IFA IFA Auditing & Assurance 2

Question 1

Audit sampling is used because:

Accepted Answer

Testing every transaction is often impractical or cost-prohibitive

Answer

It is required by US GAAP

Answer

Auditors are only required to test 10% of transactions

Answer

Management prefers limited testing

Question 2

What is a 'going concern' opinion?

Accepted Answer

A conclusion by auditors that the entity may not continue in operation for the foreseeable future

Answer

An opinion that the company is profitable

Answer

A statement that all debts are paid

Answer

An assertion that the company will grow next year

Question 3

Which document outlines the terms and objectives agreed between the auditor and client before the audit begins?

Accepted Answer

Engagement letter

Answer

Audit report

Answer

Management letter

Answer

Board resolution

Question 4

What is substantive testing in an audit?

Accepted Answer

Procedures to detect material misstatements in account balances and transactions

Answer

Testing internal controls only

Answer

Reviewing management's strategic plans

Answer

Interviewing employees about company culture

Question 5

What does 'audit trail' refer to?

Accepted Answer

A chronological record of transactions that can be traced from source to financial statements

Answer

The physical path auditors walk in the client's office

Answer

The list of all audit clients a firm has

Answer

The sequence of audit team meetings

Question 6

Which IFA ethical principle requires auditors to avoid conflicts of interest and remain objective?

Accepted Answer

Independence and objectivity

Answer

Confidentiality

Answer

Professional competence

Answer

Due care