ACCA - Audit and Assurance (AA) Questions With Complete Solutions

Objective of an external audit correct answer: The objective of an audit of financial statements is to enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with applicable financial reporting framework. An audit of financial statements is an example of an assurance engagement. Advantages of a non-statutory audit correct answer: It can provide a means of settling accounts between the partners. Where audited accounts are available this may make the accounts more acceptable to taxation authorities. The sale of the business or the negotiation of loan or overdraft facilities may be facilitated if the firm is able to produce audited accounts. An audit on behalf of a sleeping partner is useful since generally such a personal have you have a means of checking the accounts of the business or confirming the share of profits due to them. Accountability correct answer: The quality or state of being accountable; that is, being required or expected to justify actions and decisions. It suggests an application or willingness to accept responsibility for one's actions. Stewardship correct answer: Refers to the duties and obligations of a person who manages another persons property. Agents correct answer: Are people who are employed or used to provide a particular service. In the case of a company, the people being used to provide the service or managing the business also have the second role of trying to maximise their personal wealth in their own right. Assurance engagement correct answer: A practitioner that aims to obtain sufficient appropriate evidence in order to express a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the measurement or evaluation of an underlying subject matter against criteria. Elements of an assurance engagement correct answer: A three party relationship. The three parties are the intended user, the responsible party and the practitioner. A subject matter, where the data to be evaluated has been prepared by the responsible party. It can take many forms, including the financial performance, non-financial performance, process and behaviour. Suitable criteria, where the subject matter is evaluated or measured against criteria in order to reach an opinion. Evidence, where sufficient appropriate evidence needs to be gathered to support the required level of assurance. An assurance report, where a written report containing the practitioners opinion is issued to the intended user in the form appropriate to reasonable assurance engagement or a limited assurance engagement.