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?
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1 .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?
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2 .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
3 .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
4 .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 ...
5 .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
7 .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?
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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...
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