CA Audit & Risk Management 3

Question 1

Under ISA 240, which of the following is the PRIMARY responsibility for the prevention and detection of fraud?

Accepted Answer

Management and those charged with governance

Answer

ISA 240 states that management bears primary responsibility for preventing and detecting fraud, while auditors must maintain professional skepticism and assess fraud risks.

Question 2

Which risk response strategy involves accepting the potential impact of a risk without taking action to reduce it?

Accepted Answer

Risk retention

Answer

Risk retention (acceptance) means an organization consciously decides to bear the financial consequence of a risk, often because the cost of mitigation exceeds the expected loss.

Question 3

When assessing going concern under ISA 570, which period must management evaluate?

Accepted Answer

At least 12 months from the date the financial statements are authorized for issue

Answer

ISA 570 requires management to assess going concern for a period of at least 12 months from the date the financial statements are authorized for issue, not just from the balance sheet date.

Question 4

The 'three lines of defense' model in risk governance places internal audit in which position?

Accepted Answer

Third line — independent assurance to the board and senior management

Answer

Internal audit constitutes the third line of defense, providing independent assurance to the board and senior management on the effectiveness of governance, risk management, and internal controls.

Question 5

An external auditor discovers that a key audit team member has a direct financial interest in the audit client. The appropriate action is to:

Accepted Answer

Remove the team member from the engagement to eliminate the independence threat

Answer

A direct financial interest in an audit client creates a self-interest threat to independence that cannot be mitigated by safeguards; the team member must be removed from the engagement.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Audit & Risk Management 3