CA Auditing & Assurance Services 5

Question 1

Which of the following best describes the concept of 'performance materiality'?

Accepted Answer

An amount set below overall materiality to reduce the risk that aggregate uncorrected misstatements exceed materiality

Answer

Performance materiality is set lower than overall materiality to provide a buffer so that the accumulation of individually immaterial misstatements does not exceed overall materiality.

Question 2

What is the purpose of the 'engagement quality control review' (EQCR) in an audit?

Accepted Answer

To provide an objective evaluation of significant judgments made by the engagement team before the report is issued

Answer

An EQCR is performed by a qualified reviewer not part of the engagement team to provide an independent check on significant judgments, enhancing audit quality.

Question 3

Under AU-C 560, what is the auditor's responsibility regarding 'subsequent events' discovered after the audit report date but before the financial statements are issued?

Accepted Answer

The auditor must perform additional procedures and, if necessary, require financial statement adjustment or disclosure

Answer

Events discovered between the audit report date and issuance of financial statements require the auditor to assess whether the financial statements need revision and to perform additional procedures.

Question 4

Which assertion is most relevant when the auditor is testing whether all liabilities that should be recorded are included in the financial statements?

Accepted Answer

Completeness

Answer

The completeness assertion addresses whether all transactions and balances that should be recorded are included, making it critical for liability testing.

Question 5

A public accounting firm audits a client and also provides internal audit outsourcing services to that same client. Which independence threat does this create?

Accepted Answer

Self-review threat

Answer

Providing internal audit services and then relying on internal audit work during the external audit creates a self-review threat because the external auditors may evaluate their own work.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Auditing & Assurance Services 5