CPA Audit & Insurance - AA Exam Practice Test
John has been given the following draft figures for Kulran Ltd for the year ended 30 June 2011 to analyse. Materiality has been set at $35,000 and the finance director has told John in a planning meeting that there have been few changes in the year. Budgets were set at 2010 levels and there have been no major movements in non-current assets.
20112010
$$
Revenue3,497,2843,487,286
Cost of sales1,867,2942,008,967
Salaries467,900420,975
Which of the following is normally designed to detect possible material monetary errors in the above figures of financial statements?
20112010
$$
Revenue3,497,2843,487,286
Cost of sales1,867,2942,008,967
Salaries467,900420,975
Which of the following is normally designed to detect possible material monetary errors in the above figures of financial statements?
Correct Answer: C
Vote an answer
When performing risk assessment procedures and related activities to obtain an understanding of the entity and its environment, including the entity's internal control, required by ISA 315, the auditor shall perform certain procedures to obtain information for use in identifying the risks of material misstatement due to fraud.
Which of the following is not a part of an entity's risk assessment process?
Which of the following is not a part of an entity's risk assessment process?
Correct Answer: C
Vote an answer
The management of Tory Bank Ltd suspects that a bank loan officer frequently made loans to fictitious companies, disbursed loan proceed to his wife's accounts, and then the loan has been written-off as irrecoverable. Some significant facts about the loan officer include
A high standard of living, explained as the result of sound investments and not taking vacations
An expensive personal car obtained through business contacts
Gasoline and repair bills submitted for an assigned company car that is higher than company average (mileage logs were submitted on a quarterly basis)
Marked annoyance with questions from auditors
The above fraud would least likely be discovered by
A high standard of living, explained as the result of sound investments and not taking vacations
An expensive personal car obtained through business contacts
Gasoline and repair bills submitted for an assigned company car that is higher than company average (mileage logs were submitted on a quarterly basis)
Marked annoyance with questions from auditors
The above fraud would least likely be discovered by
Correct Answer: C
Vote an answer
Panama and Co has been asked to take on the role of internal auditor at one of its clients and would be responsible for implementing its own recommendations.
Which of the following will NOT be considered by external auditors in their assessment of whether to use the work of internal audit?
Which of the following will NOT be considered by external auditors in their assessment of whether to use the work of internal audit?
Correct Answer: D
Vote an answer
Rehan & Co has been appointed as an external auditor of Limba Plc for the financial year 2011-12. Rehan & Co has identified some problems in the financial statements and now at the final stage of writing the report on the audit.
In which of the following case, Rehan & Co may issue an adverse opinion?
In which of the following case, Rehan & Co may issue an adverse opinion?
Correct Answer: A
Vote an answer
The auditor finds a situation where one person has the ability to collect receivables, make deposits, issue credit memos, and record receipt of payments. The auditor suspects the individual may be stealing from cash receipts.
Which of the following audit procedures would be most effective in discovering fraud in this scenario?
Which of the following audit procedures would be most effective in discovering fraud in this scenario?
Correct Answer: B
Vote an answer
Internal auditors and management have become increasingly concerned about computer fraud. Which of the following control procedures would be least important in preventing computer fraud?
Correct Answer: C
Vote an answer
The auditor shall maintain an attitude of professional scepticism throughout the audit, recognising the possibility that a material misstatement due to fraud could exist, notwithstanding the auditor's past experience of the honesty and integrity of management and those charged with governance.
Which of the following best describes professional scepticism?
Which of the following best describes professional scepticism?
Correct Answer: A
Vote an answer