14.4 It is common practice for the auditor of a service company to provide a Type 1 or Type 2 report 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?
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1 .13.4 As a number of deficiencies within the sales cycle are individually not significant, there is no requirement to discuss or report any of them to those charged with governance.Is this statement TRUE or FALSE?
A True B False
2 .13.5 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 detect further significant deficiencies.
A 1 and 2 only B 1 and 3 only C 1, 2 and 4 only D 2, 3 and 4 only
3 .14.1 Alhare Co uses a service provider to produce its payroll. Originating documents are kept by Alhare and regularly reconciled (i.e. through control totals and reviews/re-computation of data sent to and received from the service provider). Audit approach options available to the auditor include:(1) Assess the design and implementation of the service provider’s controls relevant to the 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 of Alhare’s payrollWhich of the following would be the most likely approach taken by the auditors of Alhare concerning the service provider?
A 1 only B 3 only C 1 and 2 only D 3 and 4 only
4 .14.2 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 form his opinion?
A The possibility of loss of input documentation in transmission to the service provider B Inadequate back-up and reconstruction facilities at the service provider C Failure of service provider staff to identify exceptions in output and bring them to the attention of management D Refusal of permissi...
5 .14.3 An auditor is auditing the financial statements of Aloe Co. Aloe uses a service provider to process 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 to the 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
7 .15.4 Sufficiency of audit evidence depends, among other things, on the “risk of misstatement”.Which of the following would increase this risk, and so indicate that more evidence should be collected for “sufficiency”?
A The knowledge that the audit working papers will be reviewed by an independent external technical body B The use of audit staff who are unfamiliar with the client C The use of judgement sampling rather than statistical sampling D A reporting deadline which is unusually soon after the year end
8 .15.3 During the course of an audit, the auditor may use the following documents:(1) An analysis of repairs expenditure for tax purposes(2) An aged debt listing(3) Suppliers’ statement reconciliationsWhich of these are acceptable if prepared by the client as a basis for further audit work?
A 1 only B 1 and 2 only C 1, 2 and 3
9 .15.2 An auditor recalculates the amortisation of intangible assets to determine whether the amortisation period is reasonable.Which financial statement assertion is being tested?
A Valuation and allocation B Existence C Completeness
10 .15.5 In order to detect an understatement of sales, which of the following procedures would be most effective?
A Select sales delivery notes and check the details with the related sales invoices B Select sales invoices and check the details with the related sales orders C Select sales invoices and check the details with the related sales delivery notes D Select sales orders and check the details with the rel...
