Question 1

The concept of materiality is defined in AASB 1031.in terms of the:

Accepted Answer

A)  auditor. 
B)  preparer. 
C)  CPA Australia/ICAA members. 
D)  users of financial reports 
A)  auditor. 
B)  preparer. 
C)  CPA Australia/ICAA members. 
D)  users of financial reports

Question 2

During the audit of XYZ Ltd the auditor found a misstatement that equated to 7% of the base amount. According to the guidelines provided by AASB 1031.this amount is deemed to be:

Accepted Answer

A)  material. 
B)  not material. 
C)  a matter of professional judgement whether it is considered material. 
D)  none of the above. 
A)  material. 
B)  not material. 
C)  a matter of professional judgement whether it is considered material. 
D)  none of the above.

Question 3

From the following descriptions, determine what type of auditing procedure is being conducted:
1.the auditor watched two employees open the safe with their respective codes.
2.the amount of depreciation on the company vehicles was recalculated.
3.the auditor confirmed the journal and ledger entries for a purchases receipt were correctly made.
4.The auditor went to the entity's warehouse to examine the existence and condition of inventory.
5.The auditor took a stocktake of inventory on the shelf.
6.The auditor used the computer to randomly select a sample of accounts receivable for confirmation.
7.The auditor receives a letter from the entity's lawyers regarding the total legal fees charged for the period.
8.The auditor sent a letter to the entity's bank asking about the entity's debt covenants.
9.The auditor found the sales invoice and then sales order for an entry made in the accounts receivable ledger.
10. Expected wages expense was determined by proportionately adjusting the previous year's wages upwards by the increase in sales and then this was confirmed with the current period's figure for wages expense.

Accepted Answer

1.Observing
2.Re-performing
3.

Question 4

Identify and explain each of the four broad categories of management's assertions about account balances.

Accepted Answer

Existence: relates to whether the

Question 5

For each of the following combinations of audit evidence, rank the items in terms of their reliability:
1.
A. Bank statement from the entity's records
B. Bank statement sent directly to the auditor
C. Cash at bank ledger
2.
D. Audit firm conducts the physical count of inventory
E. Internal audit reports on the physical count of inventory
F. Auditor supervises internal audit conducting the physical count of inventory
3.
G .Management provides a representation letter on the accuracy of valuations
H. The auditor receives a letter from the agent who conducted the valuation confirming its accuracy
I. The auditor hires an independent agent to confirm the valuation
4.
J. The auditor conducted an inventory count two months before reporting date
K. Internal audit conducted an inventory count 3.days before reporting date
L .Internal audit conducted a supervised inventory count on reporting date
5.
M. Management assured the auditor of the probable outcome of a pending court case
N .The entity's lawyers assured the auditor of the probable outcome of a pending court case
O. The auditor received a representation from the entity's lawyers regarding the probable outcome of a pending court case

Accepted Answer

From least reliable to most reliable:
 \

Question 6

"Tolerable error" (or tolerable misstatement) is the term used to indicate materiality at the:

Accepted Answer

A)  balance sheet level. 
B)  income statement level. 
C)  account balance level. 
D)  transactions level. 
A)  balance sheet level. 
B)  income statement level. 
C)  account balance level. 
D)  transactions level.

Question 7

OPQ Audit Firm was planning the audit for its existing client, Alpha & Beta Corp. The audit partner was trying to determine the best audit strategy to use. Alpha & Beta Corp. is a small retailing company that does not have any warehousing facilities as all stock is kept on the premises. Being small, they only have a small team of staff, which makes the separation of duties principle difficult to achieve. The preliminary tests of controls found that the internal control procedures are well designed, but not always observed due to the small amount of staff. Previous experience with this client also showed that controls were not always observed. Despite this, OPQ has never discovered a material misstatement in the accounts.
Required: Determine what audit strategy should be used and justify your answer.

Accepted Answer

The appropriate audit strategy to use wo

Question 8

Which of the following would not be considered underlying accounting data?

Accepted Answer

A)  sales invoices. 
B)  the general ledger. 
C)  books of original entry. 
D)  related accounting manuals. 
A)  sales invoices. 
B)  the general ledger. 
C)  books of original entry. 
D)  related accounting manuals.

Question 9

The auditor has determined that there is a preponderance of persuasive evidence for each financial statement assertion that is material, and therefore a reasonable basis for their opinion. Which of the following would not be a possible opinion that the auditor could issue?

Accepted Answer

A)  an unqualified opinion. 
B)  an 'except for' opinion. 
C)  an adverse opinion. 
D)  an inability to form an opinion. 
A)  an unqualified opinion. 
B)  an 'except for' opinion. 
C)  an adverse opinion. 
D)  an inability to form an opinion.

Question 10

The completeness assertion would be violated if:

Accepted Answer

A)  the allowance for doubtful accounts was understated. 
B)  unbilled shipments had occurred during the period. 
C)  the balance of accounts payable was overstated. 
D)  all of the above would violate the completeness assertion 
A)  the allowance for doubtful accounts was understated. 
B)  unbilled shipments had occurred during the period. 
C)  the balance of accounts payable was overstated. 
D)  all of the above would violate the completeness assertion

Question 11

List and define four types of corroborating evidence.

Accepted Answer

Any four of the following:
<u>Analytical

Question 12

Which of the following is not a course of action an auditor may take if they discover material misstatements in the accounts?

Accepted Answer

A)  consider issuing an unqualified audit opinion. 
B)  consider issuing a qualified audit opinion. 
C)  perform additional audit procedures. 
D)  ask management to correct the errors. 
A)  consider issuing an unqualified audit opinion. 
B)  consider issuing a qualified audit opinion. 
C)  perform additional audit procedures. 
D)  ask management to correct the errors.

Question 13

i.  Define materiality as described in ASA320.
ii. Identify the two levels of materiality that are important in audit planning and indicate the reason for each level.

Accepted Answer

i.  Misstatements, including omissions,

Question 14

On each engagement, the specific audit objectives will normally be:

Accepted Answer

A)  the same for all clients in the same industry. 
B)  equal to the number of categories of management's financial report assertions. 
C)  similar for all clients in the same industry. 
D)  tailored to fit the individual client. 
A)  the same for all clients in the same industry. 
B)  equal to the number of categories of management's financial report assertions. 
C)  similar for all clients in the same industry. 
D)  tailored to fit the individual client.

Question 15

In determining the sufficiency of evidential matter, which of the following would not normally be a factor?

Accepted Answer

A)  materiality of the account. 
B)  audit risk. 
C)  the sampling technique used. 
D)  the size of the population. 
A)  materiality of the account. 
B)  audit risk. 
C)  the sampling technique used. 
D)  the size of the population.

The concept of materiality is defined in AASB 1031.in terms of the:

During the audit of XYZ Ltd the auditor found a misstatement that equated to 7% of the base amount. According to the guidelines provided by AASB 1031.this amount is deemed to be:

Identify and explain each of the four broad categories of management's assertions about account balances.

"Tolerable error" (or tolerable misstatement) is the term used to indicate materiality at the:

Which of the following would not be considered underlying accounting data?

The auditor has determined that there is a preponderance of persuasive evidence for each financial statement assertion that is material, and therefore a reasonable basis for their opinion. Which of the following would not be a possible opinion that the auditor could issue?

The completeness assertion would be violated if:

List and define four types of corroborating evidence.

Which of the following is not a course of action an auditor may take if they discover material misstatements in the accounts?

i. Define materiality as described in ASA320. ii. Identify the two levels of materiality that are important in audit planning and indicate the reason for each level.

On each engagement, the specific audit objectives will normally be:

In determining the sufficiency of evidential matter, which of the following would not normally be a factor?

An Overview of Auditing

Governance and the Auditor

Professional Ethics, Independence and Audit Quality

Other Assurance Engagements and Quality Standards

The Auditors Legal Liability

Overview of the Audit Financial Statements

The Auditors Report

Client Evaluation and Planning the Audit

Audit Risk Assessment

Tests of Controls

Designing Substantive Procedures

Audit Sampling

Auditing Sales and Receivables

Auditing Purchases, Payables and Payroll

Auditing Inventories and Property, Plant and Equipment

Auditing Cash and Investments

Completing the Audit

Filters

Exam 10: Materiality and Audit Evidence

The concept of materiality is defined in AASB 1031.in terms of the:

During the audit of XYZ Ltd the auditor found a misstatement that equated to 7% of the base amount. According to the guidelines provided by AASB 1031.this amount is deemed to be:

Identify and explain each of the four broad categories of management's assertions about account balances.

"Tolerable error" (or tolerable misstatement) is the term used to indicate materiality at the:

Which of the following would not be considered underlying accounting data?

The auditor has determined that there is a preponderance of persuasive evidence for each financial statement assertion that is material, and therefore a reasonable basis for their opinion. Which of the following would not be a possible opinion that the auditor could issue?

The completeness assertion would be violated if:

List and define four types of corroborating evidence.

Which of the following is not a course of action an auditor may take if they discover material misstatements in the accounts?

i. Define materiality as described in ASA320. ii. Identify the two levels of materiality that are important in audit planning and indicate the reason for each level.

On each engagement, the specific audit objectives will normally be:

In determining the sufficiency of evidential matter, which of the following would not normally be a factor?

An Overview of Auditing

Governance and the Auditor

Professional Ethics, Independence and Audit Quality

Other Assurance Engagements and Quality Standards

The Auditors Legal Liability

Overview of the Audit Financial Statements

The Auditors Report

Client Evaluation and Planning the Audit

Audit Risk Assessment

Tests of Controls

Designing Substantive Procedures

Audit Sampling

Auditing Sales and Receivables

Auditing Purchases, Payables and Payroll

Auditing Inventories and Property, Plant and Equipment

Auditing Cash and Investments

Completing the Audit

Filters