ACCA Audit and Assurance

Question 1

Which of the following best describes the primary objective of an external audit?

Accepted Answer

To express an opinion on whether financial statements give a true and fair view

Answer

To detect all fraud within the organization

Answer

To prepare financial statements on behalf of management

Answer

To assess the efficiency of management's operations

Question 2

Under ISA 315, which of the following is NOT a component of internal control?

Accepted Answer

External audit procedures

Answer

Control environment

Answer

Risk assessment process

Answer

Monitoring of controls

Question 3

What does 'audit risk' refer to?

Accepted Answer

The risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated

Answer

The risk that the auditor will be sued by the client

Answer

The risk that the client will change auditors

Answer

The risk of a material misstatement occurring in the first place

Question 4

Which ISA requires auditors to plan and perform an audit with professional skepticism?

Accepted Answer

ISA 200

Answer

ISA 240

Answer

ISA 500

Answer

ISA 700

Question 5

Which of the following is an example of a substantive procedure?

Accepted Answer

Recalculating depreciation charges on fixed assets

Answer

Reviewing the client's segregation of duties policy

Answer

Observing the client's inventory count procedures

Answer

Evaluating the design of internal controls

Question 6

What is the meaning of 'inherent risk' in an audit context?

Accepted Answer

The susceptibility of an assertion to misstatement before considering any related controls

Answer

The risk that controls fail to prevent or detect misstatements

Answer

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

Answer

The overall risk that the auditor issues a wrong opinion

Question 7

According to ISA 700, an unmodified audit opinion is issued when:

Accepted Answer

The auditor concludes that the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework

Answer

The auditor concludes that the financial statements are free from all errors

Answer

The financial statements are prepared in compliance with the entity's internal policies

Answer

The auditor has verified 100% of all transactions during the period