You are drafting an engagement letter in respect of Severn Co. You have identified four issues that could be included in the engagement letter:(1) Scope of the audit(2) Responsibilities of management of Severn Co(3) Timetable for the provision of accounting information by Severn Co(4) Fees and billing arrangementsWhich of the above issues MUST be included in the engagement letter for it to comply with ISA 210 Terms of audit engagements?
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1 .The Board has also struggled to differentiate between their responsibilities and those of the external auditor in circumstances such as the prevention and detection of fraud and error, and compliance with regulations.Which of the following statements best describes YHT & Co's responsibility regarding BJM's compliance with hygiene regulations, in line with ISA 250 Consideration of laws and regulations in an audit of financial statements?
A YHT & Co should actively prevent and detect non-compliance with the regulations. B YHT & Co should perform specific audit procedures to identify possible non-compliance. C YHT & Co should obtain sufficient appropriate audit evidence about BJM's compliance with the regulations as they have a direct...
2 .You have identified a number of issues which should be considered prior to tendering for a new client, whether:(1) The firm is independent of the potential client(2) The firm has the appropriate resources to conduct the audit of the potential client(3) The preconditions of audit will be met(4) The outgoing auditors will give Rivers & Co access to working papersGiven what you already know of Severn Co, which of these are most important to consider further prior to tendering for the audit?
A 1 and 2 B 2 and 3 C 3 and 4 D 1 and 4
3 .The partner responsible for the review of hygiene compliance has informed you that the engagement is an assurance engagement.Which of the following would NOT have been relevant to the partner in forming this opinion?
A The existence of a three-party relationship B The existence of suitable criteria C The determination of materiality D The subject matter
4 .Your firm has tendered for the engagement and has been successful. You have been asked to follow through the acceptance procedures for the firm.You are re-appraising whether it is appropriate for the firm to accept the engagement.Which of the following issues arising would cause Rivers & Co to decline the engagement?
A The engagement letter has not been received by Rivers & Co. B Rivers & Co losing a major client meaning Severn's audit fee would represent 20% of annual firm income. C A reply from the outgoing auditors stating that they declined to seek reappointment to the audit of Severn Co due to a disagreemen...
5 .The partner responsible for the review engagement has asked you to tell him what level of assurance you believe YHT & Co should provide, and also what type of opinion the firm should give.What is the level of assurance and type of opinion that can be provided on this review engagement?Level of assurance Report wording
A Reasonable Positive B Reasonable Negative C Limited Positive D Limited Negative
7 .The audit partner has told you that the independence threats arising from YHT & Co performing the review engagement should be monitored carefully.Which of the following is likely to cause the audit partner most concern?
A According to the ACCA Code of Ethics and Conduct, YHT & Co is prohibited from providing other assurance services to an audit client. B The review engagement is likely to give rise to a self-review threat, as the outcomes of the review could form the basis of the financial statements which the audi...
8 .Rivers & Co has now accepted the audit of Severn Co.Which of the following actions in relation to Severn Co is NOT necessary at this stage?
A Obtain references concerning the directors B Submit the letter of engagement C Carry out procedures to obtain an understanding of the entity D Appoint a quality control reviewer
9 .Once established, the audit committee will have many objectives.Which of the following does NOT form part of the audit committee's objectives?
A Safeguarding the privacy of whistleblowers B Appointing the external auditor C Monitoring the independence of the external auditor D Implementing a policy on the supply of non-audit services by the external auditor
10 .The ACCA Code of Ethics and Conduct requires that an external auditor implement appropriate safeguards to ensure that a conflict of interest is properly managed.Which of the following actions should NAB & Co take regarding the potential confidentiality issue?(1) Inform the audit committees of both Goofy and Mickey of the potential conflict of interest and obtain their consent to act for both parties(2) Use separate audit teams for each audit with a common independent review partner to determine whether confidentiality has been maintained(3) Draw up confidentiality agreements to be signed by the Board of Directors of Goofy and Mickey(4) Prevent unauthorised physical access to the information relating to the both company audits
A 1, 3 and 4 B 1 and 4 only C 1, 2 and 4 D 1, 2 and 3
