The audit manager has noted in the detailed audit plan that EuKaRe's control environment may be weak.Which TWO of the following statements are valid reasons as to why EuKaRe may have a weak control environment?
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1 .You instruct the audit junior to confirm whether the post is opened by more than one individual.Over which of the following internal control objectives would this provide assurance?(1) Cash receipts are not misappropriated(2) All cash receipts that occurred are recorded(3) Cash receipts are recorded at the correct amounts in the ledger(4) Cash receipts are posted to the correct receivables accounts and to the general ledger
A 1 only B 2 only C 3 and 4 D 1 and 4
2 .You have identified several audit risks which you feel your team will need to address. One such audit risk relates to the risk that income may be understated in the financial statements. You are concerned that not all income may be recorded.Which of the following statements is NOT a valid response to this audit risk?
A Obtain a breakdown of the income recorded from the cash that was collected in buckets, and vouch a sample of entries back to the volunteer in order to determine which volunteer collected the relevant donations B Perform analytical procedures on the level of donations in shopping areas per voluntee...
3 .During the course of the audit, the audit team identified numerous deficiencies in internal control relating to the sales system. The amounts exposed to the deficiencies were high and you have concluded that it is likely that the deficiencies would result in material misstatements in the financial statements. A deficiency was also identified in the purchases system but further investigation showed this to be a minor, isolated issue.Which of the following statements is correct regarding the deficiencies which must be included in the report to management?
A The deficiencies identified in the sales system only B The deficiencies identified in the purchases system only C The deficiencies identified in the sales and purchases system D Neither the deficiencies identified in the sales system nor the purchases system
4 .Another identified audit risk is the susceptibility of EuKaRe's business to fraud due to the high levels of cash involved.Which of the following statements correctly describes the auditor's responsibilities in accordance with ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements?
A The auditor is responsible for the prevention and detection of fraud and error B The auditor is not responsible for the prevention of fraud and error but is responsible for detection C The auditor is responsible for obtaining reasonable assurance that the financial statements are free from materia...
5 .Which of the following is NOT a likely effect of the deficiencies in the internal control system for ordering described above?
A Purchases may be made unnecessarily at unauthorised prices B Subsequent queries on orders cannot be traced back to the original requisition C The order forms may contain errors that are not identified D Goods could be ordered twice in error or deliberately
7 .Which of the following statements are valid recommendations with regards to improving the internal controls for goods received described above?(1) The ordering department should match orders to GRNs and mark orders as closed once all goods have been received, to enable any outstanding orders to be chased up.(2) The first copy of the GRN should be sent directly to the accounts department, without first going through the ordering department, to prevent delays in recording the purchase.(3) The goods inwards department should review the goods for their condition, in order to identify and return any damaged goods.(4) GRNs should be filed in date order or by purchase order number, instead of by the supplier's reference number, to ensure that they can be matched easily to orders.
A 1 and 3 B 1, 2 and 3 C 1, 2 and 4 D 1, 3 and 4
8 .As part of your audit of the procurement system, you have recommended that the goods inwards department should ensure that the goods received are valid business purchases, by matching all deliveries to an authorised order form before issuing a GRNWhich of the following would be an appropriate test of control to confirm that the control is operating effectively?
A For a sample of orders, check that there is a matching goods received note B Check that the numerical sequence of purchase orders is complete C For a sample of goods received notes check that there is an authorised purchase order D Check that the numerical sequence of goods received notes is compl...
9 .KLE Co's management is keen to increase the range of assignments that the company's internal audit undertake.Which of the following assignments could the internal audit department be asked to perform by management?
A Undertake 'mystery shopper' reviews, where they enter the store as a customer, purchase goods and rate the overall shopping experience B Assist the external auditors by requesting bank confirmation letters C Provide advice on the implementation of a new payroll package for the payroll department D...
10 .Which of the following best summarises the meaning of 'efficiency' in the context of a Value for Money audit as requested by KLE Co's management?
A The lowest cost at which the appropriate quantity and quality of physical, human and financial resources can be achieved B Producing the required goods and services in the shortest time possible C The extent to which an activity is achieving its policy objectives D The relationship between goods a...
