14.2 A finance company uses a service provider to process its high volume, complex transactions.Which of the following circumstances is most likely to affect the auditor’s ability to form his opinion?
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1 .13.3 Which of the following would NOT normally be considered to be a significant deficiency by an auditor?
A No sensitivity analysis was carried out on the objective determination of estimates contained within the financial statements B An immaterial fraud carried out by a senior manager had not been detected by the internal control system C Transactions in which directors have financial interests are no...
2 .13.1 During the audit of a new client numerous weaknesses have been identified. The auditor is considering the content and format of his report to management (letter of weakness).Which of the following best summarises the auditor’s approach to the report?
A Include all matters of sufficient importance identified, but structure the letter to taken account of the varying levels of significance of matters included B Report only major points to be dealt with by directors, leaving less important item to be discussed informally with members of the client...
3 .13.4 As a number of deficiencies within the sales cycle are individually not significant, there is no requirement to discuss or report any of them to those charged with governance.Is this statement TRUE or FALSE?
A True B False
4 .13.5 Which of the following items may be included within the report to management?(1) An indication of areas in which the client can assist in improving audit efficiency.(2) Constructive feedback on business systems, risk systems and risk management.(3) Details of the audit work carried out to detect deficiencies.(4) Details of additional extensive work that could have been carried to try and detect further significant deficiencies.
A 1 and 2 only B 1 and 3 only C 1, 2 and 4 only D 2, 3 and 4 only
5 .14.1 Alhare Co uses a service provider to produce its payroll. Originating documents are kept by Alhare and regularly reconciled (i.e. through control totals and reviews/re-computation of data sent to and received from the service provider). Audit approach options available to the auditor include:(1) Assess the design and implementation of the service provider’s controls relevant to the payroll processing(2) Test the service provider’s controls(3) Assess the design and implementation of the payroll controls at Alhare(4) Obtain a representation from the directors of Alhare concerning the operation of Alhare’s payrollWhich of the following would be the most likely approach taken by the auditors of Alhare concerning the service provider?
A 1 only B 3 only C 1 and 2 only D 3 and 4 only
7 .14.3 An auditor is auditing the financial statements of Aloe Co. Aloe uses a service provider to process its payroll. The auditor of the service provider recently issued a report on the design, implementation and effectiveness of the service provider’s internal controls.Which of the following procedures should the auditor of Aloe perform with respect to the assurance report issued by the service provider’s auditor?
A Perform tests of controls at the service provider B Assess control risk at maximum when auditing Aloe’s payroll C Review the audit program followed by the service provider’s auditor D Inquire concerning the competence of the service provider’s auditor
8 .14.4 It is common practice for the auditor of a service company to provide a Type 1 or Type 2 report to be used by the auditors of that service company’s clients.What is the main difference between a Type 1 and Type 2 report?
A Details of the controls tested during the service provider’s annual audit B A separate assurance report on the effectiveness of the service provider’s internal control function C Details of any modification made to the auditor’s report on the financial statements D Details of the controls te...
9 .15.4 Sufficiency of audit evidence depends, among other things, on the “risk of misstatement”.Which of the following would increase this risk, and so indicate that more evidence should be collected for “sufficiency”?
A The knowledge that the audit working papers will be reviewed by an independent external technical body B The use of audit staff who are unfamiliar with the client C The use of judgement sampling rather than statistical sampling D A reporting deadline which is unusually soon after the year end
10 .15.3 During the course of an audit, the auditor may use the following documents:(1) An analysis of repairs expenditure for tax purposes(2) An aged debt listing(3) Suppliers’ statement reconciliationsWhich of these are acceptable if prepared by the client as a basis for further audit work?
A 1 only B 1 and 2 only C 1, 2 and 3
