Ôn tập kiểm toán BCTCNC tiếng anh

1, Purple Ltd received notification from one of its competitors that they are
being sued for breach of copyright in respect of one of their products. The
competitor is seeking compensation of $10million. Purple’s solicitors are still in
the early stages of assessing the claim and acknowledge the possibility of its
success. The Finance Director has warned that such a large compensation figure
would jeopardise Purple’s ability to continue trading. In this year’s financial
statements, the Finance Director has appropriately disclosed a contingent
liability in respect of the possible compensation and the uncertainty about
Purple’s going concern status. Auditor agreed with the disclosure made by the
Finance Director. Which of the following is the most appropriate form of audit
opinion that auditor should issue if the issue remains and how the going concern
issue would be disclosed in the auditor's report?
An unmodified opinion and describe the nature of the going concern uncertainty
in the “Material Uncertainty Related to Going Concern” section
2, The financial statements of Puppy Ltd include a note relating to a significant
uncertainty over going concern. The uncertainty has arisen because a major
customer has threatened to terminate its contract early due to Puppy’s failure to
comply with service levels required by the contract. Your firm has concluded
that the disclosure note included in Puppy’s financial statements is appropriate
and adequate. Which of the following is the most appropriate form of audit
opinion that auditor should issue if the issue remains and how the going concern
issue would be disclosed in the auditor's report?
An unmodified opinion and describe the nature of the going concern uncertainty
in the “Material Uncertainty Related to Going Concern” section
3, Hilton Ltd is a drug manufacturing company specialising in making drugs to
treat heartburn. It currently manufactures one of the market-leading drugs,
Fungi, which accounts for 65% of the company's annual revenue. High numbers
of sufferers have recently experienced severe side effects when using Fungi and
a government committee is now investigating this. Hilto 's licence to
manufacture Fungi has been suspended until the investigation is complete. The
investigation by the government committee will take a long time and will not be

finished until after the financial statements for the year ended 31 December
2009 have been published. The directors have disclosed this matter in a note to
the draft financial statements, stating that if the licence is not reinstated there
would be significant doubts over Hilton's ability to continue to trade. Your firm
has concluded that the disclosure note included in Hilton’s financial statements
is appropriate and adequate. Which of the following is the most appropriate


form of audit opinion that auditor should issue if the issue remains and how the
going concern issue would be disclosed in the auditor's report?
An unmodified opinion and describe the nature of the going concern uncertainty
in the “Material Uncertainty Related to Going Concern” section
4, Which of the followings is the appropriate audit opinion that should be used
by the auditor for a company that is NOT a going concern if they have prepared
their financial statements using the going concern basis?
An adverse opinion
5, Your client intend to cease trading in two years’ time and have prepared their
financial statements on the going concern basis. What is the impact on the audit
opinion?
This is a disagreement. It is considered material by nature and is pervasive to the
users understanding of the financial statements. The auditor will issue an
adverse opinion
6, As part of the year end audit procedures of your client, Spoon Ltd, they have
said to you that they are unsure about their ability to continue as a going
concern: This is as a result of a very competitive environment in their industry.
Management intend to disclose this uncertainty in their financial statements.
What is the impact on the audit opinion?
(1) If the disclosure is adequate, then issue an unmodified opinion and will
include ‘material uncertainty relating to going concern’ paragraph.
(2) If the disclosure is not adequate and this is considered material but not

pervasive then issue a modified ‘except for’ opinion.
(3) If the disclosure is not adequate and this is considered material and pervasive
then issue an adverse opinion.
All of three statements are correct
7, Which of the following correctly describle auditor’s responsibility regarding
going concern issue?
Auditor needs to consider the appropriateness of management’s use of the going
concern assumption
8, Which TWO of the following statements correctly describes the respective
responsibilities of directors and auditors in relation to going concern?
(1) The directors must assess whether the company can continue to trade for the
foreseeable future.


(2) The auditor will evaluate management’s assessment of going concerned
(3) The auditors and the directors must make disclosure of going concern
uncertainties in the financial statements
(4) The auditor should make an assessment of an entity's ability to continue as a
going concern
(1) and (2)
9, The directors have now agreed to include going concern disclosures, while
continuing to use the going concern basis of accounting. You agree with the
client's management that the going concern basis of accounting is appropriate
under the circumstances. You have reviewed the draft disclosures and believe
they are correct and adequate. Indicate which form of audit opinion would be
appropriate and how the going concern issue would be disclosed in the auditor's
report?
An unmodified opinion and describe the nature of the going concern uncertainty
in the “Material Uncertainty Related to Going Concern” section
10, You have concluded that Stone is not a going concern. If the directors refuse

to amend the financial statements which of the following correctly describes the
impact on the auditor's report?
An Adverse opinion and an explanation of circumstances in the “Basis for
adverse opinion” section
11, The auditors have been informed that Clarinet's bankers will not make a
decision on the overdraft facility until after the auditor's report is completed. The
directors have now agreed to include some going concern disclosures and you
believe these disclosures are adequate. Which of the following correctly
summarises the impact on the auditor's report of Clarinet if the auditor believes
the company is a going concern but that this is subject to a material uncertainty?
An unmodified opinion and a disclosure in “Material Uncertainty Related to
Going Concern” section
12, In which of the following situations should a company NOT prepare
financial statements using the “breakup basis”?
There are material uncertainties relating to going concerned
13, Which of the following statements NOT CORRECT when describing the
respective responsibilities of directors and auditors in relation to going concern?
The auditors and the directors must make disclosure of going concern
uncertainties in the financial statements


14, As part of the year end audit procedures of your client, Spoon Ltd, they have
said to you that they are unsure about their ability to continue as a going
concern: This is because of a competitive environment in their industry.
Management intends to disclose this uncertainty in their financial statements.
Which of the following is most appropriate form of audit opinion that the
auditor should issue?
It depends on whether the management’s disclosure is appropriate or not
15, According to ISA 701, which of the following should be included in the
‘Key Audit Matters’ paragraph in the auditor’s report?

Matters which required significant auditor attention
16, At the completion stage of the audit, the client is required to sign a letter of
representation (management’s representation letter). If management outright
refuse to produce a written representation or they do not provide representation
on one or more areas requested by the auditor, which of the following is
appropriate action for auditor?
(1) The auditor should discuss the matters with management
(2) Re-consider the integrity of the company management – this may have an
impact on the reliability of other audit evidence given
(3) The auditor may consider the impact on the auditor report, for example,
modify the audit opinion due to an inability to obtain sufficient appropriate
evidence
All of the three above statement are appropriate
17, “A report to those charge with governance and management which normally
include the observations of auditor which identifies the weakness point of
internal control, the possible consequences which could result from those
weakness and the auditor’s recommendation for improvement. A report to
management generally includes a covering letter and an appendix showing the
control deficiencies, implication, and recommendation. This is a by-product of
the audit and may not be a comprehensive list of deficiencies”
The above statement are describing which of the following report?
Management letter
18, At the completion stage of the audit, the client is required to sign a letter of
representation (management’s representation letter). Which of the following
could be included in management representation letter?
Confirmation of management about fulfilled responsibility for preparation of
financial statements in accordance with Financial Reporting framework


19, At the completion stage of the audit, the client is required to sign a letter of

representation (management’s representation letter). Which of the following
statements correctly describes the nature of management representation letter?
A written statement by management provided to the auditor to confirm certain
matters or to support other audit evidence
20, At the completion stage of the audit, the client is required to sign a letter of
representation (management’s representation letter). Which of the following
statements NOT correctly describes the nature of management representation
letter?
Representations from management are the most reliable audit evidence and they
can be used instead of other evidence which the auditor expect to exist
21, You are auditing Plastics Co and the overall materiality threshold has been
set at $150,000. You are in the phase of an overall review of the financial
statements for the year ended 31 December 20X1 prior to the issue of the
auditor’s report. The following is included in your assessment of uncorrected
misstatement: “Missing invoice in purchases $60,000”. Which of the following
action is appropriate if the auditor is to issue an unmodified audit opinion?
No misstatement is required because this misstatement is below materiality
threshold. However, this would still be added to the schedule of unadjusted
errors as it could end up being material in aggregate
22, You are auditing Plastics Co and the overall materiality threshold has been
set at $150,000. You are in the phase of an overall review of the financial
statements for the year ended 31 December 20X1 prior to the issue of the
auditor’s report. The following is included in your assessment of uncorrected
misstatement: “Revenue relating to next year included in current year, amount of
$230,000”. Which of the following action is appropriate for the auditor?
This misstatement must be discussed with client and an adjustment is proposed.
If the management agree to adjust this misstatement, auditor can issue an
unmodified audit opinion.
23, At the completion stage of the audit, the client is required to sign a letter of
representation (management’s representation letter). Which of the following

could be included in management representation letter?
Confirmation of management that all relevant information has been provided to
auditor
24, Maison's computerised wages program is backed up daily, however for a
period of two months the wages records and back-ups have been corrupted, and
therefore cannot be accessed. Wages and salaries for these two months are


$1.1m. Profit before tax is $10m. Based on the above information Which of the
following correctly summarises the effect of the issue relating to the wages
balance in the financial statements of Maison?
Material misstatement related to “proper accounting records have not been kept”
25, You have reviewed a financial summary which is to be included in the
annual report and have found that the details are inconsistent with the financial
statements. You have notified the directors of the error in the summary financial
statements. Which of the following correctly summarises the impact on the
auditor's report if the directors do not correct this error?
Unmodified opinion and “Other Information” section including a description of
the uncorrected inconsistency
26, The auditors have discovered that the chairman’s report of XYZ Co, a listed
company, is inconsistent with the financial statements and it has been
determined that the material inconsistency is in the chairman’s report. Which of
the following auditor’s reports will be issued for XYZ Co if the directors refuse
to amend the inconsistency?
Unmodified opinion with the material inconsistency explained in the “other
information” section
27, It is 1 July 20X5. You are an audit manager at X & Co, currently finalising
the audit of Y Co for the year ended 31 March 20X5. You are performing
the final review in preparation for signing the auditor’s report. During the
year one of the company’s properties was revalued by an independent expert

valuer. Which of the following are audit procedures X & Co should perform in
conducting its overall review of the financial statements (in completion phase)
of Y Co?
Design and perform analytical procedures to confirm the financial statements are
consistent with the auditor’s understanding of the entity
28, River Co is a manufacturer of shoes. You are an audit manager with Cello &
Co and you are performing an overall review of the financial statements for the
year ended 30 September 20X8 prior to the issue of the auditor’s report. Profit
before tax for the year was $131.4m (20X7: $120.9m).
Your review also includes an assessment of uncorrected misstatements. These
have been recorded by the audit team as follows:
(1) Interest payable omitted in error 1,942
(2) Additional allowance for receivables required 9,198
(3) Error in sales invoice processing resulting in understatement of sales 8,541


Which of the uncorrected misstatements numbered (1), (2) and (3) by the audit
team MUST be adjusted for if the auditor is to issue an unmodified audit
opinion?
Misstatements 2 and 3 only
29, River Co is a manufacturer of shoes. You are an audit manager with Cello &
Co and you are performing an overall review of the financial statements for the
year ended 30 September 20X8 prior to the issue of the auditor’s report. Profit
before tax for the year was $131·4m (20X7: $120·9m).
Your review also includes an assessment of uncorrected misstatements. These
have been recorded by the audit team as follows:
(1) Interest payable omitted in error 1,942
(2) Additional allowance for receivables required 9,198
(3) Error in sales invoice processing resulting in understatement of sales 8,541
(4) Write off in respect of faulty goods 2,900

All adjustments required by the auditors have been made to the financial
statements with the exception of adjustment (4) relating to the faulty goods.
Which of the following correctly describes the effect of this matter on the
auditor’s report?
Unmodified opinion with no further disclosure
30, It is 15 March 20X3. You are an audit manager at X & Co, currently
finalising the audit of Y Co for the year ended 31 December 20X2. You are
performing the final review in preparation for signing the auditor’s report.
Which of the following are audit procedures X & Co should perform in
conducting its overall review (completion phase) of the financial statements of
Y Co ?
Review to confirm that sufficient and appropriate evidence gathered and the
audit work performed in accordance with relevant laws / standards
31, Ash Trading Co (Ash) is a new audit client of Chestnut & Co, its year end
was 31 January 20X5. The inventory count at Ash's warehouse was undertaken
on 31 January 20X5 and was overseen by the company's internal audit
department. Neither Chestnut & Co nor the previous auditors attended the count.
Detailed inventory records were maintained but it was not possible to undertake
another full inventory count subsequent to the year end. The draft financial
statements show a profit before tax of $2.4 million, revenue of $10.1 million and
inventory of $51,000. Which of the following correctly summarises the effect of
the issue relating to the inventory count of Ash at the year end?


Immaterial misstatement
32, You are audit manager and performing an audit of financial statement for the
year ended 30 Jun 20X5 of Straberry Co. All audit work will be finished by 31
July 20X5. The auditor's report is due to be signed by your audit firm on 28
September 20X5. Strawberry Co's board plans to issue the financial statements
on 21 October 20X5 which will be followed by an annual general meeting on 30

October 20X5.
At the completion stage of the audit, the client is required to sign a letter of
representation (management’s representation letter). Which of the following
would be the most appropriate date for the directors of Strawberry Co to sign the
written representation?
28 September 20X5
33, Which two of the following are elements of an assurance engagement?
(1) A three-party relationship; (2) Suitable criteria; (3) Determination of
materiality ; (4) An engagement letter.
(1) and (2) only
34. Which of the following are the key elements of an assurance engagement? :
(1) Three-party relationship; (2) A subject matter; (3) Suitable criteria; (4) An
assurance file.
(1), (2), and (3)
35. Which of the following is limitation of the provision of audit engagement ?
Sampling is used in assurance work.
36. In any assurance engagement, there are three parties involved: the
responsible party, the practitioner and the user. In respect of given subject
matter, which party determines suitable criteria?
Responsible party
37. In any assurance engagement, there are three parties involved: the
responsible party, the practitioner and the user. In respect of given subject
matter, which party provide an opinion on whether the subject matter complies
with the criteria?
Practitioner
38. Which of the following are NOT benefit of an audit report on financial
statement?
An audit report attests to the correctness of the information being reported on

39. The level of assurance provided by an assurance engagement will depend on
the type of engagement. Which of the following type of engagemeent will give
the level of reasonable assurance?
Statutory audit
40. Which of the following is TRUE regarding audit?
An audit gives the reader reasonable assurance on the truth and fairness of the
financial statements
41. Which of the following is the most appropriate definition of the external
audit?
The external audit is an exercise carried out by auditors in order to give an
opinion on whether the financial statements of a company are materially
misstated.
42. Which one of the following statements best describes the evidence obtained
and the opinion given in a reasonable assurance engagement?
Sufficient appropriate evidence and a positively worded opinion
43. Which of the following is true regarding assurance engagement?
A statutory audit gives reasonable assurance that financial statements give a true
and fair view.
44. Which of the following is TRUE regarding assurance?
A statutory audit gives reasonable assurance that the financial statement give a
true and fair view
45. The level of assurance provided by an assurance will depend on the type of
engagement. Which of the following level of assurance that a statutory audit
engagement would give?
Reasonable assurance
46. The level of assurance provided by an assurance will depend on the type of
engagement. Which of the following level of assurance that a “review of
financial information” engagement would give?
Limited assurance
47. The level of assurance provided by an assurance will depend on the type of

engagement. Which of the following level of assurance that a “report on profit
and cashflow forcast” engagement would give?
Limited assurance
48. Assurance engagements can relate only to financial measures and results?
False


49. Which of the following statements is TRUE regarding assurance: (1)
Auditors are required to express an opinion as to whether the financial
statements give a true and fair view; (2) An audit is a type of reasonable
assurance engagement.
Both statements are true
50. What sort of assurance does a reasonable assurance engagement give?
High level of assurance
51. Which concept means that directors are responsible for the management of
the shareholders property?
Stewardships
52. Which of the following statements is TRUE regarding assurance:
(1) An audit report give positive assurance
(2) A review engagement gives negative assurance.
Both statements are true
53. The following is an extract from an independent auditor’s unmodified report
on a profit forecast: “Based on our examination of the evidence supporting the
assumptions, nothing has come to our attention which causes us to believe that
these assumptions do not provide a reasonable basis for the forecast”. Which
one of the following best describes the types of assurance provided by this
statement?
Limited level of assurance expressed negatively
54. Which of the following is NOT TRUE regarding assurance?
Reasonable assurance is absolute assurance of the correctness of the subject

matter
55. Which of the following is NOT one of the five elements of an assurance
engagement?
A three party relationship consisting of a responsible party, users and subject
matter
56. Which of the following is the correct definition of an audit?
The independent examination of and expression of opinion on the financial
statements of an entity by a duly appointed auditor in pursuit of that
appointment
57. In the context of a company, which concept means holding the directors who
manage the company responsible for explaining their actions to the shareholders
who own the company.


Accountability
58. Negative assurance is associated with what sort of assurance engagement?
Limited assurance
59. Fill the appropriate word in the blank: “An assurance engagement is when a
professional examines information for which another …… is responsible for”
Party
60. Which of the following are the responsibilities of the external auditor in
auditing financial statements?
(1) Maintaining internal controls and preparing financial reports
(2) Providing internal assurance on internal control and financial reports
(3) Providing internal oversight of the reporting process
None of the above
61. Who normally appoints the external auditors of a company?
Shareholders
62. Which of the following body is responsible for setting International Standard
on Auditing?

IAASB
63. Rat LLP is the external auditor of Palm plc, a listed company. The directors
of Palm have requested that Rat LLP carry out a review engagement assessing
the effectiveness of its coporate governance policies against the UK Corporate
Goverance Code. For the above review engagement, which of the following is
the most appropriate statement regarding subject matter, suitable criteria and
responsible party:
The subject matter is Palm’s corporate governace code; The suitable criteria is
UK Corporate Goverance Code; The responsible party is the directors of Palm
plc.
64. Which one of the following best describe the concept of assurance?
Assurance refer to an assurance firm’s satisfaction as to the reliability of an
assertion being made by one party for the use of another party
65. Which of the following is a general principle for the auditor to follow?:
(1) Compliance with applicable ethical principles
(2) Compliance with International Standard on Auditing
(3) Keeping an attitude of professional scepticism when planning and
performing the audit.


(1) and (2) and (3)
66. Which TWO of the following are fundamental principles as stated in the
ACCA’s Code of Ethics and Conduct: (1) Objectivity; (2) Independence; (3)
Confidentiality; (4) Professional skepticism
1 and 3
67. Which of the following are recognised threats to independence and
objectivity as identified in ACCA's Code of Ethics and Conduct? (1)
Familiarity; (2) Self-interest; (3) Integrity; (4) Advocacy
(1), (2) and (4)
68. “The auditor should be straightforward and honest in all professional and

business relationships”. Which of the following principles of ACCA’s code of
ethics does this statement mention to?
Integrity
69. “Auditor should not allow bias, conflicts of interest or undue influence of
others to override professional or business judgements”. Which of the following
principles of ACCA’s code of ethics does this statement mention to?
Objectivity
70. “Auditors have a continuing duty to maintain professional knowledge and
skill at the level required and should act diligently and in accordance with
applicable technical and professional standards”. Which of the following
principles of ACCA’s code of ethics does this statement mention to?
Professional competence and due care
71. “Auditors should not disclose information to 3rd parties unless there is a
legal or professional right or duty to disclose”. Which of the following
principles of ACCA’s code of ethics does this statement mention to?
Confidentiality
72. “Auditors should comply with relevant laws and regulations and avoid any
action that discredits the profession”. Which of the following principles of
ACCA’s code of ethics does this statement mention to?
Professional behaviour
73. Which of the following statement explain for “self-interest” threat?
The auditors’ own personal interest in client which could influcence the
auditor’s independence
74. Which of the following statement explain for “self-review” threat?
When carrying out the audit, the auditors, review work that their own firm has
undertaken previously, e.g. preparing accounts or making a valuation.


75. Which of the following statement explain for “Advocacy” threat?
If the auditors get involved in disputes concerning the client, they may end up

acting for or against the client, which undermines the appearance of objectivity.
76. Which of the following statement explain for “Familiarity” threat?
If the auditors are involved with the client for a long time, they may become
unduly sympathetic towards directors and management and thus too inclined to
trust their unsupported word.
77. Which of the following statement explain for “Intimidation” threat?
The auditors may be intimidated by a dominant or aggressive atmosphere at the
client.
78. In which of the following situations would the auditor has duty to disclose
confidential information about a client?
The auditor suspects that the client has committed money-laundering offences.
79. Which of the following could cause “advocacy threat”?
Firm to represent Stark in a dispute with the tax authorities.
80. As part of your planning work you have identified a number of potential
risks to independence, that is “The audit firm holds shares in the audit client”.
Which ethical threats do the case relate to?
Self-interest
81. As part of your planning work you have identified a number of potential
risks to independence, that is “Your audit firm has been asked to prepare the
financial statements of a client as their finance director has been taken ill”.
Which ethical threats do the case relate to?
Self review
82. As part of your planning work you have identified a number of potential
risks to independence, that is “An audit client is about to do a share issue and
has asked you to let your other clients know so they can participate”. Which
ethical threats do the case relate to?
Advocacy
83. As part of your planning work you have identified a number of potential
risks to independence, that is “Your audit firm has provided audit service for this
client for 10 years”. Which ethical threats do the case relate to?

Familiarity
84. As part of your planning work you have identified a number of potential
risks to independence, that is “The Finance Director calls you and threatens to


move auditor if you don’t drop your fees next year”. Which ethical threats do
the case relate to?
Intimidation
85. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an
client: “Audit team to be offered a balloon flight by the client”. Which of the
following options best identifies the valid threats to independence?
Self-interest
86. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an
client: “Tax fee of taxation service to be based on a percentage of tax saved”.
Which of the following options best identifies the valid threats to independence?
Self-interest
87. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an
client: “Firm to represent the client in a dispute with the tax authorities”. Which
of the following options best identifies the valid threats to independence?
Advocacy
88. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an
client: “The audit team has been offered a discount on luxury phones”. Which of
the following options best identifies the valid threats to independence?
Self-interest
89. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an

client: “The audit senior was seconded to the client to cover for the financial
controller”. Which of the following options best identifies the valid threats to
independence?
Self-review
90. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an
client: “Total fees from LV is over 15% of the total fees of the firm for the
second consecutive year”. Which of the following options best identifies the
valid threats to independence?
Self-interest
91. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an


client: “Fees are overdue in respect of last year's audit”. Which of the following
options best identifies the valid threats to independence?
Self-interest
92. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an
client: “The engagement partner has been asked to attend meetings with
potential investors”. Which of the following options best identifies the valid
threats to independence?
Advocacy
93. From a review of the information in audit planning, your audit assistant has
highlighted some of the potential risks to independence in respect of the audit an
client: “The client has been offered the opportunity to provide other services to
the client”. Which of the following options best identifies the valid threats to
independence?
Self-review
94. In relation to the audit team being offered a 10% discount on mobile phones.

Which of the following statements is true in accordance with ACCA's Code of
Ethics and Conduct?
Unless the value of the discount is trivial and inconsequential to the audit team
members, the offer should be declined
95. In relation to the audit team being offered a balloon ride by the client. Which
of the following statements is true or false in accordance with ACCA's Code of
Ethics and Conduct?
The gift should only be accepted if its value is trivial and inconsequential to the
recipients.
96. Zoe is also concerned that Ali & Co might breach confidentiality were the
audit firm to represent Stark in its dispute with the tax authorities. Which of the
following statements best reflects the auditor's duty of confidentiality?
Auditors may disclose matters to third parties without their client's consent if it
is in the public interest, and they must do so if there is a statutory duty to do so.
97. The finance director has made two offers to members of the audit
team.Which of the following offers can be accepted by audit team?
Loan at normal rates as other clients
98. Which of the following example illustrates Detection Risk?
Sample sizes have been calculated incorrectly by the auditor and are too small
99. Which of the following example illustrates Detection Risk?


Audit staff are inexperienced
100. Which of the following example illustrates Inherent Risk?
The company operates in high-regulated industry
101. Which one of the following best describes the principal difference between
fraud and errors
Fraud is an intentional act whereas error is unintentional
102. Which of the following is NOT true regarding Performance Materiality?
Performance materiality levels are higher than the materiality for the financial

statements as a whole
103. The following information is obtained when you are doing the audit
planning for the audit of Steel Ltd for the year end 31 December 20X9: In
December 20X9, the Company placed orders for two new machines which will
be used for production, estimated total cost of those machines is $15m and the
company is not sure whether they will be received by the year end. Which of the
following summarises the key audit concern arising from the matter described?
Existence of non-current assets.
104. The following information is obtained when you are doing the audit
planning for the audit of Steel Ltd for the year end 31 December 20X9: One
large customer, Bobby, went into liquidation before the year end and
Valuation of trade receivable
105. The following information is obtained when you are doing the audit
planning for the audit of Steel Ltd for the year end 31 December 20X9: Steel is
closing one of its branch in next few months and this could lead to a large
workforce redundant. Which of the following summarizes the key audit concern
arising from the matter described?
Completeness of liabilities
106. The following statement is true or false in accordance with ISA 240 The
auditor's responsibilities relating to Fraud in an Audit of Financial statement?
“The auditor is not responsible for the prevention of fraud and error but is
responsible for detection.”
False
107. The following statement is true of auditor’s objective in relation to fraud, in
accordance with ISA 240 The auditor's responsibilities relating to Fraud in an
Audit of Financial statement?
The auditor must identify and assess the risks of material misstatement due to
fraud and obtain evidence regarding the risks of material misstatements due to
fraud.

108. Which of the following statements is NOT true regarding purpose of risk
assessment in planning audit?
The risk assessment will enable the audit senior to produce an accurate budget
for the audit assignment
109. Imagine you are doing the audit planning for the audit of Steel Ltd for the
year end 31 December 20X9. In December 20X9, the Company placed orders
for two new machines which will be used for production, estimated total cost of
those machines is $15m and the company is not sure whether they will be
received by the year end. This information has led you to be concerned that
property, plant and equipment may be overstated in the financial statements.
Which of the following statements represents a valid response to this audit risk?
Discuss with management as to whether the planes have arrived, if so then
physically verify a sample of these plane to ensure existence.
110. Imagine you are doing the audit planning for the audit of Steel Ltd for the
year end 31 December 20X9. The following statements represents a valid
response to this audit risk?
Obtain a breakdown of the capitalised costs and agree a sample of items to
invoices to determine the nature of the expenditure, to ensure that only
expenditure enhance conditions of asset, should be capitalized.
111. The following information is obtained when you are doing the audit
planning for the audit of Steel Ltd for the year end 31 December 20X9: Steel is
closing one of its branch in next few months and this could lead to a large
workforce redundant. This information has led you to be concerned that
redundancy provision may be understated in the financial statements. Which of
the following statements represents a valid response to this audit risk?
Discuss with management the status of the redundancy program, review and
recalculate redundancy provision to ensure accuracy.
112. Which of the following statements is NOT true regarding “performance
materiality”?

Performance materiality refers to the amounts set by the auditor at higher than
the materiality level for particular classes of transactions, account balances or
disclosures where the materiality level might otherwise mean that such items are
not tested.
113. In the audit of a client where controls have been assessed as deficient.
Which of the following is the most appropriate approach which should be used
by the auditor?
Substantive tests only


114. In the audit of a client where controls have been assessed as strong. Which
of the following is the most appropriate approach which should be used by the
auditor?
A mix of tests of controls and substantive procedures.
115. Two types of procedures used in gathering evidence are tests of controls
and substantive procedures. Which of the following is illustrated for substantive
procedure?
Re-calculation of net realisable value of inventory and comparisation with cost
to ensure that inventory is stated at lower of cost and net realisation value.
116. Which of the following statements is/are true regarding direct confirmation
of accounts receivable?
(1) Responses from the customer must be returned directly to the client.
(2) Under the positive method the customer only replies if the amount stated is
agrees with the customer's records
Neither (1) nor (2)
117. The auditor of M Co has agreed a sample of non-current assets selected by
physical inspection back to the noncurrent asset register. For which of the
following assertions does this test provide assurance?
Completeness
118. Which of the following techniques is generally accepted to be the most

efficient to obtain evidence regarding the existence of bank balances?
Confirmation
119. Which of the following audit procedures to prove the assertion of valuation
of inventory?
Comparing cost on a number of inventory items to sales invoices subsequent to
the year end.
120. Which of the following statements is/are true with respect to analytical
procedures? (1) Analytical procedures can be used throughout the audit; (2)
Analytical procedures must be used as risk assessment procedures.
(1) and (2)
121. This invoice and associated goods were despatched by Green plc on the last
day of the year. The auditor has verified that the despatch record and cut-off
with inventory are correct. Required: Which of the above disagreements would
be considered as a misstatement?
Neither (1) nor (2)


122. Which one of the following populations should the auditors start from
when testing for completeness of reported sales of a manufacturing company?
Good despatched notes
123. Which of the following is NOT a reason for obtaining an understanding
about the entity and its environment?
To identify the relevant internal control and test its operating effectiveness
124. Which one of the following financial statement assertions will be supported
by a sample check on the numerical sequence of despatch records and invoices?
Completeness
125. Which one of the following procedures should be undertaken to confirm
the existence of cash at bank?
Obtaining the direct confirmation of the bank balance from the client’s bank
126. Which of the following audit procedures would provide the auditor with

evidence of completeness of inventory?
Tracing test counts performed at the inventory count to the detailed inventory
listing
127. Which TWO of the following substantive procedures provide evidence
over the EXISTENCE of trade receivables?
(1) Agreeing a sample of goods despatched notes to sales invoices and to the
sales ledger;
(2) Undertaking a receivables circularization ;
(3) Review of post year-end cash receipts, if these relate to year-end receivables
follow through to the sales ledger;
(4) Recalculating the allowance for uncollectible accounts
2 and 3
128. The auditor of Green plc carried out an external confirmation of receivables
at the year end to confirm the accuracy of total trade receivables in the statement
of financial position at that date. Two of the replies to the confirmations
disagreed with the balances:
(1) Customer A disagreed with the balances because he had made a payment
two days before the year end. The auditor has confirmed that the cheque cleared
the bank two days after the year end.
(2) Customer B disagreed with the balance because their records did not contain
invoice number IN 001191. This invoice and associated goods were despatched
by Green plc on the last day of the year. The auditor has verified that the
despatch record and cut-off with inventory are correct.


Required: Which of the above disagreements would be considered as a
misstatement?
Neither (1) nor (2)