review' threat to an auditor's independence?

Accepted Answer

The audit firm prepared the financial statements for the client and is now auditing them.

Answer

The audit firm is promoting shares in the client company.

Answer

An audit team member has a close family member who is a director at the client.

Answer

The client has threatened to replace the audit firm over a disagreement about an accounting principle.

An auditor is reviewing the non-current assets of a manufacturing company.To verify the 'existence' assertion for the machinery, which of the following audit procedures would be the MOST appropriate?

An auditor is reviewing the non-current assets of a manufacturing company.
To verify the 'existence' assertion for the machinery, which of the following audit procedures would be the MOST appropriate?