CIPFA: A&A Exam Updated ACTUAL
QUESTIONS AND CORRECT ANSWERS
Outline the function of an assurance engagement - CORRECT ANSWER An assurance
engagement typically provides improved or additional information that enhances
stakeholders' confidence in an organisation / process and may allow senior management to
make better decisions.
List the tree parties of an assurance engagement - CORRECT ANSWER - The
responsible party: owners/ management
- The users: stakeholders
- The practitioner: the firm or individual who will conduct the assurance work
One of both of the RP / User may engage the practitioner
Define: Audit - CORRECT ANSWER The systematic process of obtaining and then
objectively evaluating the accounts or financial records of an organisation
Define: Internal audit - CORRECT ANSWER An independent, objective assurance and
consulting activity designed to add value and improve an organisation's operations.
It helps an organisation accomplish its objectives by bringing a systematic, disciplined
approach to evaluate and improve the effectiveness of risk management, control and
governance processes.
Define: Reasonable assurance - CORRECT ANSWER A high level of assurance
obtained through sufficient and appropriate audit evidence to reduce audit risk (risk of an
inappropriate opinion when the financial statements are materially misstated) to an
acceptably low level.
Conclusion expressed positively (found to be the case). Opinion persuasive but not
conclusive.
,Define: Limited assurance - CORRECT ANSWER A lower but meaningful level of
assurance that the risk of material misstatement has been reduced to an acceptable level,
enabling a conclusion to be expressed negatively (nothing to indicate that something is not
the case).
What is the purpose of an audit? - CORRECT ANSWER To enhance the degree of
confidence of intended users in the financial statements. This is achieved by the expression of
an opinion by the auditor on whether the financial statements are prepared, in all material
respects, in accordance with an applicable financial reporting framework.
Distinguish between 'True' and 'Fair' - CORRECT ANSWER True
- Factually correct and prepared in accordance with applicable framework
- Free of material misstatement
Fair
- Faithful without bias
- Reflect the economic substance of transactions rather than legal form
What legal requirements exist surrounding true and fair - CORRECT ANSWER -
Companies act 2006 states that a company's auditor must make a report to the company's
members on all annual accounts of the company, expressing a true and fair opinion
- Government Resources and Accounts Act 2000
Outline functions auditors are not expected to do - CORRECT ANSWER - Correct
Financial statements
- Prevent fraud or error
- Detect all cases of fraud or error
The financial statements subject to audit are those of the entity, prepared by management of
the entity with oversight from those charged with governance and does not relive them of
their responsibilities.
,Define: those charged with governance and management - CORRECT
ANSWER Those charged with governance:
- The person or organisation responsible for overseeing the strategic direction of the entity
and obligations relating to accountability.
Management:
- Executive responsibility for the conduct of the entity's operations.
What is the requirement of ISA 200? - CORRECT ANSWER 'The auditor shall comply
with relevant ethical requirements, including those pertaining to independence, relating to
financial statement audit engagements.'
Which body is responsible for issuing ISAs?
Comment on how they are applied in the UK and Ireland. - CORRECT
ANSWER ISAs are issued by the IAASB (International Auditing and Assurance
Standards Board).
In the UK, this is the FRC.
UK ISAs only differ slightly from their international counterparts owing to the need to adhere
to UK law.
True or False: ISAs are mandatory and wholly applicable to public service organisations. -
CORRECT ANSWER False: they are considered best practice but are usually adopted
into the codes of practice.
What is the requirement of ISA 210? - CORRECT ANSWER To agree the basis on
which the audit is performed, which is documented by the engagement letter. This should
include:
- Scope
- Responsibilities
- Applicable financial reporting framework
, - The expected form and content of any reports to be issued by the auditor
Outline the legal framework of the Companies Act 2006 - CORRECT ANSWER - An
audit is required for the financial statements of limited companies
- Small companies and dormant companies may be excused this requirement
- Auditors are appointed annually
- A company's auditor must make a report to the company's members on all annual accounts
stating whether they give a true and fair view
- Sets out responsibility to report on other aspects of the company annual report including the
director's report, remuneration report and the corporate governance statement.
True or False: An auditor has unlimited access to a company's books, vouchers and it is a
criminal offence for management to withhold this information - CORRECT
ANSWER True
Outline the criminal offences associated with the companies act 2006 - CORRECT
ANSWER - Knowingly or recklessly providing information to a company auditor that
is 'misleading, false or deceptive'.
- Not providing the auditor with the information they request without delay.
- When an auditor knowingly or recklessly includes anything in an audit report which is
misleading, false or deceptive.
- Failure to resign where there is a conflict of interest on the proscribed grounds.
True or False: An outgoing auditor is entitled to make a statement to the members of the
company regarding the circumstances under which they have ceased to be the appointed
auditor. - CORRECT ANSWER True
Comment on whether an auditor's civil liability can be negotiated? - CORRECT
ANSWER Yes it can but must be fair, reasonable and disclosed.
Common on suitability of a potential auditor - CORRECT ANSWER - Should be
appropriately qualified and properly supervised
QUESTIONS AND CORRECT ANSWERS
Outline the function of an assurance engagement - CORRECT ANSWER An assurance
engagement typically provides improved or additional information that enhances
stakeholders' confidence in an organisation / process and may allow senior management to
make better decisions.
List the tree parties of an assurance engagement - CORRECT ANSWER - The
responsible party: owners/ management
- The users: stakeholders
- The practitioner: the firm or individual who will conduct the assurance work
One of both of the RP / User may engage the practitioner
Define: Audit - CORRECT ANSWER The systematic process of obtaining and then
objectively evaluating the accounts or financial records of an organisation
Define: Internal audit - CORRECT ANSWER An independent, objective assurance and
consulting activity designed to add value and improve an organisation's operations.
It helps an organisation accomplish its objectives by bringing a systematic, disciplined
approach to evaluate and improve the effectiveness of risk management, control and
governance processes.
Define: Reasonable assurance - CORRECT ANSWER A high level of assurance
obtained through sufficient and appropriate audit evidence to reduce audit risk (risk of an
inappropriate opinion when the financial statements are materially misstated) to an
acceptably low level.
Conclusion expressed positively (found to be the case). Opinion persuasive but not
conclusive.
,Define: Limited assurance - CORRECT ANSWER A lower but meaningful level of
assurance that the risk of material misstatement has been reduced to an acceptable level,
enabling a conclusion to be expressed negatively (nothing to indicate that something is not
the case).
What is the purpose of an audit? - CORRECT ANSWER To enhance the degree of
confidence of intended users in the financial statements. This is achieved by the expression of
an opinion by the auditor on whether the financial statements are prepared, in all material
respects, in accordance with an applicable financial reporting framework.
Distinguish between 'True' and 'Fair' - CORRECT ANSWER True
- Factually correct and prepared in accordance with applicable framework
- Free of material misstatement
Fair
- Faithful without bias
- Reflect the economic substance of transactions rather than legal form
What legal requirements exist surrounding true and fair - CORRECT ANSWER -
Companies act 2006 states that a company's auditor must make a report to the company's
members on all annual accounts of the company, expressing a true and fair opinion
- Government Resources and Accounts Act 2000
Outline functions auditors are not expected to do - CORRECT ANSWER - Correct
Financial statements
- Prevent fraud or error
- Detect all cases of fraud or error
The financial statements subject to audit are those of the entity, prepared by management of
the entity with oversight from those charged with governance and does not relive them of
their responsibilities.
,Define: those charged with governance and management - CORRECT
ANSWER Those charged with governance:
- The person or organisation responsible for overseeing the strategic direction of the entity
and obligations relating to accountability.
Management:
- Executive responsibility for the conduct of the entity's operations.
What is the requirement of ISA 200? - CORRECT ANSWER 'The auditor shall comply
with relevant ethical requirements, including those pertaining to independence, relating to
financial statement audit engagements.'
Which body is responsible for issuing ISAs?
Comment on how they are applied in the UK and Ireland. - CORRECT
ANSWER ISAs are issued by the IAASB (International Auditing and Assurance
Standards Board).
In the UK, this is the FRC.
UK ISAs only differ slightly from their international counterparts owing to the need to adhere
to UK law.
True or False: ISAs are mandatory and wholly applicable to public service organisations. -
CORRECT ANSWER False: they are considered best practice but are usually adopted
into the codes of practice.
What is the requirement of ISA 210? - CORRECT ANSWER To agree the basis on
which the audit is performed, which is documented by the engagement letter. This should
include:
- Scope
- Responsibilities
- Applicable financial reporting framework
, - The expected form and content of any reports to be issued by the auditor
Outline the legal framework of the Companies Act 2006 - CORRECT ANSWER - An
audit is required for the financial statements of limited companies
- Small companies and dormant companies may be excused this requirement
- Auditors are appointed annually
- A company's auditor must make a report to the company's members on all annual accounts
stating whether they give a true and fair view
- Sets out responsibility to report on other aspects of the company annual report including the
director's report, remuneration report and the corporate governance statement.
True or False: An auditor has unlimited access to a company's books, vouchers and it is a
criminal offence for management to withhold this information - CORRECT
ANSWER True
Outline the criminal offences associated with the companies act 2006 - CORRECT
ANSWER - Knowingly or recklessly providing information to a company auditor that
is 'misleading, false or deceptive'.
- Not providing the auditor with the information they request without delay.
- When an auditor knowingly or recklessly includes anything in an audit report which is
misleading, false or deceptive.
- Failure to resign where there is a conflict of interest on the proscribed grounds.
True or False: An outgoing auditor is entitled to make a statement to the members of the
company regarding the circumstances under which they have ceased to be the appointed
auditor. - CORRECT ANSWER True
Comment on whether an auditor's civil liability can be negotiated? - CORRECT
ANSWER Yes it can but must be fair, reasonable and disclosed.
Common on suitability of a potential auditor - CORRECT ANSWER - Should be
appropriately qualified and properly supervised
