lOMoAR cPSD| 49074884
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,During which stage of the audit will the auditor identify and assess the risk of material
misstatement at the financial statement as well as assertion levels?
The correct answer is:
Planning stage
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Which of the statements below is not correct about internal controls and tests of
controls?
The correct answer is:
Successful tests of controls will eliminate the extent, and possibly, change the nature of
substantive tests but the need to perform substantive tests is a matter of professional
judgement.
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Detection risk relates to the nature, timing and extent of the auditor’s procedures put
in place to respond to the risk of material misstatement and to reduce audit risk to an
acceptable level.
Detection risk may arise because the auditor…
1. selects an inappropriate audit procedure, and/or
2. misapplies an appropriate procedure, and/or
3. misinterprets the results of the test.
Which of the following options are correct regarding detection risk?
The correct answer is:
1, 2 and 3
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,Which of the following statements are true regarding the system of internal control in
less complex entities?
Note: There could be more than one correct answer. Select all correct options.
The correct answers are:
As part of the control environment in a less complex entity, management and the
lowerlevel employees may be working closely together so employees will frequently be
exposed to how managers behave and conduct themselves.,
The information system and related controls in the smaller entity are more likely to have
a simple accounting system under the charge of the accountant. ,
Implementing control activities can be expensive and smaller entities may not have the
necessary resources to put in more effective but costly security controls.
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The following statements are made by your fellow candidate audit trainee about
inherent risks of an audit associated with the nature of audit procedures.
1. Management will always provide the auditor with complete information
relating to the financial statements.
2. When the auditor performs procedures related to the completeness of
information they can be 100% certain that all information has been recorded or
conveyed to them.
3. Fraud, including collusion and falsification of documents, may be so
sophisticated and expertly hidden that conventional audit procedures will be
ineffective in detecting misstatement.
4. An audit is not an official investigation into wrongdoing, and accordingly the
auditor does not have the legal powers which may be necessary to pursue certain
evidence.
5. Audit procedures for material items are conducted on 100% of the account
balance so the risk that material misstatement will go undetected is reduced.
Which of these statements are incorrect regarding inherent risks of an audit
associated with the nature of audit procedures?
, The correct answer is:
1, 2 and 5
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Which of these factors are not normally considered by the auditor when calculating
planning materiality?
The correct answer is:
Changes in the market in which the entity operates.
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The inventory balance in the financial statements is reflected as R2 800 000. The audit
evidence obtained by the auditor indicates the balance should be R2 300 000. The
materiality calculated by the auditor for the audit of the financial statements is R250
000. Which of the following statements is correct?
The correct answer is:
The inventory balance is misstated in the financial statements and the misstatement
amounts to R500 000
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The following conclusion was included in the auditor’s report:
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that
these financial statements do not present fairly, in all material respects, (or do not give a
true and fair view of) the financial position of ABC Company as at December 31, 20X1,
and (of) its financial performance and cash flows for the year then ended, in accordance
with International Financial Reporting Standards for Small and Medium-sized Entities.
Indicate the type of assurance engagement that was performed on the financial
statements of ABC Company.
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,During which stage of the audit will the auditor identify and assess the risk of material
misstatement at the financial statement as well as assertion levels?
The correct answer is:
Planning stage
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Which of the statements below is not correct about internal controls and tests of
controls?
The correct answer is:
Successful tests of controls will eliminate the extent, and possibly, change the nature of
substantive tests but the need to perform substantive tests is a matter of professional
judgement.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Detection risk relates to the nature, timing and extent of the auditor’s procedures put
in place to respond to the risk of material misstatement and to reduce audit risk to an
acceptable level.
Detection risk may arise because the auditor…
1. selects an inappropriate audit procedure, and/or
2. misapplies an appropriate procedure, and/or
3. misinterprets the results of the test.
Which of the following options are correct regarding detection risk?
The correct answer is:
1, 2 and 3
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
,Which of the following statements are true regarding the system of internal control in
less complex entities?
Note: There could be more than one correct answer. Select all correct options.
The correct answers are:
As part of the control environment in a less complex entity, management and the
lowerlevel employees may be working closely together so employees will frequently be
exposed to how managers behave and conduct themselves.,
The information system and related controls in the smaller entity are more likely to have
a simple accounting system under the charge of the accountant. ,
Implementing control activities can be expensive and smaller entities may not have the
necessary resources to put in more effective but costly security controls.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
The following statements are made by your fellow candidate audit trainee about
inherent risks of an audit associated with the nature of audit procedures.
1. Management will always provide the auditor with complete information
relating to the financial statements.
2. When the auditor performs procedures related to the completeness of
information they can be 100% certain that all information has been recorded or
conveyed to them.
3. Fraud, including collusion and falsification of documents, may be so
sophisticated and expertly hidden that conventional audit procedures will be
ineffective in detecting misstatement.
4. An audit is not an official investigation into wrongdoing, and accordingly the
auditor does not have the legal powers which may be necessary to pursue certain
evidence.
5. Audit procedures for material items are conducted on 100% of the account
balance so the risk that material misstatement will go undetected is reduced.
Which of these statements are incorrect regarding inherent risks of an audit
associated with the nature of audit procedures?
, The correct answer is:
1, 2 and 5
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Which of these factors are not normally considered by the auditor when calculating
planning materiality?
The correct answer is:
Changes in the market in which the entity operates.
Cxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
The inventory balance in the financial statements is reflected as R2 800 000. The audit
evidence obtained by the auditor indicates the balance should be R2 300 000. The
materiality calculated by the auditor for the audit of the financial statements is R250
000. Which of the following statements is correct?
The correct answer is:
The inventory balance is misstated in the financial statements and the misstatement
amounts to R500 000
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
The following conclusion was included in the auditor’s report:
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that
these financial statements do not present fairly, in all material respects, (or do not give a
true and fair view of) the financial position of ABC Company as at December 31, 20X1,
and (of) its financial performance and cash flows for the year then ended, in accordance
with International Financial Reporting Standards for Small and Medium-sized Entities.
Indicate the type of assurance engagement that was performed on the financial
statements of ABC Company.
