Edskills Centre of Finance

CAF-08 Audit
Test 01
Batch C-1
Date: 27 Oct, 2021
Teacher: Khurram Salahudin-FCA
Total Marks: 18 Marks
Time allowed: 35 Minutes

Student Full Name:

Q.1 A friend of yours has invested in the shares of Ascender Limited. On receiving the company’s annual report,
he made the following comments:

“The auditor has expressed an unqualified opinion. Since the auditor must have arrived at his opinion after
testing majority of the transactions, therefore the financial statements are correct in all respects. Since no
control deficiencies and fraudulent conduct had been reported by the auditor, I can safely invest further amount
of money in the company because there is no risk that I will lose my money due to fraudulent conduct of
management or misrepresentations in the financial statements.”

Required:

Write a letter to your friend to remove his misconceptions related to the audit of financial statements including
brief explanation of your point of view. (08)

Q.2 Aslam is a junior member of your audit team. During an informal discussion with your team members, Aslam
has inquired you about the reasons of emphasizing on professional scepticism when honesty and integrity of the
management is not questionable based on prior experience. Briefly respond to the inquiry of Aslam. (03)

Q.3Link the correct definition to each term.

Part(a)

(i) Accountable (iv) True

(ii) Steward (v) Fair

(iii) Agent (vi) Materiality

(a) An expression of the relative significance or importance of a particular matter in the context of the
financial statements as a whole.

(b) A person employed to provide a particular service.

(c) Factual and conforming with reality. In conformity with relevant standards and law and correctly
extracted from accounting records.

(d) A person employed to manage other people's property.

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(e) Free from discrimination and bias and in compliance with expected standards and rules. Reflecting the
commercial substance of underlying transactions.

(f) Being required or expected to justify actions and decisions.

Part(b)

What level of assurance is provided by a review engagement?

Part(C)

Which of the following is not an assurance engagement?

 External audit
 Compilation engagement
 Review engagement
 Agreed-upon procedures ( 07 )

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