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Audit and Assurance 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.

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  1. Under ISA 530, which sampling method gives every item in the population an equal chance of selection?

    Answer: Random sampling

    Random sampling ensures that every item in the population has an equal probability of being selected, making it a statistically valid method under ISA 530.

  2. What type of modified audit opinion is issued when a misstatement is material but not pervasive?

    Answer: Qualified opinion

    A qualified opinion ('except for') is issued when the auditor concludes that misstatements are material but not pervasive to the financial statements.

  3. Which of the following best describes 'control risk'?

    Answer: The risk that a misstatement will not be prevented or detected by the entity's internal controls

    Control risk is the risk that a material misstatement that could occur will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.

  4. Which ISA deals with the auditor's responsibilities regarding fraud?

    Answer: ISA 240

    ISA 240 'The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements' sets out the auditor's duties when considering fraud risk.

  5. What is 'tolerable misstatement' in the context of audit sampling?

    Answer: The maximum monetary error in a population that the auditor is willing to accept

    Tolerable misstatement is the maximum monetary error in a population that the auditor is willing to accept and still conclude that the audit objective has been achieved.

  6. Under ISA 550, which of the following is the primary concern when auditing related party transactions?

    Answer: Whether the transactions have been conducted at arm's length and adequately disclosed

    ISA 550 requires auditors to assess whether related party transactions are conducted at arm's length and are adequately disclosed in accordance with the applicable financial reporting framework.

  7. Which of the following procedures is most effective for verifying the existence of trade receivables?

    Answer: Sending direct confirmation requests to customers (circularization)

    Direct confirmation (circularization) is the most effective procedure for verifying existence because it obtains third-party evidence directly from the debtor confirming the balance.