CPA CFE Audit and Assurance

Question 1

Under Canadian Auditing Standards (CAS), what is the primary objective of a financial statement audit?

Accepted Answer

To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement and to express an opinion thereon

Answer

To detect all instances of fraud within the organization

Answer

To guarantee the accuracy of every transaction recorded

Answer

To evaluate management's effectiveness in running the business

Question 2

What is audit risk, and what are its three components?

Accepted Answer

The risk that the auditor may unknowingly fail to modify the opinion on materially misstated financial statements; inherent risk, control risk, and detection risk

Answer

The risk of business failure; market risk, credit risk, and operational risk

Answer

The risk of losing the audit client; pricing risk, timing risk, and staffing risk

Answer

The risk of regulatory sanctions; compliance risk, legal risk, and reputational risk

Question 3

Under CAS, when is the auditor required to communicate key audit matters (KAMs) in the audit report?

Accepted Answer

For audits of listed entities, and when law or regulation requires it or the auditor decides to communicate them

Answer

For all audit engagements regardless of entity type

Answer

Only when the auditor issues a qualified opinion

Answer

Only when fraud is detected during the audit

Question 4

What is the purpose of obtaining a management representation letter during an audit?

Accepted Answer

To obtain written confirmation from management regarding their responsibilities and specific assertions relevant to the financial statements

Answer

To replace other audit evidence and reduce the work performed

Answer

To serve as the engagement letter for the audit

Answer

To document the fee arrangement between the auditor and client

Question 5

Under CAS, what does the concept of materiality in planning an audit relate to?

Accepted Answer

The magnitude of misstatements that, individually or in aggregate, could reasonably be expected to influence the economic decisions of users of the financial statements

Answer

The total assets of the company being audited

Answer

The number of transactions processed during the year

Answer

The auditor's fee for the engagement

Question 6

What type of audit opinion is issued when the auditor concludes that misstatements are material but not pervasive to the financial statements?

Accepted Answer

Qualified opinion

Answer

Unmodified (clean) opinion

Answer

Adverse opinion

Answer

Disclaimer of opinion