In preparation for the audit planning meeting, the audit junior has identified a number of areas requiring audit focus.Based on the information regarding the wages system, which TWO of the following are likely to introduce the highest risk of material misstatement?
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1 .In the light of the partner's request concerning documentation, you are considering different options for recording the system.Which of the following recording methods most suits her requirements?
A A computerised ICEQ B Computerised narrative notes C A flow chart D Copying the company's control manual
2 .During the previous audit, the audit team had recommended SouthLea's management to ensure that any amendments to standing data on the wages system are reviewed by an authorised manager.Which of the following is a test of control designed to provide evidence that the recommended internal control is operating effectively?
A Review overtime lists for evidence of authorisation B Review the log of amendments to standing data for evidence of review C Perform a proof in total using the number of employees and average wage D Obtain printouts of employee wage rates and compare these to HR records
3 .Which of the following statements about the responsibilities of external and internal auditors with regards to fraud is NOT correct?
A The external auditor must maintain an attitude of professional scepticism throughout the audit recognising the possibility that a material misstatement due to fraud could exist. B The internal auditor must always consider the potential of management overriding controls and modify their audit proce...
4 .Which of the following recommendations are appropriate in increasing the independence of SouthLea's internal audit department?(1) The chief internal auditor should be appointed by the board of directors.(2) The chief internal auditor should report to the board of directors.(3) The finance director should decide on the scope of the internal audit work
A (1) and (2) only B (1) and (3) only C (2) and (3) only D (1), (2) and (3)
5 .You have been told by the finance director that the senior management team is looking to upgrade the company's computerised accounting system in a year's time. This is partly because the senior management team believes that due to the increasing size and complexity of the business, the company will need more robust general IT controls in the future.Which TWO of the following are general IT controls?
A Full testing procedures using test data when developing computer applications B One for one checking C Disaster recovery procedures D Hash totals
7 .Gillian owned a 70% shareholding in R Ltd, an unquoted investment company. On 23 July 2016, she gave a 20% shareholding in R Ltd to her son. The values of shareholdings in R Ltd on 23 July 2016 were as follows: ￡ 100% shareholding 600,000 70% shareholding 350,000 50% shareholding 200,000 20% shareholding 80,000 What is the diminution in value of Gillian's estate as a result of her gift on 23 July 2016?
A ￡150,000 B ￡270,000 C ￡80,000 D ￡120,000
8 .Joel and Sunita were a married couple. Sunita died in July 2008 and 65% of her nil rate band of ￡312,000(2008/09) was unused. Joel died in May 2016. He had made a potentially exempt transfer (after all available exemptions) of ￡75,000 in August 2012.Joel left his estate to his sister. Any relevant elections were made.What is the nil rate band available to set against Joel’s death estate?
A ￡325,000 B ￡452,800 C ￡461,250 D ￡536,250
9 .On 7 July 2011, Paul made a gross chargeable transfer (after all exemptions) of ￡260,000. On 19 December 2016 he gave ￡190,000 to a trust. Paul agreed to pay any lifetime IHT due.How much inheritance tax will be payable by Paul on the December 2016 transfer of value?
A ￡28,250 B ￡31,250 C ￡29,750 D ￡23,800
10 .Donald made the following transactions in the tax year 2016/17:(1) A gift of ￡2,000 to his grand-daughter on the occasion of her marriage.(2) A sale of a vase to his friend, Alan, for ￡1,000 which both Donald and Alan believed to be the market value of the vase. The vase was later valued by an auction house as worth ￡20,000 at the date of the sale.Ignoring the annual exemption, what is the total value of potentially exempt transfers made by Donald as a result of these gifts?
A ￡21,000 B Nil C ￡2,000 D ￡19,000
