Đề Assurance tháng 12

1. In order to decide on his audit approach the auditor must first assess the entity’s
control risk
For each of the following companies select whether the factors described indicate
that control risk would initially be assessed as higher or lower than normal.
Navy Ltd is a small business with few staff and an owner-manager who has little day-
to-day involvement with the business
A. Higher
B. Lower
Cobalt Ltd has a well-qualified management team which promotes a culture of
control
C. Higher
D. Lower
Tests of controls carried out in previous years at Cornflower plc have shown a high
incidence of errors
E. Higher
F. Lower

2. In relation to the audit of small entities, select whether each of the following
statements is true or false.
Effective segregation of duties is sometimes not economically feasible in a small
business but may be compensated for by other controls
A. True
B. False
Where management is dominated by one individual, as is often the case in small
owner-managed businesses, the attitude of the dominant individual becomes very
important in enhancing or undermining the internal control structure
C. True
D. False

3. The following describes part of the purchasing system for components used in the
assembly of gear boxes at Gear Ltd.
For each process described, select strength or deficiency to indicate whether that
process indicates a strength or a deficiency in the system.

Staff in the buying department log the details onto the computer system which
automatically allocates a unique sequential order number and generates an order
form in triplicate. One copy of the order is sent to the supplier, the second to the
goods receiving department and the third to the accounts department
A. Strength
B. Deficiency
Components are received by staff in the goods receiving department who check the
purchase order number on the supplier's delivery note to the copy order received
from the buying department and use an on-line terminal to enter the inventory item
numbers, quantity and purchase order number. The system checks that data against
the open purchase order file. Any discrepancies are immediately displayed on the
screen and must be resolved
C. Strength
D. Deficiency

4. The scope and objectives of an internal audit function vary widely and depend on
the size and structure of the entity and the requirements of its management
Which three of the following functions could internal audit perform and still operate
effectively?
A. Provision of assurance on the adequacy of control within the entity's systems and
activities
B. Implementation of procedures designed by management
C. Management, on a day-to-day basis, of the entity's risk assessment process
D. Identification of opportunities to reduce costs through greater economy
E. Provision of advice to management on cost-effective controls for new systems
and activities

5. Which three of the following control procedures would reduce the risk of
invoicing errors such as incorrect goods, incorrect quantities or incorrect price?
A. Reconciliation of sales order and despatch note
B. Sequence check on sequentially numbered orders
C. Production of computer generated invoices from despatch details
D. Use of bar-code scanners to record goods despatched

6. Which of the following is indicative of a weak control environment?

A. The management of Oak Ltd requires staff in the company's buying department to
sign an annual declaration regarding the existence of business relationships and
conflicts of interest
B. The management of Elm Ltd requires staff with cash custodial functions to take an
annual holiday and during this time for their work to be performed by other staff
members
C. The management of Pine Ltd believes that the costs involved in introducing a
system of budgetary control outweigh the benefits that would be gained from such a
process
D. The management of Ash Ltd has a conservative attitude to committing the
company to high risk ventures
7. One component of internal control is an entity's risk assessment process.
Which three of the following are reasons why an entity needs to have a risk
assessment process? (chap 5, 2.2)
A. To identify relevant business risks
B. To assess the likelihood of occurrence of identified business risks
C. To prevent the occurrence of identified business risks
D. To decide upon actions to manage identified business risks

8. The following describes part of the cash at bank system in operation at Jupiter Ltd.

For each process described, select strength or deficiency to indicate whether that
process indicates a strength or a deficiency in the system.

Cheques received through the post are recorded on a cash receipts listing by Mr
Muller, the receptionist, who is responsible for opening the mail each morning
A. Strength
B. Deficiency
At the end of each week the accounts supervisor, Mrs Wagner, checks the record
made by Mr Muller against the cash receipts book
C. Strength
D. Deficiency

At the end of each month Mrs Perera, the financial controller, reconciles the bank
statement to the cash book and investigates any differences
E. Strength
F. Deficiency

9. For each of the balances described below, select whether the external auditor is
likely to rely on internal controls or adopt a fully substantive approach
Trade receivables
Evergreen Ltd has only five customers, each of which is expected to owe a material
amount at Evergreen Ltd's year end
A. Rely on internal controls
B. Adopt a fully substantive approach
Inventories
Abundant Ltd has over five thousand five hundred product lines. It operates a system
of perpetual inventory counting, supported by a full inventory count at the year end
C. Rely on internal controls
D. Adopt a fully substantive approach
10. The auditor of Toyco Ltd, a distributor of toys, has identified the following
deficiencies within that organisation's accounting system.

For each example select the most likely consequence which might arise as a result
of that deficiency.
( Chap 7 )
Failure to check that all goods leaving the warehouse are accompanied by the
appropriate despatch documentation
A. Overstated receivables
B. Understated receivables

Failure to chase customers who have old unpaid balances

C. Overstated receivables
D. Understated receivables

11. An internal control system, regradl of how carefully designed and implemented it
is, is subject to inherent limitation such as collusion, human errors and management
override (chap 5)
For each of the internal controls listed below select its principle inherent limitation.
Failure by employees to undertake a procedure due to time pressure.
A. Collusion
B. Human error
C. Management override
The chief executive instructed staff at the year-end physical inventory count to
increase the quantity of inventory in order to improve reported earnings.
D. Collusion
E. Human errors
F. Management override
12. Internal controls can be classified as preventative of detective
Select whether each of the following internal control is primarily preventative or
primarily detective (chap 5)
A locked storeroom which requires staff to key in a password in order to gain entry
A. Preventative
B. Detective
Reconciliation of cash book entries with bank statements on a monthly basis
C. Preventative
D. Detective
The company has a policy of hiring highly qualified accounting personnel
E. Preventative
F. Detective
13. There are various methods available to the assurance provider to allow him to
gather evidence. However, the quality of evidence gather by some methods is
affected by weaknesses attaches to those methods
For each of the following procedures select the weakness which applies to it.

Discussion with management as to the need for a provision against year-end

receivables
A. Limited by the underlying accounting system
B. Limited to the point in time when the procedure takes place
C. Possible misrepresentation

Comparison of expenses in the 20X6 income statement to expenses in the 20X6

budget, and investigation of any differences
D. Limited by the underlying accounting system ( chap 11 /206)
E. Limited to the point in the time when the procedures takes place
F. Possible misrepresentation

14. In deciding on audit procedure to be performed, the auditor is required to base

on a number of financial statement assertions
For each of the following audit procedures, select the primary financial statement
assertion which it is designed to test.

Inspection of factory premises

A. Rights and obligations
B. Existence (chap 11/204)
C. Valuation and allocation
Inspection of addressee on purchase invoice respect of an item included in inventory
at the year end.
D. Rights and obligations
E. Existence
F. Accuracy
15. The assurance provider at Croan plc selects a small number of goods received
notes and traces these through the accounting system in the nominal ledger, tp
check that he has recorded the system correctly
Which of the following types of the test does the above process describe ?
A. Test of controls
B. Test of details
C. Walk-through test
D. Analytical procedure
16. Assurance provides use a number of different techniques to obtain evidence
For each of the following procedures select the techniques it illustrates.

Estimating an expected interest change and comparing it to the interest change in

the financial statements ( Chap 11/205)
 A. Recalculation
B. Analytical procedures
Using CAATS to age the list of payables balances
C. Recalculation
D. Analytical procedures
17. ISA 520 Analytical procedure provides guidance on the application of analytical
procedure during an audit
In which two of the following situations must analytical procedure be used? (chap
11/ 210)
A. Where an initial assessment of internal controls has indicated that those
control can not be relied upon and hence the auditor does not plan to
perform tests of control
B. As risk assessment procedures to obtain an understanding of the entity and
its environment (planning stage )
C. As a form of substantive audit procedure
D. In the overall review carried out at the end of audit ( completion stage )
18. Most audit firms adopt a technique known as “directional testing”. This means
that when carrying out their audit tests the firm usually tests primarily for
overstatement or primarily for understatement.
For each of the following populations from which a sample for testing is to be drawn,
select whether the most likely objective of the test will be to test primarily for
overstatement or primarily for understatement.

Pre-year end despatch notes

A. Overstatement of sales
B. Understatement of sales

Listing of year-end inventory, which agrees to the nominal ledger

C. Overstatement of inventory
D. Understatement of inventory

19. The gross profit percentage at Cherry Ltd, based on the figures in the financial
statements, has increased compared to the previous year.
Which two of the following may explain this increase ?
A. During the current year Cherry Ltd increased its selling prices by 14%
B. During the current year Cherry Ltd decreased its selling prices by 14%
C. Understatement of this year-end inventory figure
D. Overstatement of the year-end inventory figure
20. Madority & Co has been engaged to provide assurance on the recoverability of
trade receivable at Harry Ltd
Which of the following is the most persuasive source of evidence in respect of the
assignment ?
A. Cash received in full after the year end.
B. A written representation confirming that all debts are recoverable in full
 C. Positive responses from an external confirmation of trade receivables
D. Sales invoices supporting the receivables balances
21. Which two of the following substantive procedures must an auditor always
carry out ? (chap 4/1.4)

A. External confirmation of year-end receivables.

B. Agreeing the financial statements to the underlying accounting records.
C. Physical verification of plant and machinery.
D. Examining material journal entries.
22. When checking the reasonableness of specific allowances for receivables, an
assurance provider may test for both understatement and overstatement.
For each of the following procedures, select whether they will provide evidence of
understatement or overstatement in respect of specific allowances for receivables.

A review of the post year-end cash book in respect of debts provided against to
identify any amounts received in relation to those debts since the year end.
A. Overstatement of allowance.
B. Understatement of allowance
A check on aged receivables after the year end to debts provided against at the year
end to ensure that debts which have continued to age were provided against.
C. Overstatement of allowance.
D. Understatement of allowance.

23. There are a number of sample selection methods available to the assurance
provider.
For each of the selection processes described below select whether the sample
selection method being used is random, haphazard or systematic.
Claire is selecting a sample of goods received notes at Strata plc. She selects the
third goods received and every 50th one thereafter.
A. Random
B. Haphazard
C. Systematic
Amanda is selecting a sample of 20 sales invoices at Sub. Ltd. She selects them
intuitively from the file of sales invoices for the year.
D. Random
E. Haphazard
F. Systematic
24. With regards to external confirmations sent by the auditor in accordance with ISA
505 External confirmation, whether each of the following statements is true or false.

Balances may be confirmed at a date other than the year end.

A. True
B. False
A negative form of confirmation request may be used where there are a large
number of small balances.
C. True
D. False
Replies may be sent either directly to the auditor or to the client.
E. True
F. False
25. In relation to determining the sample size for tests of controls select whether
each of the following statements is true or false.

The higher the tolerable rate of deviation, the larger the sample size will need to be
A. True
B. False
The greater the auditor’s desired level of assurance that the tolerable rate of
deviation is not exceeded by the actual rate of deviation in the population, larger the
sample size will need to be
C. True (chap 11/218)
D. False
26. Indiana Ltd is a fashion retailer, operating a constant mark-up on its purchases. It
operates from a single high street shop, which it rents from a local landlord. Its staff
consists of its two founders (who are also directors and shareholders) and one sales
assistant.
Which of the following mixtures of tests is most likely to be appropriate ?
A. Tests of detail only.
B. A mixture of tests of controls and tests of detail.
C. A mixture of tests of detail and analytical procedures.
D. A mixture of tests of controls, tests of detail and analytical procedures.
27. For each of the issues below select whether or not they would be likely to be
included in or excluded from the representation letter. (chap 12)
All related party transactions have been disclosed.
A. Include
B. Exclude
Confirmation by management that all transactions have been recorded and reflected
in financial statements.
C. Include
D. Exclude
28. For each of the following statements, select whether they are true or false in the
context of audit documentation.
One reason for retaining audit documentation is in case the auditor is subsequently
sued by his client (page 192)
A. True
B. False
Audit documents must be kept for a minimum of six years from the end of the
accounting period to which they relate (page 197)
 C. True
D. False
Audit documentation must include the name of both the preparer and the name of
the reviewer (khung page 194)
E. True
F. False
29. There are two methods of obtaining evidence available to the assurance
provider, tests of controls and substantive procedures.
For each of the following examples, select the method illustrated.

Running test data against the client’s system to check that orders over a certain
amount are rejected (chap 11 / CAAT)
A. Test of control
B. Substantive procedure
Using audit software to age the year-end inventory life
C. Test of control
D. Substantive procedure
Physically inspecting a sample of plant and machinery
E. Test of control
F. Substantive procedure

30. The following supplier statement reconciliation has been prepared by the
accountant at Xanthe Ltd at 31 December 20X7
Balance per supplier statement
(a) Goods in transit (goods received 1 January, 20X8)
(b) Cash in transit (cheque posted 30 December)
Balance per payables ledger
For items (a) and (b) below, select the documentary evidence to which the auditor
would check them.
(a) Goods in transit (goods received 1 January 20X8) (12,345)
A. Post year-end goods received notes
B. Pre year-end purchase invoices
(b) Cash in transit (cheque posted 30 December) (27,890)
C. Pre year-end cash book
D. Post year-end bank statement

31. The following are examples of conclusions which could be drawn following an
assurance engagement in respect of forecast information. For each of the following
statements, select the level of assurance it provides.

In our opinion the forecast information is properly prepared on the basis of the
assumptions underlying the forecast information

A. Absolute
B. High

C. Limited

Nothing has come to our attention that indicates the assumptions underlying the
forecast information are unreasonable

D. Absolute

E. High

F. Limited

32. Which three of the following describe possible benefits of an assurance report?

An assurance report

A. provides some degree of independent verification to the users of the report

B. confirms to the users of the report that the information being reported on has been
correctly prepared

C. reduces the risk of management bias in the information being reported on

D. may act as a deterrent, thereby reducing the risk of error or fraud

33. For each of the following statements select whether they are true or false in
respect of the concept of materiality.

Materiality may be determined by reference to key figures in the financial statements

of a particular entity.

A. True

B. False

Materiality set at too high a level is likely to result in over auditing and inefficiencies.

C. True ( tôi nghĩ z ^^ )

D. False

Materiality set at the planning stage of an audit may be revised as the audit
progresses.

E. True
F. False

34. Which of the following best describes professional scepticism? The assurance
provider

A will not believe anything that the party responsible for the subject matter tells him

B. will not believe unquestioningly everything that the party responsible for
the subject matter tells him

C. will always assume the worst outcome in cases of uncertainty

D. will believe everything that the party responsible for

35. For each of the following statements, select whether or not it describes an
example of Uhe "expectations gap".

The public believes that an external auditor will uncover all errors in the financial
statements

A. Expectations gap

B. Not expectations gap

The public believes that an unmodified audit report guarantees that the reporting
entity will continue to exist

C. Expectations gap

D. Not expectations gap

36. The risk of material misstatement can split into two components; inherent risk
and control risk. For each of the following examples, select the type of risk illustrated.

The organisation operates in a highly-regulated sector

A. Inherent

B. Control

The directors will be paid bonus based on profits

C. Inherent
D. Control

The organisation has recently installed a new computer system

E. Inherent

F. Control

37. Which three of the following are reasons why assurance can never be absolute?

A. The subject matter may contain estimates

B. Control risk cannot be eliminated

C. The assurance provider may be familiar with that particular client

D. The assurance provider will test only a sample of items

38. In an assurance engagement a practitioner expresses a conclusion designed to

enhance the level of confidence of the intended users about the evaluation of a
subject matter against criteria.

In the context of a statutory audit which of the following statements is true?

A The subject matter is the financial statements; the intended users are the directors

B. The subject matter is the financial statements; the criteria is accounting standards

C. The criteria is accounting standards; the intended users are the directors

D. The subject matter is accounting standards; the intended users are the
shareholders

39. Which two of the following would mean that Munro & Co, an assurance finm,
would normally be unable to accept an audit engagement at Jack Lid?

Jack Ltd's previous auditors were Sally & Co.

A. The risk of misstatement at Jack Ltd has been assessed as high

B. Jack Ltd will not give Munro & Co permission to contact the outgoing auditor

C. The outgoing auditor has not replied to Munro & Co's request for information
D. Jack Ltd will not give the outgoing auditor permission to reply to Munro & Co

40. In his audit report the auditor expresses an opinion on a number of matters.
Some of these matters are reported on by exception only. Which two of the following
are reported on by exception? (chap 4 )

A. The information in the directors' report is consistent with the financial statements

B. Certain disclosures of directors' remuneration specified by law have been

made

C. Retums, adequate for the audit, have been received from branches not
visited

D. The financial statements have been prepared in accordance with UK Generally

Accepted Accounting Practice

41. There are two main approaches to a code of professional ethics, a rules based
ethical code and a code based upon a set of principles. For each of the following
statements select whether they are true or false. (chap 14)

ICAEW adopts a rules based approach because it is more clear cut when a member
is in breach of the code and as a result that member can be subjected to disciplinary
procedures

A True

B. False

ICAEW adopts a principles based approach to encourage compliance by members

who are faced with ethical dilemmas which are too diverse to be covered in a code

C. True

D. False

42. The following are examples of situations in which an audit firm might be faced with
threats to its independence. For each example select the type of threat which that situation
illustrates.

The directors of Topaz plc have requested that its external auditors undertake an
engagement to value brands which are material to the financial statements

A. Self-review
B. Advocacy

The external auditors have acted for Amethyst Ltd since its incorporation twelve years ago

C. Advocacy

D. Familiarity

The directors of Turquoise Ltd have requested that the external auditors design and
implement a financial information technology system

E. Advocacy

F. Management

46. The ICAEW Code of Ethics is based on a set of fundamental principles.

For each description set out below select which fundamental principle it represents.

A Professional accountant should comply with relevant laws and regulations

and should avoid any action that discredits the profession
A. Professional competence and due care
B. Integrity
C. Professional behaviour

A professional accountant should be trustworthy, straightforward, honest, fair

and candid
D. Professional competence and due care
E. Integrity
F. Professional behaviour

47. The following three statements relate to a professional accountant's duty of

confidentiality.

Statement 1: A professional accountants duty of confidentiality to his client is

overridden by money laundering regulations
Statement 2: A professional accountant's duty of confidentiality to his client is
overridden when the client is engaged in terrorist activities
Statement 3: A professional accountant's duty of confidentiality to his client is
overridden when the client has evaded tax
Which of the following is correct?
A. Statement 1 is false, but Statements 2 and 3 are true
B. Statement 2 is false, but Statements 1 and 3 are true
C. Statements 1 and 2 are true but Statement 3 is false
D. Statements 1, 2 and 3 are all true

48. The following situations have arisen at Drummer LLP in respect of the provision
of non audit services for two external audit clients.

The management of Turtle Ltd has requested that Drummer LLP undertake an
engagement to provide recruitment services that would involve the firm taking
responsibility for the appointment of the finance director.

The management of Partridge plc, a listed company, has requested that a member
of the audit team assists with the preparation of the annual financial statements.

Which of the following is the most appropriate action for Drummer LLP to take?
A. Accept the work at Turtle Ltd and reject the work at Partridge plc
B. Accept the work at Partridge plc and reject the work at Turtle Ltd
C. Accept the work at both Turtle Ltd and Partridge plc
D. Reject the work at both Turtle Ltd and Partridge plc

49. During the audit of Safety Ltd, a company which specialises in providing training
courses in health and safety procedures, a junior member of the audit team
discovered a number of instances where courses were paid for in advance, in cash,
by a particular customer. The cash was deposited into Safety Lid's bank account and
subsequently refunded by direct transfer into an overseas bank account. The cashier
informed the audit junior that this customer is a personal friend of the managing
director and periodically books onto a course and then withdraws prior to the
commencement of the course.
Which of the following is the most appropriate action for the audit junior to take?
A. Discuss the matter with the managing director and advise him to disclose the
matter to the relevant authority
B. Report the matter to the audit manager so that she can discuss it with the
managing director
C. Report the matter to a designated officer within the audit firm with the
managing director's permission
D. Report the matter to a designated officer within the audit firm without the
managing director's permission
50. The following are examples of situations, involving audit clients, in which Abbey
& Co, a mid-tier audit firm with 64 partners, might need to implement safeguards in
order to protect its independence.

For each situation, select the most appropriate safeguard or state that there are no
safeguards which could reduce the risk to an acceptable level in accordance with the
FRC's Ethical Standard.

The directors of Bagel Ltd have requested that Abbey & Co undertake a one-off
assignment to review profit and cash flow forecasts to be submitted to the company's
bankers in support of their application for an extension of the overdraft facility
A. Fee threshold not exceeded
B. Informed management
C. No safeguards possible
The directors of Drain plc, a listed company, wish to outsource the company's payroll
function and have requested that the business services department of Abbey & Co
processes the payroll
D. Fee threshold not exceeded
E. Informed management
F. No safeguards possible