FCCA Audit and Assurance Flashcards

Which of the following is an example of a test of controls?

Answer: Inspecting authorization signatures on payment vouchers

Inspecting authorization signatures on payment vouchers tests whether the control of requiring authorization is operating effectively — a classic test of controls.

An auditor issues a qualified opinion with the phrase 'except for.' What does this mean?

Answer: There is a material but not pervasive misstatement or scope limitation

A qualified 'except for' opinion indicates a material issue that is confined to specific areas (not pervasive), such as a material misstatement or scope limitation.

Under PCAOB standards (applicable to US-listed company auditors), auditors must maintain independence from their audit clients. Which of the following is an independence threat?

Answer: A partner owning shares in an audit client

A partner owning shares in an audit client creates a financial self-interest threat to independence, violating both PCAOB and SEC independence rules.

In a group audit, the group auditor refers to work performed by a component auditor. Under ISA 600, the group auditor is responsible for which of the following?

Answer: The overall group audit opinion, including reliance on component auditors' work

Under ISA 600, the group engagement partner is solely responsible for the group audit opinion, even when relying on work performed by component auditors for subsidiaries or divisions.

Which audit documentation standard requires that audit working papers be sufficiently detailed to allow an experienced auditor to understand the work performed?

Answer: ISA 230

ISA 230 (Audit Documentation) requires working papers to enable an experienced auditor with no prior connection to the engagement to understand the procedures performed and conclusions reached.

An FCCA working in internal audit uses the IIA's International Professional Practices Framework (IPPF). What is the primary difference between internal and external audit?

Answer: Internal audit serves the organization's governance needs; external audit serves external financial statement users

Internal audit serves management and the board by evaluating governance, risk, and controls internally, while external audit primarily serves external stakeholders by opining on financial statements.