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

Inspecting authorization signatures on purchase orders tests whether the control of requiring authorization is operating effectively, making it a test of control.

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

Settlement of a lawsuit at a different amount from the existing provision provides evidence of a condition that existed at the reporting date and requires adjustment (an adjusting event).

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

An engagement letter documents and confirms the agreed terms of the audit engagement, helping to avoid misunderstandings by clarifying the auditor's and management's respective responsibilities.

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

ISA 610 allows reliance on internal audit work only when internal auditors are sufficiently independent, objective, and competent, and when their work is considered adequate for the external auditor's purposes.

Question 5

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

Accepted Answer

Occurrence

Answer

The 'occurrence' assertion for classes of transactions relates to whether the transactions and events recorded have actually occurred and pertain to the entity.

ACCA - Association of Chartered Certified Accountants Certification Practice Test

ACCA - Association of Chartered Certified Accountants Certification Practice Test

ACCA Audit and Assurance 3