CA Auditing & Assurance Services 4

Question 1

Which of the following best describes 'detection risk' in the audit risk model?

Accepted Answer

The risk that the auditor's procedures fail to detect a misstatement that exists

Answer

Detection risk is the risk that the auditor's substantive procedures will not detect a material misstatement that exists in an account balance or transaction class.

Question 2

An auditor encounters a situation where the client restricts access to a significant class of transactions. What is the most likely audit report outcome?

Accepted Answer

Qualified opinion or disclaimer of opinion due to scope limitation

Answer

A scope limitation prevents the auditor from obtaining sufficient appropriate evidence, leading to either a qualified 'except for' opinion or a disclaimer if the limitation is pervasive.

Question 3

What is 'professional skepticism' as applied in auditing?

Accepted Answer

A questioning mind and critical assessment of audit evidence without assuming honesty or dishonesty

Answer

Professional skepticism requires auditors to maintain a questioning mind and critically evaluate evidence without being presumptuous about client honesty or dishonesty.

Question 4

Which engagement requires the practitioner to obtain an understanding of the subject matter and suitable criteria before performing procedures?

Accepted Answer

Both B and C

Answer

Both agreed-upon procedures and attestation engagements require the practitioner to understand the subject matter and applicable criteria, though they differ in scope and level of assurance.

Question 5

Under AICPA standards, which of the following threats to auditor independence can be mitigated by a 'self-review safeguard'?

Accepted Answer

Preparation of financial statements followed by auditing them

Answer

When auditors prepare financial statements and then audit them, the self-review threat arises; firm policies separating these services can serve as a safeguard.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Auditing & Assurance Services 4