IFA IFA Auditing & Assurance 2

Question 1

Audit sampling is used because:

Accepted Answer

Testing every transaction is often impractical or cost-prohibitive

Answer

Audit sampling allows auditors to draw conclusions about a population by testing only a portion of items when 100% testing is impractical.

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

A going concern qualification is issued when auditors have substantial doubt about an entity's ability to continue operating for the next 12 months.

Question 3

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

Accepted Answer

Engagement letter

Answer

An engagement letter sets out the terms of the audit engagement, including scope, responsibilities, fees, and reporting timelines, agreed before work commences.

Question 4

What is substantive testing in an audit?

Accepted Answer

Procedures to detect material misstatements in account balances and transactions

Answer

Substantive testing involves audit procedures designed to detect material misstatements at the assertion level in account balances, transactions, and disclosures.

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

An audit trail is a chronological record of all transaction steps, allowing tracing from source documents through to the final financial statements.

(IFA) Institute of Financial Accountants Certification Practice Test

(IFA) Institute of Financial Accountants Certification Practice Test

IFA IFA Auditing & Assurance 2