Auditing and Assurance Training Auditing and Assurance Training MCQ 2 — Questions and Answers
Question 1: Which type of audit opinion is issued when financial statements are presented fairly in all material respects but contain a scope limitation that is not pervasive?
- Adverse opinion
- Disclaimer of opinion
- Qualified opinion (Correct answer)
- Unmodified opinion
Correct answer: Qualified opinion
A qualified opinion is issued when a matter is material but not pervasive, such as a non-pervasive scope limitation.
Question 2: In auditing, what does the term 'inherent risk' refer to?
- Risk that internal controls will fail to prevent misstatements
- Risk that audit procedures will not detect misstatements
- Susceptibility of an assertion to material misstatement before considering controls (Correct answer)
- Risk that the auditor issues an incorrect opinion
Correct answer: Susceptibility of an assertion to material misstatement before considering controls
Inherent risk is the susceptibility of an assertion to a material misstatement assuming no related controls exist.
Question 3: Which sampling method gives every item in a population an equal probability of selection?
- Systematic sampling
- Haphazard sampling
- Stratified sampling
- Simple random sampling (Correct answer)
Correct answer: Simple random sampling
Simple random sampling ensures every item has an equal and independent chance of being selected.
Question 4: What is the primary purpose of analytical procedures performed at the end of an audit?
- To identify areas of audit risk during planning
- To test specific account balances
- To assess whether financial statements are consistent with the auditor's understanding (Correct answer)
- To evaluate the effectiveness of internal controls
Correct answer: To assess whether financial statements are consistent with the auditor's understanding
Final analytical procedures help the auditor assess whether the financial statements make sense in light of overall audit findings.
Question 5: Under ISA 265, to whom must significant deficiencies in internal control be communicated?
- Shareholders only
- Regulatory authorities only
- Those charged with governance and management (Correct answer)
- Only the external audit firm's quality control partner
Correct answer: Those charged with governance and management
ISA 265 requires auditors to communicate significant deficiencies in writing to both those charged with governance and management.
Question 6: Which of the following best describes 'professional skepticism' in auditing?
- Assuming all management representations are false
- Blind acceptance of all audit evidence
- An attitude that includes a questioning mind and critical assessment of evidence (Correct answer)
- Relying solely on prior-year audit findings
Correct answer: An attitude that includes a questioning mind and critical assessment of evidence
Professional skepticism involves a questioning mindset and critical evaluation of evidence, neither assuming dishonesty nor unquestioned acceptance.
Question 7: What is the effect on audit risk when an auditor reduces the level of detection risk?
- Audit risk increases
- Audit risk remains unchanged
- Audit risk decreases (Correct answer)
- Inherent risk decreases
Correct answer: Audit risk decreases
Reducing detection risk through more extensive procedures lowers the overall audit risk.
Auditing and Assurance Training Auditing and Assurance Training MCQ 2
Which type of audit opinion is issued when financial statements are presented fairly in all material respects but contain a scope limitation that is not pervasive?