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 formhis opinion?
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1 .Which of the following is used by the auditor to determine if a deficiency in internalcontrol is significant?
A Professional scepticism B Performance materiality C Professional judgement
2 .Which of the following would NOT normally be considered to be a significant deficiencyby an auditor?
A No sensitivity analysis was carried out on the objective determination of estimatescontained within the financial statements B An immaterial fraud carried out by a senior manager had not been detected by theinternal control system C Transactions in which directors have financial interests are not ...
3 .As a number of deficiencies within the sales cycle are individually not significant, there is norequirement to discuss or report any of them to those charged with governance.Is this statement TRUE or FALSE?
A True B False
4 .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 detectfurther 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 .Alhare Co uses a service provider to produce its payroll. Originating documents are kept byAlhare and regularly reconciled (i.e. through control totals and reviews/re-computation ofdata sent to and received from the service provider). Audit approach options available to theauditor include:(1) Assess the design and implementation of the service provider’s controls relevant tothe 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 ofAlhare’s payrollWhich of the following would be the most likely approach taken by the auditors ofAlhare concerning the service provider?
A 1 only B 3 only C 1 and 2 only D 3 and 4 only
7 .An auditor is auditing the financial statements of Aloe Co. Aloe uses a service provider toprocess 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 tothe 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 .It is common practice for the auditor of a service company to provide a Type 1 or Type 2report 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 internalcontrol function C Details of any modification made to the auditor’s report on the financial statements D Details of the controls tes...
9 .Which of the following is the LEAST persuasive method of gathering evidence?
A Inspection of a supplier’s invoice B Reperformance of a depreciation calculation undertaken by the reporting accountant C Inspection of a sales invoice produced by the client
10 .An auditor recalculates the amortisation of intangible assets to determine whether theamortisation period is reasonable.Which financial statement assertion is being tested?
A Valuation and allocation B Existence C Completeness
