Audit and Assurance Principles Flashcards
7 cards from real ACCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Audit and Assurance Principles flashcards as text
Which type of audit opinion is issued when the financial statements are materially misstated but the misstatement is NOT pervasive?
Answer: Qualified opinion
A qualified opinion ('except for') is appropriate when there is a material but non-pervasive misstatement or limitation on scope.
Under ACCA's Code of Ethics, which principle requires auditors not to disclose client information to third parties without proper authority?
Answer: Confidentiality
The confidentiality principle prohibits auditors from disclosing client information acquired during the engagement to unauthorized parties.
What is 'tolerable misstatement' in audit sampling?
Answer: The maximum monetary error in a population the auditor can accept without modifying the opinion
Tolerable misstatement is the amount set by the auditor for sampling purposes, representing the maximum error acceptable before the conclusion about the population changes.
Which assertion is MOST directly tested when an auditor reviews the physical inventory count?
Answer: Existence
Observing a physical count tests that recorded inventory items actually exist at the balance sheet date.
An audit firm provides bookkeeping services to an audit client. Which threat does this primarily create?
Answer: Self-review threat
Preparing accounting records and then auditing those same records creates a self-review threat because the firm is auditing its own work.
Under ISA 240, management override of controls is considered a significant fraud risk in every audit because:
Answer: Management is uniquely positioned to override controls regardless of their design
ISA 240 recognizes that management can circumvent controls that would otherwise prevent or detect fraud, making this a presumed risk in every audit.
What is the auditor's primary objective when testing controls (tests of controls)?
Answer: To obtain evidence about the operating effectiveness of controls in preventing or detecting material misstatements
Tests of controls are designed to evaluate whether internal controls operated effectively throughout the period, supporting a reduced assessed level of control risk.