Multiple choice questions（20marks）
1.Which two of the following are elements of an assurance engagement?
(1)A three-party relationship
(2)Suitable criteria
(3)Determination of materiality
(4)An engagement letter
A(1)and(2)only
B(1)and(3)only
C(2)and(3)only
D(1),(2)and(3)
2.Who normally appoints the external auditors of a company?
A Directors
B Shareholders
C Audit committee
D Senior management
3.Which of the following is the most appropriate definition of the external audit?
A The external audit is an exerci carried out by auditors in order to give an opinion on whether the financial statements of a company are materially misstated.
B The external audit is an exerci carried out in order to give an opinion on the effectiveness of a company's internal control system.
C The external audit is performed by management to identify areas of deficiency within a company and to make recommendations to mitigate tho deficiencies.
D The external audit provides negative assurance on the truth and fairness of a company's financial statements
4.In which of the following situations would the auditor be able to disclo confidential information about a client?
(1)Disclosure is required by law.
(2)Disclosure is permitted by law but the auditor has not requested the client's permission.
(3)The auditor suspects that the client has committed money-laundering offences.
A(1)and(2)only
B(1)and(3)only
sheetmetal
C(2)and(3)only
D(1),(2)and(3)
5.Who is ultimately responsible for a company's system of internal controls?
A External auditors
英语角策划书B Board of directors
C Internal auditors
D Audit committee
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6.Which of the following statements about materiality are correct?
(1)Information is material if its omission or misstatement could influence the economic decisions of urs of the financial statements.
(2)Materiality is bad on the auditor's experience and judgement.
(3)Materiality is always bad on revenue.
(4)Materiality should only be calculated at the planning stage of the audit.
刷赞平台推广网站便宜A(1),(2)and(3)
B(1),(3)and(4)
C(1)and(2)
D(2)and(4)
7.What are the two elements of the risk of material misstatement at the asrtion level?
A Inherent risk and detection risk
B Audit risk and detection risk
C Inherent risk and control risk
D Detection risk and control risk
8.'Audit risk'reprents the risk that the auditor will give an inappropriate opinion on the financial statements when the financial statements are materially misstated.Which of the following categories of risk can be controlled by the auditor?
Category of risk:
(1)Control risk
(2)Detection risk
(3)Sampling risk
A(1)and(2)
B(2)only
C(1)and(3)
D(2)and(3)
9.Which of the following statements are correct with regard to the relationship between the audit plan and the audit strategy for an external audit engagement?
新和中学(1)The audit plan should be developed before the audit strategy is established.
(2)The audit plan and the audit strategy should be established and developed at the same time.
(3)The overall audit strategy should be more detailed than the audit plan.
(4)The audit strategy should be established before the audit plan is developed.
A(1)and(3)
B(2)only
C(3)and(4)
D(4)only
10.Who is responsible for the prevention and detection of fraud?
A Internal auditors
辞职信范文B External auditors
C Tho charged with governance and management
D The audit committee
Ca Study(80marks)
2010.Dec.2a
Explain the concept of TRUE and FAIR prentation.
2011.Jun.5aemini
You are the audit manager of Daffy&Co and you are briefing your team on the approach to adopt in undertaking the review and finalisation stage of the audit.In particular,your audit nior is unsure about the steps to take in relation to uncorrected misstatements.
During the audit of Minnie Co the following uncorrected misstatement has been noted.
The property balance was revalued during the year by an independent expert valuer and an error was made in relation to the assumptions provided to the valuer.
Required:
(a)Explain the term‘misstatement’and describe the auditor’s responsibility in relation to misstatements.
2008.Dec.2b
Auditors have various duties to perform in their role as auditors,for example,to asss the truth and fairness of the financial statements.
Required:
Explain THREE rights that enable auditors to carry out their duties.
2013.J.1b
Introduction
Fox Industries Co(Fox)manufactures engineering parts.It has one operating site and a customer ba spread across Europe.The company’s year end was30April2013.Below is a description of the purchasing and payments system.
Purchasing system
Whenever production materials are required,the relevant department nds a requisition form to the ordering department.An order clerk rais a purcha order and contacts a number of suppliers to e which can despatch the goods first.This supplier is then chon.The order clerk nds out the purcha order.This is not quentially numbered and only orders above$5,000require authorisation. Purcha invoices are input daily by the purcha ledger clerk,who has been in the role for many years and,as an experienced team member,he does not apply any application controls over the input process.Every week the purcha day book automatically updates the purcha ledger,the purcha ledger is then posted manually to the general ledger by the purcha ledger clerk.
Payments system
Fox maintains a current account and a number of saving(deposit)accounts.The current account is reconciled weekly but the saving(deposit)accounts are only reconciled every two months.In order to maximi their cash and bank balance,Fox has a policy of delaying payments to all suppliers for as long as possible.Suppliers are paid by a bank transfer.The finance director is given the total amount of the payments list,which he authoris and then process the bank payments.
Required:
(b)As the external auditors of Fox Industries Co,write a report to management in respect of the purchasing and
payments system described above which:
(i)Identifies and explains FOUR deficiencies in the system;and
(ii)Explains the possible implication of each deficiency;and
(iii)Provides a recommendation to address each deficiency.
A covering letter IS required.
Note:Up to two marks will be awarded within this requirement for prentation and the remaining marks will be split equally between each part.
2013.Dec.1d2
Minty Cola Co(Minty)manufactures fizzy drinks such as cola and lemonade as well as other soft drinks and its year end is31December2013.You are the audit manager of Parsley&Co and are currently planning the audit of Minty.
钱英文You attended the planning meeting with the engagement partner and finance director last week and recorded the minutes from the meeting shown below.You are reviewing the as part of the process of preparing the audit strategy.
露宿的拼音
Minutes of planning meeting for Minty
Minty’s trading results have been strong this year and the company is forecasting revenue of$85million, which is an increa from the previous year.The company has invested significantly in the cola and fizzy drinks production process at the factory.This resulted in expenditure of$5million on
updating, repairing and replacing a significant amount of the machinery ud in the production process.
As the level of production has incread,the company has expanded the number of warehous it us to store inventory.It now utilis15warehous;some are owned by Minty and some are rented from third parties.There will be inventory counts taking place at all15of the sites at the year end.
A new accounting general ledger has been introduced at the beginning of the year,with the old and new systems being run in parallel for a period of two months.
As a result of the increa in revenue,Minty has recently recruited a new credit controller to cha outstanding receivables.The finance director thinks it is not necessary to continue to maintain an allowance for receivables and so has relead the opening allowance of$1·5million.
In addition,Minty has incurred expenditure of$4·5million on developing a new brand of fizzy soft drinks. The company started this process in January2013and is clo to launching their new product into the market place.
The finance director stated that there was a problem in November in the mixing of raw materials with
in the production process which resulted in a large batch of cola products tasting different.A number of the products were sold;however,due to complaints by customers about the flavour,no further sales of the goods have been made.No adjustment has been made to the valuation of the damaged inventory,which will still be held at cost of$1million at the year end.
As in previous years,the management of Minty is due to be paid a significant annual bonus bad on the value of year-end total asts.
Required:
(d)Describe substantive procedures the audit team should perform to obtain sufficient and appropriate audit evidence in relation to the following three matters:
(ii)The relea of the$1·5million allowance for receivables;and
2013.Jun.5b
Panda Co manufactures chemicals and has a factory and four offsite storage locations for finished goods.
Panda Co’s year end was30April2013.The final audit is almost complete and the financial statements and audit report are due to be signed next week.Revenue for the year is$55million and profit before taxation is$5·6million.
The following two events have occurred subquent to the year end.No amendments or disclosures have been made in the financial statements.
Event1–Defective chemicals
Panda Co undertakes extensive quality control checks prior to despatch of any chemicals.Testing on3 May2013found that a batch of chemicals produced in April was defective.The cost of this batch was $0·85million.In its current condition it can be sold at a scrap value of$0·1million.The costs of correcting the defect are too significant for Panda Co’s management to consider this an alternative option.
Event2–Explosion
An explosion occurred at the smallest of the four offsite storage locations on20May2013.This resulted in some damage to inventory and property,plant and equipment.Panda Co’s management h
ave investigated the cau of the explosion and believe that they are unlikely to be able to claim on their insurance.Management of Panda Co has estimated that the value of damaged inventory and property, plant and equipment was$0·9million and it now has no scrap value.
Required:
For each of the two events above:
(i)Explain whether the financial statements require amendment;and
(ii)Describe audit procedures that should be performed in order to form a conclusion on any required amendment.
Answers to multiple choice questions:
1.A
2.B
3.D
4.B
5.B
6.C
7.C
8.D
腐化堕落9.D10.C
