ACCA - AUDIT AND ASSURANCE (AA) UPDATED
ACTUAL QUESTIONS AND CORRECT ANSWERS
Question:
Objective of an external audit
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.
Question:
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.
Answer:
Advantages of a non-statutory audit
Question:
Accountability
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.
Question:
Stewardship
Answer:
Refers to the duties and obligations of a person who manages another persons
property.
Question:
Agents
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.
Question:
Assurance engagement
,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.
Question:
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.
Answer:
Elements of an assurance engagement
Question:
Intended users
Answer:
The individual or organisation, or group thereof that the practitioner expects will
use the assurance repot.
Question:
The individual conducting the engagement which will usually be the engagement
partner or other members of the engagement team, or as applicable, the firm.
Answer:
Practitioner
Question:
Objective of a reasonable assurance engagement
Answer:
Is a reduction in assurance engagement risk to an acceptably low level in the
circumstances of engagement as the basis for the insurance practitioners
conclusion. The conclusion would usually be expressed in a positive forum.
Question:
Objective of a review engagement
Answer:
Is obtain limited assurance about whether the subject matter information is free
from material misstatement.
Question:
, Where underlying subject matter has not been measured or evaluated by the
practitioner, and the practitioner concludes whether or not the subject matter
information is free from material misstatement.
Answer:
An attestation engagement
Question:
Where the underlying subject matter has been measured and evaluated by the
practitioner, and the practitioner then presents conclusions on the reported
outcome in the insurance report.
Answer:
A direct engagement
Question:
Internal audit function
Answer:
Will perform assurance and consulting activities designed to evaluate and
improve the effectiveness of the entities governance, risk management and
internal control processes.
Question:
True
Answer:
Information is factual and conforms with reality. In addition, the information
conforms with required standards and law. The financial statements have been
correctly extracted from the books and records.
Question:
Fair
Answer:
Information is free from discrimination and bias and is in compliance with
expected standards and rules. The accounts should reflect the commercial
substance of the companies underlying transactions.
Question:
An audit gives the reader this assurance on the truth and fairness of the financial
statements, which is high, but not absolute, level of assurance. The auditors report
does not guarantee that the financial statements are correct, but that they are true
and fair with in a reasonable margin of error.
Answer:
Reasonable assurance
Question:
Materiality
Answer:
An expression of the relative significance or importance of a particular matter in
the context of the financial statements as a whole. The matter is material if it's a
mission or misstatement would reasonably be expected to influence the
ACTUAL QUESTIONS AND CORRECT ANSWERS
Question:
Objective of an external audit
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.
Question:
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.
Answer:
Advantages of a non-statutory audit
Question:
Accountability
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.
Question:
Stewardship
Answer:
Refers to the duties and obligations of a person who manages another persons
property.
Question:
Agents
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.
Question:
Assurance engagement
,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.
Question:
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.
Answer:
Elements of an assurance engagement
Question:
Intended users
Answer:
The individual or organisation, or group thereof that the practitioner expects will
use the assurance repot.
Question:
The individual conducting the engagement which will usually be the engagement
partner or other members of the engagement team, or as applicable, the firm.
Answer:
Practitioner
Question:
Objective of a reasonable assurance engagement
Answer:
Is a reduction in assurance engagement risk to an acceptably low level in the
circumstances of engagement as the basis for the insurance practitioners
conclusion. The conclusion would usually be expressed in a positive forum.
Question:
Objective of a review engagement
Answer:
Is obtain limited assurance about whether the subject matter information is free
from material misstatement.
Question:
, Where underlying subject matter has not been measured or evaluated by the
practitioner, and the practitioner concludes whether or not the subject matter
information is free from material misstatement.
Answer:
An attestation engagement
Question:
Where the underlying subject matter has been measured and evaluated by the
practitioner, and the practitioner then presents conclusions on the reported
outcome in the insurance report.
Answer:
A direct engagement
Question:
Internal audit function
Answer:
Will perform assurance and consulting activities designed to evaluate and
improve the effectiveness of the entities governance, risk management and
internal control processes.
Question:
True
Answer:
Information is factual and conforms with reality. In addition, the information
conforms with required standards and law. The financial statements have been
correctly extracted from the books and records.
Question:
Fair
Answer:
Information is free from discrimination and bias and is in compliance with
expected standards and rules. The accounts should reflect the commercial
substance of the companies underlying transactions.
Question:
An audit gives the reader this assurance on the truth and fairness of the financial
statements, which is high, but not absolute, level of assurance. The auditors report
does not guarantee that the financial statements are correct, but that they are true
and fair with in a reasonable margin of error.
Answer:
Reasonable assurance
Question:
Materiality
Answer:
An expression of the relative significance or importance of a particular matter in
the context of the financial statements as a whole. The matter is material if it's a
mission or misstatement would reasonably be expected to influence the
