ACCA Audit and Assurance 3

Question 1

Which of the following is an example of a test of control?

Accepted Answer

Inspecting authorization signatures on a sample of purchase orders

Answer

Agreeing a sample of sales invoices to the general ledger

Answer

Recalculating accruals at the year-end

Answer

Casting the trial balance to check arithmetic accuracy

Question 2

Under ISA 560, which of the following subsequent events requires adjustment of the financial statements?

Accepted Answer

Settlement of a lawsuit for an amount different from the provision already recognized

Answer

A major acquisition completed after the year-end that had not been contemplated before

Answer

A fire destroying a significant portion of inventory after the reporting date

Answer

Announcement of a major restructuring plan after the year-end

Question 3

What is the purpose of an engagement letter in an audit?

Accepted Answer

To document the terms of the audit engagement and define responsibilities of both parties

Answer

To confirm the auditor's independence prior to accepting the engagement

Answer

To communicate the final audit findings to management

Answer

To obtain management representations about the financial statements

Question 4

Under ISA 610, when can an external auditor rely on the work of internal audit?

Accepted Answer

When internal audit is organizationally independent, objective, and competent, and the work is adequate for the purposes

Answer

Whenever management instructs the external auditor to do so

Answer

When the internal audit department reports directly to the board of directors

Answer

When the external auditor can reduce their fee by using internal audit work

Question 5

Which of the following financial statement assertions relates to whether transactions occurred and relate to the entity?

Accepted Answer

Occurrence

Answer

Completeness

Answer

Accuracy

Answer

Classification

Question 6

What is the auditor's primary response when significant doubt exists about an entity's ability to continue as a going concern?

Accepted Answer

Obtain sufficient appropriate audit evidence and evaluate the adequacy of disclosures in the financial statements

Answer

Issue an adverse opinion immediately

Answer

Withdraw from the engagement

Answer

Report the matter directly to the tax authorities

Question 7

Under the ACCA Code of Ethics, which threat arises when an auditor audits financial statements they personally prepared?

Accepted Answer

Self-review threat

Answer

Advocacy threat

Answer

Familiarity threat

Answer

Intimidation threat