ACCA SP Advanced Audit and Assurance (AAA)

Question 1

During the audit of a listed company, the audit team discovers that management has recorded a material transaction with a related party at an amount significantly above market value.
Under ISA 550, the auditor should FIRST:

Accepted Answer

Evaluate whether the transaction has been properly disclosed and consider the implications for the risk of material misstatement

Answer

Immediately report the matter to the regulatory authorities

Answer

Resign from the engagement as management lacks integrity

Answer

Issue a qualified audit opinion without further investigation

Question 2

An auditor is assessing going concern for a manufacturing company. Which of the following indicators would present the MOST significant doubt about going concern?

Accepted Answer

The company's bank has withdrawn its overdraft facility and a major loan covenant has been breached with no waiver obtained

Answer

The company's revenue has declined by 5% compared to the prior year

Answer

Employee turnover has increased by 15% during the year

Answer

The company has changed its accounting policy for depreciation

Question 3

Under ISA 240 The Auditor's Responsibilities Relating to Fraud, there is a presumption that revenue recognition involves a risk of fraud. In which situation is the auditor PERMITTED to rebut this presumption?

Accepted Answer

When the revenue streams are simple and predictable, and the auditor has documented the basis for rebuttal

Answer

When the company has strong internal controls over revenue

Answer

When management asserts that no fraud has occurred

Answer

The presumption can never be rebutted under any circumstances

Question 4

An audit firm has been engaged to audit Company X. The audit engagement partner's spouse owns 2% of Company X's shares. Under IESBA Code of Ethics, this represents:

Accepted Answer

A breach of independence requirements that cannot be mitigated — the partner must be replaced

Answer

An acceptable situation provided it is disclosed to those charged with governance

Answer

A self-interest threat that can be reduced to an acceptable level through safeguards

Answer

An advocacy threat that requires a second partner review

Question 5

The auditor of a group is planning the group audit. Under ISA 600 (Revised), which of the following is the group auditor's responsibility regarding component auditors?

Accepted Answer

The group auditor must evaluate the competence and independence of component auditors and issue appropriate instructions

Answer

The group auditor has no responsibility for work performed by component auditors

Answer

The group auditor must re-perform all audit procedures carried out by component auditors

Answer

The group auditor can delegate full responsibility to component auditors for significant components

Question 6

After completing the audit, the auditor identifies a material uncertainty related to going concern that is adequately disclosed in the financial statements. The appropriate audit opinion is:

Accepted Answer

An unmodified opinion with a separate 'Material Uncertainty Related to Going Concern' section

Answer

A qualified opinion with an emphasis of matter paragraph

Answer

An adverse opinion because the company may not survive

Answer

A disclaimer of opinion due to the uncertainty