Once NAB & Co has accepted appointment as Mickey's auditor they must draw up an engagement letter.Which of the following must be included in the audit engagement letter?
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1 .From a review of the information above, your audit assistant has highlighted some of the potential risks to independence in respect of the audit of Goofy.(1) Audit engagement partner has been in the position for six years(2) Audit engagement partner's daughter works for Goofy(3) Audit engagement partner's daughter's bonus would be in the form of shares(4) 5% bonus offered if audit is completed three weeks earlier than last yearWhich of the following options correctly identifies the valid threats to independence and allocates the threat to the appropriate category?
A Familiarity 1 and 3; Self-interest 2 and 4 B Familiarity 2 and 4; Self-interest 1 and 3 C Familiarity 1 and 2; Self-interest 3 and 4 D Familiarity 2 and 3; Self-interest 1 and 4
2 .One of the shareholders, who is not an executive director, has heard about Conoy's plans to establish an audit committee. He has drawn up a list of statements which he feels the Board should review before making any decisions:Which TWO of the statements made by the shareholder are TRUE in relation to the establishment of the audit committee?
A Those remaining shareholders who are not already executive directors should be appointed as nonexecutive directors and should be part of the audit committee B The chief internal auditor should not be part of the audit committee C Establishing an audit committee will mean that there is a specialist...
3 .NAB & Co have decided that they would like to accept nomination as Mickey's auditors and Mickey's existing auditors have agreed to resign rather than be removed from office. The audit manager in charge of the tender has set out a list of procedures that the firm must undertake before Mickey can be approved as an audit client.(1) Ensure that the existing auditor's resignation has been properly conducted(2) Communicate with Mickey's existing auditors(3) Submit an engagement letter to Mickey's management(4) Perform client screening procedures, including an assessment of Mickey's risk profileWhich of the following summarises the correct order in which the above procedures should be undertaken?
A 1, 3, 2, 4 B 4, 3, 2, 1 C 1, 4, 2, 3 D 2, 4, 1, 3
4 .Before NAB & Co can accept appointment as Mickey's auditors they must determine whether the preconditions for an audit are met and obtain management's agreement that it acknowledges and understands its responsibilities.Which of the following is NOT included in the agreement obtained by the auditor?
A Management's responsibility for preparing the financial statements B Management's responsibility for internal control to enable the preparation of financial statements which are free from material misstatement C Management's responsibility to provide the auditor with all information relevant to th...
5 .Which of the following correctly summarises the order in which the steps required by the firm's policy for first year audits would take place?
A 1, 2, 3, 4 B 3, 2, 1, 4 C 1, 2, 4, 3 D 2, 1, 4, 3
7 .The audit junior has asked you whether internal control questionnaires (ICQs) should be completed as well as internal control evaluation questionnaires (ICEQs).Which of the following statements is correct in relation to ICQs and ICEQs?
A ICEQs determine whether controls exist which meet specific control objectives; ICQs determine whether there are controls which prevent or detect specified errors or omissions B ICEQs are generally easier to apply to a variety of different systems than ICQs C ICQs are likely to overlook how interna...
8 .Based on your understanding of the nature of EuKaRe you have identified that income is primarily in the form of cash.Which element of audit risk is increased by this fact?
A Detection risk B Inherent risk C Control risk D Business risk
9 .Which of the internal control activities identified in the audit junior's notes above would satisfy the objective of preventing/detecting a material misstatement if it is operating effectively?
A 1 only B 3 only C 1 and 2 D 3 and 4
10 .Your audit partner has highlighted to you that it is imperative that TEY & Co acts in line with ISA 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment. This means it must identify and assess the risks of material misstatement at both the financial statements level and at the assertion level, for classes of transactions, events and their related disclosures, and account balances and their related disclosures.Which of the following statements is NOT an explanation of why ISA 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment requires a risk assessment to be carried out at the planning stage?
A The risk assessment will help the audit team gain an understanding of the entity for audit purposes B The risk assessment will enable the audit senior to produce an accurate budget for the audit assignment C The risk assessment will form the basis of the audit strategy and the detailed audit plan ...
