Which of the following features are corporate governance weaknesses which Tangerine Co would need to address prior to their listing?(1) The chairman has sole responsibility for liaising with shareholders(2) The company has not established an internal audit function(3) The chairman and one of the NEDs are former executive directors of Tangerine Co
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1 .Following your preliminary visit to South's head office you are now aware of the following information.The company installed a new till system in all supermarkets four months before the year end. The new till system is linked to the accounting system at head office and automatically posts transactions to the accounting system.Previously journals were made manually based on totals on till rolls.Having reviewed this information you have identified several audit risks which you feel your team will need to address. The first risk relates to the cost of the new till system which South has capitalised as a noncurrent asset. You are concerned that South may have included within the capitalised costs some items which are revenue in nature, leading to the overstatement of non-current assets.Which of the following statements is a valid response to this audit risk?
A Obtain a copy of the training manual relating to the new till system and discuss with directors the extent of training staff have received on the new system B Agree the capitalised costs from the trial balance back to invoices to confirm their value C Inspect invoices capitalised within the cost o...
2 .Mr Day's daughter, Zoe, is currently learning about International Standards on Auditing (ISAs) in her studies. She has asked you for clarification of the following.Which is the correct order of the following stages involved in the development of an ISA?(1) Distribution of exposure draft for public comment(2) Consideration of comments received from the public(3) Approval by IAASB members(4) Establishment of task force to develop draft standard(5) Discussion of proposed standard at a public meeting
A 1, 5, 4, 3, 2 B 2, 4, 1, 3, 5 C 4, 5, 1, 2, 3 D 5, 4, 2, 1, 3
3 .A second audit risk relates to how well the new till system is operating. You are concerned that the system may not be reliable, and that consequently not all sales have been recorded, resulting in an understatement of revenue. You are also concerned that staff may not yet be familiar with the system, leading to an increased risk of errors relating to data entry.Which of the following statements represent valid responses to this audit risk?(1) Perform analytical procedures by comparing daily / weekly sales by store with both the prior year and with expectations, in order to determine whether any unusual patterns have occurred following the installation of the new system(2) Vouch the sales revenue per the system to the till receipts to confirm the accuracy of the sales(3) Obtain a copy of the training manual relating to the new till system and discuss with directors the extent of training staff have received on the new system(4) Test the internal controls relating to the till system and the transfer of data into the accounting system
A 2 and 4 B 3 and 4 C 1, 2 and 4 D 1, 3 and 4
4 .Zoe is also concerned that Ali & Co might breach confidentiality were the audit firm to represent Stark in its dispute with the tax authorities.Which of the following statements best reflects the auditor's duty of confidentiality?
A Auditors must never, under any circumstances, disclose any matters of which they become aware during the course of the audit to third parties, without the permission of the client. B Auditors may disclose any matters in relation to criminal activities to the police or taxation authorities, if requ...
5 .After a number of people living close to one of South's stores became seriously ill, the source of the illness was traced back to meat the customers had purchased from South. Legal proceedings were commenced against South by a number of customers during the financial year, demanding USD1m in compensation. You plan to review the legal correspondence relating to the claims made by customers to whom South sold contaminated meat.Which of the following are valid objectives of this audit procedure?(1) To determine whether South's reputation will have been damaged within the local area(2) To confirm whether there are deficiencies in South's internal controls relating to food hygiene(3) To assess whether a provision for customer compensation is required in South's financial statements(4) To determine whether disclosure of the nature and financial effect of the legal claim is required in South's financial statements
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7 .Mason has secured a five year contract with each of its four customers (the police force, ambulance service, fire service and the coastguard). The contracts in place are all of equal value. Under the terms of the contract Mason charges customers an annual fee to cover the maintenance, storage and testing of the aircraft and equipment. The annual fee is payable in advance each year with the first annual payment being paid on the date the contract commences.Based on the above information, which of the following statements summarises a key audit risk?
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8 .The audit engagement partner's review has identified the following additional corporate governance weaknesses:(1) All the directors have been members of the board for at least four years(2) The board is comprised of six executive and four non-executive directorsWhich of the following would the engagement partner recommend to address these weaknesses to ensure compliance with corporate governance principles?
A Weakness 1 The directors should be subject to re-election at regular intervals not exceeding three years; Weakness 2 At least 50% of the board must be comprised of non-executive directors B Weakness 1 The directors must be re-appointed annually by the chairman; Weakness 2 At least 75% of the board...
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A Perform a proof in total calculation of the depreciation charge for the year and investigate any significant differences B Review minutes of training meetings to determine whether the pilots have been trained how to use the specialist equipment C Obtain a breakdown of the capitalised costs and agr...
10 .The engagement partner has assessed the make-up of the audit committee.Which of the following would be valid conclusions from this assessment?(1) It is acceptable for the chairman to chair the audit committee(2) A new member of the audit committee with relevant financial experience must be recruited
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