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i Contents ICAEW 2018

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ii ICAEW 2021
Contents
Page
Title Questions Answers
1 Concept of and need for assurance 3 77
2 Process of assurance: obtaining an engagement 7 79
3 Process of assurance: planning the assignment 10 80
4 Process of assurance: evidence and reporting 17 83
5 Introduction to internal control 22 85
6 Revenue system 28 87
7 Purchases system 31 88
8 Employee costs 35 90
9 Internal audit 39 92
10 Documentation 42 93
11 Evidence and sampling 44 94
12 Written representations 51 96
13 Substantive procedures – key financial statement figures 53 97
14 Codes of professional ethics 62 100
15 Integrity, objectivity and independence 65 101
16 Confidentiality 72 103
ICAEW 2021 Contents iii

iv Assurance ICAEW 2021
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2 Assurance: Electronic Question Bank ICAEW 2021
Chapter 1: Concept of and need for assurance
1 Which three of the following constitute possible subject matter which may be evaluated for the
purposes of an assurance engagement?
A Data
B Systems or processes
C Corporate governance
D IFRS LO 1a
2 Which two of the following describe the roles of the responsible party in any assurance engagement?
A Setting the criteria of the assurance engagement
B Gathering evidence on the subject matter
C Issuing an opinion on the subject matter against the criteria set
D Preparing the subject matter LO 1c
3 Which one of the following describes the assurance provided and conclusion given in a reasonable
assurance engagement?
A Absolute and negative
B High and negative
C High and positive
D Low and positive LO 1a
4 Which three of the following statements form part of the generally accepted definition of 'fair', in
the context of 'a true and fair view'?
A The information is free from discrimination and bias.
B The accounts have been correctly extracted from the company's books and records.
C The information complies with generally accepted accounting practice.
D The accounts reflect the commercial substance of the company's underlying transactions. LO 1a
ICAEW 2021 Chapter 1: Concept of and need for assurance 3

5 The following is an extract from an independent accountant's unmodified report on a profit forecast:
"Based on our examination of the evidence supporting the assumptions, nothing has come to our
attention which causes us to believe that these assumptions do not provide a reasonable basis for the
forecast."
Which one of the following best describes the types of wording and of assurance provided by this
statement?
A High level of assurance expressed using a negative form of words
B Limited level of assurance expressed using a negative form of words
C Reasonable assurance expressed using a negative form of words
D Negative assurance expressed using a positive form of words LO 1a
6 With respect to the benefits of assurance engagements, for each of the following statements
select whether they are true or false.
Assurance is an independent and professional activity that users value.
A True
B False
The principle objective of assurance is to detect and correct fraud.
C True
D False
Assurance assignments may take many forms.
E True
F False LO 1a/b
7 The following are ways in which the assurance provider might be able to 'close' the expectations gap.
For each, select whether it is true or false.
By issuing an engagement letter setting out the work to be carried out and its limitations:
A True
B False
By reducing the audit fee:
C True
D False
By including a caveat in the assurance report:
E True
F False LO 1d

8 Which two of the following statements best describe the statutory audit?
A It leads to a certification of the correctness of the financial statements.
B It is an independent examination.
C It is an opinion on the truth and fairness of the financial statements.
D It may be carried out by both external and internal auditors. LO 1a
9 The following statements describe possible limitations of the provision of assurance. For each
statement select whether it is a limitation or is not a limitation.
Sampling is part of the audit process.
A Is a limitation
B Is not a limitation
The provision of assurance in itself can be a subjective process.
C Is a limitation
D Is not a limitation
The auditors may be auditing that particular client for the first time.
E Is a limitation
F Is not a limitation LO 1a
10 Ilford plc is a large audit client of Smith LLP. Ilford plc has approached Smith LLP to request that they
carry out a review of the inventory system in operation at the Brent branch and the extent to which it
operates in line with company policy.
With reference to the above review engagement, select which part of the review description
constitutes the subject matter, which part is the suitable criteria, and which party is the responsible
party.
The subject matter:
A The Brent branch's inventory system
B Ilford plc's inventory system
policies The suitable criteria:
C The Brent branch's inventory system
D Ilford plc's inventory system policies
The responsible party:
E Ilford plc
F Smith LLP LO 1a
ICAEW 2021 Chapter 1: Concept of and need for assurance 5

11 The following is an extract from an independent auditor's unmodified report.
"In our opinion, the financial statements give a true and fair view of the state of the company's affairs
at 31 March 20X7, and of its profit for the year then ended."
Which one of the following describes the type of assurance provided by this statement?
A Absolute assurance expressed positively
B High level of assurance expressed positively
C Limited level of assurance expressed positively
D Limited level of assurance expressed negatively LO 1a

Chapter 2: Process of assurance: obtaining an
engagement
1 Horus LLP, an assurance firm, has the following two clients among its client portfolio. For each client,
select whether inherent risk is higher or lower.
Osiris Ltd is planning to list on the local stock exchange within the next year.
A Higher risk
B Lower risk
Set Ltd has made one third of its finance department redundant as part of an efficiency drive.
C Higher risk
D Lower risk LO 1f
2 Marnie LLP, an audit firm, has been asked by Opportunity Ltd to accept appointment as
auditor. Opportunity Ltd's previous auditor was Kim LLP.
Which one of the following should be Marnie LLP's course of action if Opportunity Ltd refuses to give
them permission to contact Kim LLP?
A Contact Kim LLP in writing in any case and then accept the appointment
B Telephone Kim LLP in order to obtain the information sought and then accept the appointment
C Contact Kim LLP's other clients to try and gain access to Kim LLP, and then accept the
appointment
D Make no communication with Kim LLP or their other clients and should normally decline the
appointment LO 1e
3 Under which three of the following circumstances must a firm decline, or should normally decline, an
appointment as auditor to a company?
A The prospective client refuses to grant the firm permission to contact the previous auditor.
B The prospective client refuses to grant permission to the previous auditor to communicate
with the firm.
C The prospective client still owes audit fees to the previous auditor.
D The client is one for which your firm is ethically barred from acting. LO 1e
ICAEW 2021 Chapter 2: Process of assurance: obtaining an engagement 7

4 In order to comply with the Money Laundering Regulations, which one of the following is the number
of years for which assurance firms should keep records of the identification of their clients?
A For a minimum of seven years and for seven years after the relationship with the client has
ceased
B For a minimum of five years and for five years after the relationship with the client has ceased
C For a minimum of five years and for seven years after the relationship with the client has ceased
D There is no requirement to hold records on client identification for more than one year
LO 1c
5 For each of the following statements about engagement letters select whether they are true or false.
The engagement letter provides an opportunity for management to set out in writing their opinion on
subjective areas in the financial statements.
A True
B False
The engagement letter clarifies the role and responsibilities of auditors and directors.
C True
D False
The engagement letter contains documentation on the preliminary client risk assessment.
E True
F False
The engagement letter contains the auditor's opinion on the financial statements.
G True
H False LO 1e
6 Which one of the following is not a right that an auditor has under the Companies Act 2006?
A The right of access to the company's accounting records
B The right to receive all necessary information and explanations
C The right to see all minutes of management and shareholders' meetings
D The right to disclose confidential information in every circumstance without the permission of
the client LO 1c

7 For each of the following factors at separate prospective clients, select whether that factor indicates
that inherent risk is likely to be high or low.
The client is experiencing financial difficulties.
A High risk
B Low risk
Three firms of auditors have resigned from the client in the past five years.
C High risk
D Low risk
The company carries out very few unusual transactions.
E High risk
F Low risk LO 1f
ICAEW 2021 Chapter 2: Process of assurance: obtaining an engagement 9

Chapter 3: Process of assurance: planning the
assignment
1 Which three of the following would be found in the overall audit strategy document?
A Detailed plan of audit procedures
B Calculation of preliminary materiality thresholds
C Budget and fee
D Timetable LO 1f
2 According to ISA (UK) 315, Identifying and Assessing Risks of Material Misstatement Through
Understanding the Entity and its Environment, which three of the following are reasons why the
auditor should understand the entity and its environment?
A To identify and assess the risks of material misstatements
B To be in a position to design and perform audit procedures
C To be better able to assess the risks of fraud
D To obtain information for other future assignments with the same client LO 1f
3 Which three of the following describe analytical procedures?

A Comparing a cash account balance with a bank balance and identifying reconciling items
B Comparing actual results with forecast results
C Comparing company ratios with industry averages
D Comparing budgeted with actual results LO 3b
4 As part of his analytical procedures on the financial statements of Cookies Ltd, the auditor noted that
the gross profit margin had decreased from 38% last year to 35% this year. The accountant of
Cookies Ltd explains that this is due to a combination of the factors listed below.
For each of the following factors indicate whether or not it is a plausible explanation.
The price of sugar, one of the company's principal raw materials, has increased during the year.
A Plausible
B Not plausible
During the year the company has introduced an early payment discount for customers who pay within
14 days.
C Plausible
D Not plausible LO 1f/3g

5 For each of the following statements concerning materiality, select whether they are true or false.
Materiality should be determined at the beginning of an audit and should not be changed during the
course of an audit.
A True
B False
Materiality always relates to monetary amounts.
C True
D False
Materiality is calculated using the same formula for all audit clients.
E True
F False LO 1g
6 Which one of the following is most likely to be adopted as an audit strategy if inherent and control
risk are assessed as low?
A Rely on controls, limited substantive procedures necessary
B Rely on controls, no substantive procedures necessary
C Rely on controls, extensive substantive procedures necessary
D No reliance on controls, extensive substantive procedures necessary LO 1f/3f
7 Which one of the following is an implication of purchase invoices not being authorised?
A Unauthorised purchases will be made.
B Purchases will be made from unauthorised suppliers.
C Unauthorised payments will be made.
D Purchases will not be made at the best possible price. LO 2f/g
ICAEW 2021 Chapter 3: Process of assurance: planning the assignment 11

8 For each of the following statements concerning performance materiality, select whether they
are true or false.
Performance materiality should always be higher than materiality for the financial statements as a
whole.
A True
B False
Performance materiality is intended to provide a margin of safety in relation to detected
misstatements.
C True
D False
A lower level of performance materiality results in more audit work being performed.
E True
F False LO 3g
9 Which three of the following procedures could be used to identify audit risks?
A Computation
B Verification
C Inquiry
D Observation
E Analytical procedures LO 3d
10 Audit risk can be split into three components: inherent risk, control risk and detection risk.
For each of the following factors select the type of risk on which it will have an impact.
This is the first year of the audit.
A Inherent risk
B Control risk
C Detection risk
The client entity has an internal audit function.
D Inherent risk
E Control risk
F Detection risk
The client entity is intending to list on the stock exchange within two years.
G Inherent risk
H Control risk
I Detection risk LO 1f

11 Audit risk can be split into three components: inherent risk, control risk and detection risk.
For each of the following examples select the type of risk illustrated.
The client entity operates in an industry where the auditor has no previous experience.
A Inherent risk
B Control risk
C Detection risk
Purchase invoices at the client entity are not authorised prior to payment.
D Inherent risk
E Control risk
F Detection risk
Management of the client entity is rewarded under a profit-related scheme.
G Inherent risk
H Control risk
I Detection risk LO 1f
12 Which one of the following describes control risk?

A The susceptibility of an account balance or class of transactions to material misstatements,
assuming there are no related controls
B The risk that the auditor's procedures do not detect material misstatements
C The risk that a material misstatement would not be prevented, detected or corrected by the
accounting and internal control system
D The risk that a material misstatement is caused by external pressures faced by the company
LO 2b/f
13 Which one of the following best describes professional scepticism?

A Disbelieving everything the client says
B Asking the client a number of times the same question to see if the answer is the same
C Making management sign off all evidence provided to the auditor
D Forming a critical assessment and bringing into question the reliability of audit evidence LO 1i

14 As part of his analytical procedures on the financial statements of Nails Ltd, Peter has identified that
the current ratio has decreased from 1.7 to 1.3. All purchases of inventory are currently made for cash
and all sales are credit sales.
Which two of the following could be a valid explanation for this decrease?
A The company has increased its credit policy to customers from 30 to 50 days.
B The company has shifted its reliance from long-term debt to short-term debt.
C The company has decided to adopt a just in time inventory system (whereby the supplier
will deliver direct to its stores, eliminating the need for a distribution centre).
D The company has recently offered special discounts to customers to attract more sales.
LO 1f/3g
15 As part of her analytical procedures on the financial statements of PC Ltd, a manufacturing company,
Amisha, has identified that the gross margin has increased from 23% to 28%.
Which two of the following could be a valid explanation for this increase?
A The company has considerably reduced discounts for bulk purchases given to customers.
B The price of raw materials has increased and this increase has been passed on to
customers through increased sales prices.
C The recent increase in competition has resulted in sales prices having to be reduced.
D There has been a significant change in the sales mix. LO 1f/3g
16 Which two of the following would increase inherent risk?

A The company operates in a fast-moving industry.
B The company does not provide IT training to its employees.
C The company does not authorise sales orders prior to sales being made.
D The company has a number of legal claims against it which threaten its future. LO 1f

17 For each of the following situations, select the most appropriate approach which should be used by
the assurance firm in the given circumstance.
The audit of an existing client, with established internal controls:
A Tests of control only
B Substantive procedures only
C A mix of tests of control and substantive procedures
The review of a company's statement of financial position in a limited assurance engagement:
D Tests of control only
E Substantive procedures only
F A mix of tests of control and substantive procedures LO 3f
18 For each of the following situations, indicate whether there is most likely to have been a fraud or
an error.
The management of Tosco Ltd intentionally included sales in the financial statements before the year
end, even though they were made after the year end.
A Fraud
B Error
It has come to light that the purchases clerk of Foofa Ltd has been paying monies into his own bank
account instead of those of suppliers.
C Fraud
D Error
The new unqualified financial accountant at Talent Ltd has included expenses in the financial
statements at the date when payments were made to the suppliers.
E Fraud
F Error LO 1j

19 For each of the following statements concerning related party transactions, select whether they
are true or false.
Related party transactions are a relatively simple area of the audit.
A True
B False
Related party disclosures need to be tested principally for existence.
C True
D False
North Ltd made a loan to a company which is owned by Victoria Spivey, whose father is a director of
North Ltd. Since the loan was to a company, which is legally a separate entity from Victoria, it is not a
related party transaction.
E True
F False LO 3i

Chapter 4: Process of assurance: evidence and
reporting
1 For each of the following statements in respect of audit evidence select whether they are true or false.
Original documents are more reliable than photocopies.
A True
B False
Oral representations are more reliable than written forms of evidence.
C True
D False
External documents obtained from external sources are more reliable than external documents from
client sources.
E True
F False LO 3e
2 To which one of the following does 'sufficiency' of audit evidence relate?

A The quality of audit evidence
B The reliability of audit evidence
C The quantity of audit evidence
D The relevance of audit evidence LO 3g
3 For each of the following forms of evidence select from 1 to 3 in order to rank them in terms of
their reliability (where 1 is the most reliable and 3 is the least reliable).
Schedule of aged receivables obtained from the client:
A 1
B 2
C 3
Bank statement obtained from the client:
D 1
E 2
F 3
Bank statement obtained directly from the bank:
G 1
H 2
I 3 LO 3e
ICAEW 2021 Chapter 4: Process of assurance: evidence and reporting 17

4 Which three of the following relate to assertions about account balances at the period end?
A Occurrence
B Completeness
C Existence
D Rights and obligations
E Cut-off LO 3d/f
5 Which three of the following relate to assertions about classes of transactions for the period under
audit?
A Occurrence
B Completeness
C Existence
D Cut-off LO 3d/f
6 Which one of the following describes the meaning of 'financial statement assertions'?
A The representations made by management that are embodied in the financial statements
B The representations made by the auditor on the financial statements that are embodied in the
auditor's report
C The representations made by the auditor that are embodied in the financial statements
D The representations made by management in the written representation letter
LO 3d/f
7 Which two of the following approaches could the auditor use when gathering audit evidence?
A Tests of control only
B Substantive procedures only
C Both tests of control and substantive procedures
D Analytical procedures only LO 3f

8 In carrying out tests of control, which three of the following types of procedures can be used?
A Inquiry
B Analytical procedures
C Computation
D Inspection
E Re-performance LO 3b
9 With regards to substantive procedures, select whether the following statements are true or
false. The auditor must always carry out substantive procedures on material items.
A True
B False
Substantive procedures are made up of tests of detail only.
C True
D False
Substantive procedures are carried out as part of the overall review of the financial statements.
E True
F False LO 3b
10 Which three of the following are required by the Companies Act 2006 to be reported on by
exception in an auditor's report?
A Adequate accounting records have been kept.
B Returns adequate for the audit have been received from branches not visited.
C The information given in the directors' report is consistent with the financial statements.
D Details of directors' emoluments have been correctly disclosed in the financial statements.
E In respect of the company's profit or loss for the period, the financial statements give a true and
fair view. LO 1h
11 For which one of the following financial statement assertions does attendance at a period-end
inventory count primarily provide assurance?
A Existence
B Accuracy, valuation and allocation
C Rights and obligations
D Classification LO 3d/f
12 Sending external confirmations to receivables is not helpful for ascertaining which one of the
following?
A The collectability of the receivables balance
B The existence of the receivables balance

C Whether the receivables balance belongs to the client entity
D The accuracy of the receivables balance LO 3f
13 For each of the following statements select whether they are true or false.
Reviewing supplier statement reconciliations selected on the basis of purchases turnover in the year
helps to confirm the completeness of the accounts payable balance.
A True
B False
Recalculating the depreciation charge helps in verifying the rights and obligations assertion for non-
current assets.
C True
D False
Reviewing inventory movements after the reporting period helps verify the valuation of inventory.
E True
F False LO 3d/f
14 The following are types of tests that might be carried out by an assurance provider. For each
example, select the financial statement assertion that is being tested.
A sample of purchases, taken from the purchases account from throughout the year, is checked
against supplier invoices.
A Cut-off
B Existence
C Occurrence
Insurance expenses are compared year on year.
D Rights and obligations
E Existence
F Accuracy LO 3d/f
15 Two types of procedures used in gathering evidence are tests of controls and substantive
procedures. Sometimes, a specific procedure can serve as both a test of control and substantive
procedure.
For each of the following examples, select the type of procedure(s) illustrated.
The year-end bank reconciliation is reviewed.
A Test of control
B Substantive procedure
C Both a test of control and a substantive procedure

Sales for the year are compared to the budget.
D Test of control
E Substantive procedure
F Both a test of control and a substantive procedure LO 3b
16 Audit risk can be split into three components: inherent risk, control risk and detection
risk. For each of the following examples, select the type of risk illustrated.
The company does not maintain a non-current asset register to record its assets.
A Inherent
B Control
C Detection
The budget for this year's audit has remained the same as for the previous year, even though several
new subsidiaries need to be audited this year.
D Inherent
E Control
F Detection LO 1f
17 Audit risk can be split into three components: inherent risk, control risk and detection
risk. For each of the following examples, select the type of risk illustrated.
An audit firm selects its samples systematically. Invoice number 12345 should have been tested, but
the audit assistant tested 12346 instead.
A Inherent
B Control
C Detection
Sarf Ltd has experienced a high turnover of staff connected with the receivables account.
D Inherent
E Control
F Detection LO 1f

Chapter 5: Introduction to internal control
1 "To ensure that purchases are made at the best possible price."
Which one of the following best describes the above
statement?
A A risk
B A control objective
C A control procedure
D A test of control LO 2b
2 The following statements relate to small companies and their internal control systems.
For each statement select whether it is true or false.
Small companies have no need for internal control systems.
A True
B False
Small companies can use unsophisticated methods of control to compensate for the lack of formal
controls.
C True
D False
Small companies have difficulty with implementing segregation of duties controls.
E True
F False LO 2a/b
3 With regards to the following control procedures, select whether they are primarily preventative or
detective controls.
Bank reconciliations are prepared on a monthly basis.
A Preventative
B Detective
Management accounts are compared on a monthly basis against the budget.
C Preventative
D Detective
Supplier statements are reconciled with trade payables balances.
E Preventative
F Detective LO 2e

4 Which three of the following are likely roles of the audit committee?
A To review the working papers of the external audit firm
B To monitor the independence of the external auditor
C To monitor the effectiveness of the company's internal audit function
D To make recommendations to the board in relation to the external auditor LO 2b
5 The following are descriptions of internal controls in operation at Lilly Ltd. For each description select
the type of control activity which it illustrates.
Only authorised staff may access the inventories storeroom.
A Performance review
B Information processing
C Physical control
The despatch record signed by the customer is agreed to the authorised sales order.
D Performance review
E Information processing
F Physical control LO 2e
6 Controls in an IT system are classified as general controls or application controls. For each of the
following controls select whether they are general controls or application controls.
Training of staff in use of computer programs:
A General
B Application
Password protection of the computer system:
C General
D Application
One-for-one checking of processed output to source documents:
E General
F Application LO 2d/e
ICAEW 2021 Chapter 5: Introduction to internal control 23

7 Controls in an IT system are classified as general controls or application controls. For each of the
following select whether they are general controls or application controls.
Cyclical review of master files:
A General
B Application
Back-up power sources:
C General
D Application
Computer maintenance agreements and insurance:
E General
F Application LO 2d/e
8 Which one of the following methods of recording internal controls and document flow is
generally regarded as the most effective?
A Flowcharts
B Family trees
C Narrative notes
D Questionnaires LO 2i
9 Which three of the following are components of a system of internal controls?

A The control environment
B The entity's strategy-devising process
C The entity's risk assessment process
D Control activities LO 2d

10 ISA (UK) 315, Identifying and Assessing the Risks of Material Misstatement Through Understanding of
the Entity and its Environment states that an internal control system in an organisation consists of five
components: the control environment, the entity's risk assessment process, the information system,
control activities and monitoring of controls.
For each of the following examples, select the component which it illustrates.
The preparation of order forms only when a pre-numbered purchase requisition has been received:
A Control environment
B Information system
C Control activities
The authorising of all credit notes prior to being issued to customers for returns made:
D Control environment
E Information system
F Control activities LO 2d
11 The following statements refer to possible limitations of an internal control system. For
each statement, select whether it is true or false.
Internal controls are ineffective if staff collude to override them.
A True
B False
Internal controls are designed to deal with all types of transactions, both routine and
non-routine.
C True
D False
Senior management staff may be in a position to ignore internal controls.
E True
F False LO 2f

12 The following are examples of internal controls which operate at Willow plc. For each example, select
The inventory count is carried out by two teams – one team performs the count and the other team
checks the counting.
C Segregation of duties
Chasing, by the credit controller, of customers listed on an exception report as having exceeded their
credit period.
F Segregation of duties LO 2d/e
13 For each of the following statements select whether they are true or false in respect of risk.
Inherent and control risks are components of audit risk.
A True
B False
Auditors should provide suggestions for companies to overcome business risks.
C True
D False
Identifying business risks is part of the company's risk assessment processes.
E True
F False LO 1f/2f
14 Which two of the following are reasons why segregation of duties is important in an internal control
system?
A It improves efficiency.
B It helps to prevent fraud.
C It improves the rate of detection of errors.
D It is a way of assigning roles within a large organisation. LO 2b

15 For each of the following statements select whether they are true or false.
Under the UK Corporate Governance Code, entities must determine whether or not they need an
audit committee.
A True
B False
The audit committee is part of a company's control environment.
C True
D False
The audit committee is responsible for the external auditor only (not internal audit).
E True
F False LO 2b

Chapter 6: Revenue system
1 The following deficiencies have been identified in the revenue system at Cog Ltd. For each deficiency
select the most likely consequence.
Credit checks are not made for new customers.
A Increased risk of irrecoverable receivables
B Company may process loss-making sales orders
C Entries are not recorded correctly in the receivables account leading to misstatements in the
financial statements
Invoices are not matched to sales order and despatch record prior to being raised.
D Increased risk of irrecoverable receivables
E Company may process loss-making sales orders
F Entries are not recorded correctly in the receivables account leading to misstatements in the
financial statements LO
2f/g
2 The following deficiencies have been identified in Smart Ltd's revenue system. For each deficiency
select the most likely consequence.
Sales discounts are not authorised prior to being given.
A Increased risk of client dissatisfaction
B Company may process loss-making sales orders
C Cash receipts are not recorded correctly in the cash account
Invoices are not checked for arithmetic accuracy prior to being issued to customers.
D Increased risk of client dissatisfaction
E Company may process loss-making sales orders
F Cash receipts are not recorded correctly in the cash account LO 2f/g

3 The following describes processes which form part of the purchases system at Red Ltd, where all
sales are made on credit.
For each process, select whether it represents a strength or a deficiency of the system.
The quality of goods returned is checked by the warehouse manager.
A Strength
B Deficiency
Delivery drivers must sign a copy of the delivery record on delivery of the goods.
C Strength
D Deficiency
Sales invoices are matched with despatch records.
E Strength
F Deficiency LO 2g
4 Which two of the following controls would help to ensure that money received is banked?
A Matching cash receipts with invoices
B Monthly bank reconciliations
C Daily banking of money received
D Investigation of shortages and surpluses of cash in the business LO 2f
5 The following describes processes which form part of the revenue system at Blue Ltd, where all
sales are made on credit.
For each process, select whether it represents a strength or a deficiency of the system.
Customers are not requested to sign as evidence of receipt of goods.
A Strength
B Deficiency
Sales orders are accepted by fax and are processed directly into the system without further action.
C Strength
D Deficiency
All sales orders are sequentially numbered within the computer system.
E Strength
F Deficiency LO 2g
ICAEW 2021 Chapter 7: Purchases system 29

6 Claret Ltd operates a number of control procedures in its revenue system. Assuming all controls
operate effectively, which one of the following procedures is most likely to ensure that only goods
ordered are delivered?
A Despatch records are matched with sales orders.
B Invoices are matched with despatch records.
C Invoices are matched with sales orders.
D Payment receipts are matched with invoices. LO 2f
7 Hammers Ltd operates a number of control procedures in its revenue system. Assuming all controls
operate effectively, which one of the following procedures will help to ensure that invoices are
correctly and accurately prepared?
A Sales orders are matched with despatch records.
B Invoices are matched with despatch records.
C Invoices are matched with sales orders.
D Payment receipts are matched with invoices. LO 2f
8 Which two of the following deficiencies could result in the misstatement of trade receivables?
A Signed despatch records are not agreed to sales invoices raised.
B Sales discounts are not always authorised.
C Customers normally pay within 40 days instead of the 30-day credit period.
D Sales returns are not recorded separately from revenue. LO 2f/g
9 Which two of the following documents assist in testing sales cut-off?

A Sales orders
B Despatch records
C Sales invoices
D Remittance advices LO 3d/f
10 Which two of the following would assist in testing for the overstatement of revenue?
A Gross profit margin
B Debt/equity ratio
C Trade accounts receivable days
D Inventory days LO 3f

Chapter 7: Purchases system
1 Which one of the following is a reason for pre-numbering purchase order forms?
A To ensure that all orders authorised are subsequently processed
B To ensure the completeness of the payables balance
C To ensure the correctness of the amounts paid to suppliers
D To maintain supplier relations LO 2b/f
2 The following deficiencies have been identified in the purchases system at Till Ltd. For each deficiency
select the most likely consequence which might arise as a result of that deficiency.
Purchase orders are not authorised prior to being placed.
A Goods may be misappropriated for personal use.
B The company may not purchase goods on the most advantageous terms.
C There are errors in the financial statements.
Invoices are not always recorded.
D Goods may be misappropriated for personal use.
E The company may not purchase goods on the most advantageous terms.
F There are errors in the financial statements. LO 2f/g
3 The following describes processes which form part of the purchases system in operation at Ochre Ltd.
For each process select whether it represents a strength or a deficiency of the system.
Orders may only be placed with suppliers included on an approved list.
A Strength
B Deficiency
Purchase order forms are kept in the stationery cupboard.
C Strength
D Deficiency LO 2g

4 The directors of Park Ltd have just discovered an irregularity perpetrated by one of their suppliers.
The supplier would deliver products that were not ordered to Park Ltd and then subsequently invoice
Park Ltd for these goods.
Which one of the following controls would have prevented this fraud?
A All orders are authorised by the purchases director.
B All purchase orders are kept in a locked box in the purchases department office.
C All goods received are agreed to purchase orders.
D All invoices received are agreed to goods received records. LO 2f
5 The following are descriptions of internal controls in operation at Flash Ltd. For each description select
All goods received are stored in a secure storeroom with limited access.
C Physical control
The payables account is reconciled with suppliers' statements on a monthly basis.
6 The following describes processes which form part of the purchases system in operation at Green
Ltd. For each process select whether it represents a strength or a deficiency of the system.
All orders are placed directly with suppliers by the production department.
A Strength
B Deficiency
All supplier invoices are matched against purchase orders and goods received records prior to being
entered into the accounting system.
C Strength
D Deficiency LO 2g

7 Mary prepares the reconciliation between supplier statements and the payables in the nominal ledger.
Which two of the following functions should Mary not be involved with?
A Depositing cash receipts
B Preparing the annual budget
C Making purchase orders
D Handling cash payments to suppliers LO 2f
8 Numerical sequence should not necessarily be applied to which one of the following types of
documentation?
A Goods received records
B Purchase orders
C Supplier statements
D Purchase requisitions LO 2b/f
9 Which two of the following documents assist in testing cut-off for purchases?
A Goods received records
B Purchase requisitions
C Supplier invoices
D Purchase orders LO 3f
10 Staple Ltd, which makes all of its purchases on credit, has seen a fall in trade payables days from 45 on
31 December 20X5 to 30 days on 31 December 20X6.
Which two of the following are plausible reasons for this fall?
A Invoices relating to goods received after the year end were posted to the nominal ledger before
the year end.
B Invoices relating to goods received before the year end were posted to the nominal ledger after
the year end.
C Suppliers have tightened credit terms given to Staple Ltd.
D Suppliers have extended credit terms given to Staple Ltd. LO 1f/3g

11 Twist Ltd is a large IT company that sells computer hardware and provides consultancy services.
Which one of the following internal controls is most likely to prevent the theft of computers held for
resale?
A All inventories are counted once a month and agreed to the inventory records.
B Inventories leave the storeroom only once there is an approved sales order.
C Sales invoices are matched against customer-signed despatch records.
D Sales invoices are checked for accuracy prior to being posted to the customer. LO 2f
12 The organisational structure at Washy Ltd (a manufacturer and retailer of electrical goods) is as
follows. The sales department is headed by Olivia Jones and her assistant is Mary Smith. Olivia Jones
reports to the managing director, John Waters. There are several other departments (production,
accounting, purchasing, HR and internal audit).
Which one of the following statements reflects the most effective segregation/allocation of duties
with regards to sales ordering?
A All sales orders should be recorded by Mary Smith and approved by Olivia Jones.
B Mary Smith should record the sales orders, Olivia Jones should review them and John
Waters should give the final approval.
C Both Mary Smith and Olivia Jones can approve the sales orders.
D It is not necessary for Olivia Jones to become involved in the recording and approval of sales
orders. LO 2b/f
13 The following deficiencies have been identified at Ring Ltd. For each deficiency select the most likely
consequence.
Suppliers are not approved prior to being added to the official suppliers listing.
A Goods ordered are of an inferior quality
B Goods received do not satisfy internal purchase
requirements Goods received are not checked against the order
made.
C Goods ordered are of an inferior quality
D Goods received do not satisfy internal purchase requirements LO 2f/g

Chapter 8: Employee costs
1 The following system of time recording operates at Green Ltd.
Staff clock in and out of work using a swipe card. There is no supervision of this practice but there is a
control in place ensuring that only current employees have a swipecard in their possession.
Which one of the following might be a consequence of the above?
A Employees are paid at an inappropriate rate.
B Employee deductions are inappropriate.
C Employees are paid for more than the hours worked.
D Fictional employees may be set up. LO 2f/g
2 The auditors of Pink Ltd have performed analytical procedures on the salaries figures in the
financial statements and the salary per head appears to have increased by 10% from the previous
year.
Assuming there are no errors in the salaries figure, which one of the following explains this
movement?
A An increase in staff numbers along all staff levels
B An increase in general inflation
C An increase in the number of low-skilled staff
D An increase in the number of highly-skilled staff LO 3g
3 At Blue Ltd, the payroll department is responsible for both processing salaries and for maintaining all
staff records and contracts.
Which two of the following represent risks in this system arising from the above responsibilities?
A Fictitious employees are easily created.
B Salary deductions are miscalculated.
C Salaries are paid at the wrong time.
D Changes in employee circumstances are not updated on the payroll. LO 2f/g
ICAEW 2021 Chapter 8: Employee costs 35

4 In a system where wages are paid in cash, which three of the following duties should be segregated?
A Preparing the payroll summary
B Requesting each employee to sign for his pay packet
C Filling pay packets with the cash
D Distribution of wages
E Requesting verification of employees' identity LO 2b/d
5 The following describes certain processes of the payroll system in operation at Orange Ltd.
There is no separate personnel department.
A Strength
B Deficiency
Only selected payroll staff have access to standing information on staff.
C Strength
D Deficiency
All changes in salary rates are approved by the head of human resources.
E Strength
F Deficiency LO 2g
6 The following are descriptions of internal controls in operation at Josh Ltd.

For each description select the type of control activity which it illustrates.
Payroll information is agreed to personnel files prior to processing.
C Physical control
Budgeted salaries are compared to actual salaries on a monthly basis.

7 Maryland Ltd employs 150 employees and has very high annual staff turnover.
Which one of the following controls would best ensure that only existing employees are paid and that
leavers do not continue to be paid?
A Staff records are maintained for each member of staff.
B Staff complete work schedules, which they submit direct to the payroll department.
C Monthly comparisons are made between staff records held by the human resources manager
and the payroll office.
D Staff are paid by direct transfers to their bank accounts. LO 2f
8 Picture Ltd maintains a computerised payroll system. All employees are paid by BACS directly into their
bank account.
Which two of the following controls will be most effective in ensuring that accurate payments are
made to employees?
A Authorisation of overtime worked
B A sample of calculations performed by the payroll package are manually re-performed each
month
C The BACS list is reviewed by the chief accountant together with supporting payroll
documentation
D The print out from the bank is agreed to the BACS list and any discrepancies investigated LO 2f
9 Hill Ltd operates a number of controls over its payroll. For the following three controls, select
whether they are preventative or detective controls.
All staff records are maintained by the human resources manager. Any changes in these records are
promptly communicated to the payroll department.
A Preventative
B Detective
Payroll costs are compared to budget on a monthly basis.
C Preventative
D Detective
All employees who are paid weekly by cash must show evidence of their identification prior to
receiving their wages.
E Preventative
F Detective LO 2e
ICAEW 2021 Chapter 8: Employee costs 37

10 The following describes certain processes of the payroll system in operation at Ukulele Ltd.
Payroll services are provided by a specialist outsourcing firm. However the payroll is not routinely
checked in-house.
A Strength
B Deficiency
The remuneration of executive company directors is set by a committee composed solely of non-
executive company directors.
C Strength
D Deficiency
The remuneration of company employees is set by directors.
E Strength
F Deficiency LO 2g

Chapter 9: Internal audit
1 The scope and objectives of the 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 Evaluating corporate objectives
B Performing operational audits
C Monitoring controls
D Authorising transactions LO 2h
2 The following statements relate to the differences between internal and external auditors.
For each statement select whether it is true or false.
Internal auditors should not co-operate with external auditors.
A True
B False
Statutory audits are carried out by external auditors only.
C True
D False
The internal audit function forms part of the overall internal control system.
E True
F False LO 2h
3 The scope and objectives of the 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 Advising on the implementation of accounting and operational standards
B Liaising with external auditors
C Recommending improvements in operations
D Voting on decisions that involve external audit matters LO 2h
ICAEW 2021 Chapter 9: Internal audit 39

4 Which one of the following is the main reason why the internal audit function should not get
involved in operational matters?
A For reasons of confidentiality
B To preserve their integrity
C Internal auditors do not possess the skills to handle operational matters
D To preserve their independence LO 2h
5 In order to preserve their independence, the internal audit function should report directly to which
one of the following?
A The chief accountant
B The finance director
C The audit committee
D The non-executive directors LO 2h
6 Smarter Supermarkets operates a chain of fifteen supermarkets across London. At head office, there is
an internal audit function which carries out audits and investigations on the individual supermarkets
in the chain.
Which two of the following could the internal audit function carry out and still operate effectively?
A Tests of the controls at the Westminster supermarket as part of a routine internal audit cycle
B Temporarily filling the role of the Lewisham supermarket manager while she is on sick leave
C Identification of risks at the proposed Waterloo supermarket, which is due to open next year
D Investigation into the physical controls at all the supermarkets LO 2h
7 Internal and external auditors provide a variety of services to companies.

For each of the following examples select whether it is a service which would be provided by internal
auditors only, by external auditors only or by either.
Preparation of a report on the effectiveness of internal controls:
A Internal auditors
B External auditors
C Either
Investigation into a material fraud committed in the entity:
D Internal auditors
E External auditors
F Either LO 2h

8 Many of the procedures undertaken by the internal auditor are very similar to those performed by
the external auditor.
Which three of the following will normally be done by the external auditor?
A Testing internal controls
B Making recommendations regarding improvements to controls
C Making recommendations on the overall operational effectiveness of the entity
D Examining and testing financial information LO 2h
9 The scope and objectives of the internal audit function vary widely and depend on the size and
structure of the entity and the requirements of its management.
Which two of the following functions could internal audit perform and still operate effectively?
A Preparation of reconciliations between the payables account and supplier statements
B Approving annual budgets
C Reviewing accounting systems and related controls
D Examining financial and operational information for management LO 2h
ICAEW 2021 Chapter 9: Internal audit 41

Chapter 10: Documentation
1 For each of the following statements concerning documentation, select whether they are true or false
in accordance with ISA (UK) 230, Audit Documentation.
The preparation of documentation is a legal requirement.
A True
B False
Documentation assists team members to direct and supervise work done.
C True
D False
Documentation may be in paper or electronic form.
E True
F False LO 3a
2 Which three of the following documents would be found on a permanent, as opposed to a

current, audit file?
A Accounts checklist
B Company memorandum and articles of association
C Details of client company history
D Legal documents such as lease agreements and title deeds LO 3a
3 Which three of the following documents would be found on a current, as opposed to a

permanent, audit file?
A Management accounts
B Summary of unadjusted errors
C Written representation
D Engagement letter LO 3a
4 Which one of the following reflects the number of years for which the ICAEW requires firms to retain
their audit documentation after the end of the accounting period to which the documentation relates?
A 5 years
B 6 years
C 7 years
D 10 years LO 3a

5 James LLP are the auditors of Eye Ltd. Eye Ltd has asked to have a look at James LLP's working
papers in respect of the ongoing audit of its financial statements.
Which one of the following should be the course of action taken by James LLP to comply with ICAEW
Code of Ethics?
A Refuse, as the working papers belong to James LLP and are not part of Eye Ltd's
accounting records
B Refuse but agree to show Eye Ltd any working papers they request once the audit is complete
C Show Eye Ltd whatever working papers they request
D Show Eye Ltd the working papers only at James LLP's discretion and only those documents that
will not prejudice the audit LO 4j
6 Select whether the following statements are true or false in respect of the reasons for preparing audit
documentation.
To enable an experienced auditor to carry out quality control reviews:
A True
B False
To provide evidence of audit work carried out in the event of a legal dispute:
C True
D False
To retain a record of matters of continuing significance to future audits:
E True
F False LO 3a
7 With regards to audit working papers, select whether the following statements are true or
false. Working papers belong to the auditor.
A True
B False
Auditors prepare working papers on a voluntary basis.
C True
D False
There are no circumstances under which audit working papers should be given to a third party without
the permission of the client.
E True
F False LO 3a
ICAEW 2021 Chapter 10: Documentation 43

Chapter 11: Evidence and sampling
1 For each of the following statements concerning the use of test data and audit software select
whether they are true or false.
Test data involves the use of the assurance provider's own software.
A True
B False
Test data can test the operation of the client's system and so ascertain whether certain controls are in
operation.
C True
D False
Audit software can be installed on a client's system to reperform calculations relating to year-end
balances.
E True
F False LO 3b
2 For each of the following statements concerning analytical procedures select whether they are true or
false.
Analytical procedures can be used in tests of controls.
A True
B False
Analytical procedures are only helpful where the integrity of the underlying data is high.
C True
D False
Analytical procedures must be carried out by senior audit personnel only.
E True
F False LO 3d/e
3 There are a number of factors that the auditor should consider when using analytical
procedures. These include suitability and reliability factors.
Which three of the following factors relate to reliability?
A The source of the information
B The materiality of the items involved
C The relevance of the information available
D The comparability of the information available LO 3e

4 Which one of the following describes sampling risk?
A The risk that the sample cannot be tested due to a lack of source documentation
B The risk that the sample chosen is not representative of the population
C The risk that the auditor's testing techniques cannot be applied to the sample chosen
D The risk that the underlying population is incomplete LO 3b/f
5 The gross margin at West Ltd has increased from the previous year.
Assuming there are no errors in the financial statements, which one of the following explains this
increase?
A Sales volume has increased.
B Administrative costs have increased.
C The cost of raw materials has increased without an effect on the sales price.
D The company now employs more efficient production techniques. LO 3g
6 Which one of the following describes how an assurance provider would check the completeness
assertion for non-current assets?
A Trace an entry in the non-current asset register to the physical asset
B Trace a physical non-current asset to a figure in the financial statements
C Trace a physical non-current asset to an entry in the non-current asset register
D Trace an entry in the financial statements to the physical asset LO 3d/f
7 Which one of the following sources of evidence would assist in verifying the existence of the
trade receivables balance?
A Trade receivables confirmations
B Sales orders
C Analytical procedures over the trade receivables balance
D Recalculations of the individual receivable balances LO 3d/f
8 In testing for the completeness of liabilities, which three of the following sources of documentation
would be helpful?
A Board minutes
B Correspondence with client solicitors
C The year-end bank statement
D Bank letter LO 3d/f
ICAEW 2021 Chapter 11: Evidence and sampling 45

9 When auditing a provision which two of the following methods are most likely to detect
understatement of the provision?
A Test the process used by management to estimate the amount
B Use an independent estimate
C Review subsequent events
D Re-perform the calculation of the provision LO 3d
10 Which one of the following best describes random selection in audit testing?
A Testing 100% of a population
B Testing all items in a population with a particular characteristic
C Testing items in a population that appear unusual or suspicious
D Testing less than 100% of a population where each item in the population has an equal chance of
selection LO 3d
11 For each of the following statements concerning statistical and non-statistical sampling select whether
they are true or false.
Non-statistical sampling involves an element of subjectivity.
A True
B False
Statistical sampling involves the random selection of a sample.
C True
D False
Statistical sampling requires the auditor to input a required confidence level.
E True
F False LO 3d

12 In testing the authorisation of sales orders, select whether each of the following factors would cause
an increase in the sample size, a decrease in the sample size or would have a negligible effect on the
sample size.
An increase in the level of tolerable misstatement:
A Increase
B Decrease
C Negligible effect
An increase in the number of sampling units:
D Increase
E Decrease
F Negligible effect
An increase in detection risk:
G Increase
H Decrease
I Negligible effect LO 3g
13 In testing whether all goods received records are matched with purchase orders, select whether
each of the following factors would cause an increase in the sample size, a decrease in the sample
size or would have a negligible effect on the sample size.
An increase in the level of expected misstatement:
A Increase
B Decrease
C Negligible effect
An increase in the auditor's required confidence level:
D Increase
E Decrease
F Negligible effect LO 3g
14 In testing the valuation assertion for non-current assets, select whether each of the following factors
would cause an increase in the sample size, a decrease in the sample size or would have a negligible
effect on the sample size.
An increase in the use of other substantive procedures directed at the same assertion:
A Increase
B Decrease
C Negligible effect
Stratification of the population:
D Increase
E Decrease

15 In testing the valuation assertion for trade receivables, select whether each of the following factors
would cause an increase in the sample size, a decrease in the sample size or would have a
negligible effect on the sample size.
An increase in the level of tolerable misstatement:
A Increase
B Decrease
C Negligible effect
An increase in the auditor's assessment of audit risk in this area:
D Increase
E Decrease
16 With regards to tolerable misstatement and sampling risk, select whether the following
statements are true or false.
Tolerable misstatement is a monetary amount set by the auditor in respect of which the auditor seeks
to obtain an appropriate level of assurance that the monetary amount set by the auditor is not
exceeded by the actual misstatement in the population.
A True
B False
Tolerable misstatement is used by management as a guide to the extent of misstatements they can
make.
C True
D False
Sampling risk is the risk that the actual misstatements found in a sample will exceed the expected
misstatements.
E True
F False LO 3d/g
17 For each of the following descriptions relating to sample selection select whether they describe
random selection, haphazard selection or systematic selection.
Mark is selecting a sample of sales invoices to carry out a directional test. He uses a computerised
generator to identify the items to be selected.
A Random
B Haphazard
C Systematic
John is selecting a sample from a list of accounts payable. He makes his selection by choosing every
15th balance.
D Random
E Haphazard
F Systematic LO 3d/g

18 Inspecting board minutes is an important test of detail that can assist in evidence gathering for
many account balances and disclosures.
Which three of the following account balances are supported by the evidence likely to be provided by
board minutes?
A Contingent liabilities
B Company commitments
C Sundry expenses
D Additions to significant tangible non-current assets
E Utility expenses LO 3d
19 In which one of the following circumstances may block sampling be appropriate?

A When checking that controls were in operation throughout the year
B When testing whether certain transactions have been allocated to the correct accounting period
C When testing for understatement of assets
D When testing for understatement of liabilities LO 3d
20 In which one of the following circumstances is monetary unit sampling most appropriate?
A When testing for understatement of assets
B When testing for overstatement of assets
C When testing for understatement of liabilities
D When testing for understatement of expenses LO 3d
21 In respect of an assurance engagement which one of the following is the least persuasive method of
gathering evidence?
A Re-performance of a depreciation calculation
B Inspection of a supplier's invoice
C Inspection of an internally-generated order for the purchase of a non-current asset
D Communicating with a third party to confirm ownership of a non-current asset LO 3e

22 All methods of obtaining evidence have weaknesses. These are listed below in the options presented.
For each method of obtaining evidence, select the weakness that is most likely to be present.
Analytical procedures:
A Limited to the point in time it takes place
B Limited by underlying accounting system
Observation of a procedure:
C Limited to the point in time it takes place
D Limited by underlying accounting system
Direct confirmation of a payables balance:
E A balance which is understated may be agreed because it favours the respondent
F A balance which is overstated may be agreed because it favours the respondent
LO 3c
23 Auditors obtain evidence using procedures set out in ISA (UK) 500, Audit Evidence.
For each of the following tests select the type of procedure which is being used.
The auditor examines a title deed to confirm that the company has ownership of a plot of land.
A Inspection
B Observation
C Confirmation
The auditor is present while a sales order is being processed to test if the controls are carried out.
D Inspection
E Observation
F Confirmation LO 3f

Chapter 12: Written representations
1 Which three of the following are purposes of a written representation letter?
A Confirmation that the financial statements reflect all transactions
B Confirmation that management has fulfilled its responsibility for the preparation of the financial
statements
C Confirmation that management acknowledges the terms of the engagement
D Confirmation that management has provided the auditor with all relevant information and access
as agreed in the terms of the audit engagement LO 3h
2 For each of the following statements in respect of written representations select whether they are
true or false.
Written representations act as a substitute for other audit evidence.
A True
B False
Written representation letters contain confirmation that the effects of uncorrected misstatements are
immaterial.
C True
D False
Written representations contain a statement that management has disclosed all relevant subsequent
events to the auditors.
E True
F False LO 3h
3 At which one of the following stages in the audit should a written representation letter be signed?
A Before the audit has commenced
B During the course of the audit
C Just prior to the signing of the auditor's report
D After the auditor's report is signed LO 3h
4 Which one of the following drafts and signs the written representation letter?
A Auditor drafts and signs
B Auditor drafts, senior management sign
C Senior management draft and sign
D Senior management draft, auditor signs LO 3h
ICAEW 2021 Chapter 12: Written representations 51

5 Which two of the following statements would be most likely to be included in a written representation
letter?
A Related party relationships and transactions have been appropriately accounted for and are in
accordance with materiality and the requirements of IFRSs.
B We have disclosed to you the results of our assessment of the risk that the financial statements
may be materially misstated as a result of fraud.
C Non-current assets are accurately measured in the financial statements in accordance with the
requirements of IFRSs.
D All events subsequent to the date of the financial statements and for which IFRSs require
adjustment or disclosure have been adjusted or disclosed. LO 3h
6 Which one of the following statements is an accurate description of a written representation?

A It confirms the scope of the engagement.
B It sets out material deficiencies in internal controls.
C It confirms verbal representations which management have made to audit staff in order to
provide evidence towards the auditor's opinion.
D It sets out matters arising during the engagement which are of interest to management. LO 3h
7 Which two of the following situations would be referred to in the written representation letter?
A Management has refused the auditor permission to contact a major customer.
B Management has confirmed its belief that ongoing litigation with a former employee will not
result in the company having to pay compensation.
C Management has confirmed its belief that a defaulting customer will pay its debts in due course.
D Management has confirmed its belief that all fraud committed by management or employees
with significant roles in internal control has been disclosed. LO 3h
8 Which two of the following matters are management required to confirm in a written representation?
A That management has fulfilled its responsibility for the preparation of the financial statements
B That management is responsible for protecting the interests of the shareholders
C That management has recorded and reflected all transactions in the financial statements
D That the audit fee will be paid in full within three months of the signing of the auditor's report
LO 3h

Chapter 13: Substantive procedures – key financial
statement figures
1 For each of the following substantive procedures carried out on a schedule of non-current assets
which agrees to the financial statements, select which financial statement assertion will be addressed.
Tracing items from the non-current asset register to the schedule:
A Completeness
C Existence
Confirming whether the casts on the schedule are correct:
D Completeness
E Accuracy, valuation and allocation
F Existence LO 3d
2 For each of the following substantive procedures on non-current assets, select which financial
statement assertion will be addressed.
Checking a sample of non-current assets to purchase invoices:
A Completeness
C Existence
Selecting a sample of assets on the non-current asset register and confirming that they are physically
present:
D Completeness
F Existence LO 3d
3 When testing the rights and obligations assertion for a sample of plant and machinery, which one of
the following sources of evidence would be most helpful?
A The client's asset register
B Physical verification of the assets
C Purchase invoices
D Recalculation of the depreciation charge LO 3d
ICAEW 2021 Chapter 13: Substantive procedures – key financial statement figures 53
4 For each of the following risks of misstatement in respect of intangible non-current assets select the
financial statement assertion which is directly affected.
Intangible assets are not tested for impairment on an annual basis:
A Completeness
C Existence
Expenses are inappropriately capitalised as intangible assets:
D Completeness
E Rights and obligations
F Existence LO 3d
5 For each of the following audit tests, select which financial statement assertion would be supported.
Enquiries about possible obsolete or slow-moving inventory:
A Completeness
C Cut-off
Taking the last 10 goods received records of the current period and the first 10 goods received records
of the next period and checking that they have been allocated to the correct period:
D Completeness
F Cut-off LO 3d
6 By attending the inventory count on which three of the following is the auditor gaining assurance?
A The quantity of inventory
B The existence of inventory
C The rights and obligations over the inventory
D The effectiveness of the company's controls over the inventory count LO 3d

7 When reviewing the instructions for the inventory count in respect of the organisation of the
count, which one of the following would cause concern to the auditor?
A All inventory is to be tidied and organised into sections for counting.
B The count will be supervised by the stores manager.
C There are restrictions on the movement of inventories while the count is underway.
D Third party inventory is placed in a separate area and marked as belonging to the third party.
LO 3g
8 For each of the following statements in respect of perpetual inventory counts select whether they
are true or false.
Management do not need to ensure that inventory lines are counted at least once a year.
A True
B False
Management should ensure that all material differences that arise from the inventory counts are
investigated and corrected.
C True
D False
The inventory count should be organised so there is minimal movement of inventories at the time of
the count.
E True
F False LO 3g
9 Which three of the following are most likely to indicate that the net realisable value of inventory is
lower than its cost?
A There is physical deterioration of the inventory.
B There has been an increase in selling price.
C Newer models are now available.
D There has been a marketing decision to offer small discounts during a sale period.
E There has been a significant unforeseen increase in production costs which cannot be passed on
to the customer. LO 3g
10 There are a number of ways that the auditor can test whether inventories are stated at the lower
of cost and net realisable value.
Which two of the following procedures will assist the auditor in this?
A Corresponding with suppliers
B Reviewing post year-end sales
C Comparing sales prices to cost
D Sending receivables confirmations LO 3d
11 Direct confirmation with customers assists in obtaining evidence about which three of the following
assertions?
A Existence
B Rights and obligations
C Accuracy, valuation and allocation
D Cut-off LO 3d
12 The following statements relate to the types of confirmations which may be sought from
receivables. For each statement select whether it is true or false.
Under the negative method, the customer is requested to confirm the accuracy of the balance shown
or state his disagreement.
A True
B False
Under one of the options available for the positive method of direct confirmation, the customer may
be requested to provide the balance owed.
C True
D False
Positive confirmations must be used where there are a large number of balances.
E True
F False LO 3b
13 In which two circumstances might it be permissible to use the negative method of

receivables confirmation?
A The assessed risk of material misstatement is high.
B A small number of large balances is involved.
C A substantial number of errors is not expected.
D The auditor has no reason to believe that customers will disregard the request. LO 3d
14 If the client refuses permission for the auditor to communicate with customers for the purposes of
confirming their trade accounts receivable balances, the auditor should do which one of the following?
A Seek evidence from the invoices sent to customers
B Seek evidence from post year-end receipts from customers
C Perform alternative audit procedures and consider the implications on the auditor's report if
these do not generate relevant and reliable audit evidence
D Rely on analytical procedures LO 3g

15 The following statements relate to the selection of a sample of customers from whom direct
confirmation of balances will be sought. For each statement select whether it is true or false.
Samples should be selected giving each customer an equal chance of being selected. There should be
no further considerations.
A True
B False
The sample of customers should include accounts that are old, unpaid, written off and with credit
balances.
C True
D False
Customers with whom it is difficult to communicate should be avoided.
E True
F False LO 3f/g
16 For each of the following audit tests on trade receivables select which financial statement assertion
would be supported.
Comparing the method of calculating the allowance against trade receivables against other entities in
the same industry:
A Completeness
C Existence
Obtaining and reviewing an analysis of aged receivables at the period end for amounts outstanding for
more than the allowed credit period:
D Completeness
F Existence LO 3d
17 During the course of the audit of Ham Ltd, Mary receives 24 replies out of the 27 direct customer
confirmation letters. Mary has already communicated with the three outstanding respondents on at
least four occasions.
Which one of the following should be Mary's next course of action?
A No action is necessary as 24 out of 27 responses is sufficient.
B Mary should pass on the details of the outstanding responses to an independent company
official for chasing.
C Mary should continue her efforts to contact the customers.
D Mary should deem that they are fictitious customers. LO 3g
18 For each of the following risks of misstatement in respect of the bank and cash balance select
the financial statement assertion to which they relate.
Not all the client's bank balances are being disclosed.
A Completeness
B Existence
C Accuracy, valuation and allocation
Reconciliation differences between the bank balance and the cash account balance are not
investigated and resolved by management.
D Completeness
E Existence
F Accuracy, valuation and allocation LO 3d
19 Keeping the cash account open to take credit for remittances received after the year end is one way of
window dressing.
Which one of the following demonstrates how the auditor can address this risk?
A By checking the cheque payment slips to ensure that outstanding payments really relate to
the current period end
B By checking the bank paying in slips of outstanding lodgements to ensure they belong to
the current year end
C By confirming with customers the date of their payments to the client
D By confirming with suppliers the date of receipt of the client's payments LO 3d/f
20 Which three of the following items will be included in a bank letter from a specific bank?
A Details of all standing orders with the bank
B The bank balance on each account with the specific bank
C Any guarantees made by the client
D Any titles or other assets held for safe custody by the bank LO 3b
21 Direct confirmations from suppliers are not always used by auditors. Under which two of the following
circumstances are supplier confirmations necessary?
A Where supplier invoices and supplier statements are available and part of the standard
documentation of a purchases cycle
B Where there is a pressure on the auditor to complete his audit on time
C Where the auditor suspects that the client is deliberately trying to understate payables
D Where the client refuses to provide supplier statements to the auditor LO 3d

22 An important control within the payables cycle is the comparison between supplier statements
and the payables account.
Which one of the following assertions is most supported by this control procedure?
A Existence
B Completeness
C Rights and obligations
D Presentation LO 3d
23 Which one of the following sources of information will not be helpful for
auditing non-current liabilities?
A Loan agreements
B Bank letters
C Share certificates
D Board minutes LO 3d
24 The results of substantive tests on trade payables at Waltham Ltd are set out below. The
materiality threshold set for these tests was £12,000.
For each of the following results, select the action which should be taken by the audit senior.
Of the 15 supplier confirmations sent, only 10 were returned.
A Draw conclusion
B Refer to senior colleague
C Extend sample
In a sample of 30 supplier invoices out of approximately 300, representing 5% of the payables
balances, errors were found on the payables account concerning the recording of liabilities from 8
invoices totalling £200.
D Draw conclusion
E Refer to senior colleague
F Extend sample LO 3i
25 Which three of the following are the more significant risks in relation to a non-current asset balance in
the financial statements?
A Non-current assets exist and have been included in the financial statements but belong to a
third party.
B Non-current assets have not been depreciated.
C Expenses unrelated to non-current assets have been included in the non-current asset balance.
D Non-current assets have not been disclosed properly in the financial statements.
LO 3d
26 For each of the following circumstances in respect of inventory, select which financial statement
assertion would be affected.
Differences identified at the inventory count, where physical inventory exceeded amounts recorded in
the inventory records, have not been adjusted in the inventory records.
A Completeness
B Existence
C Cut-off
Inventory in transit at the end of the year has not been taken into account.
D Completeness
E Existence
F Cut-off LO 3d
27 The auditor of Ilford Ltd carried out a receivables circularisation at the year end to confirm the
accuracy of total trade receivables in the statement of financial position at that date. Two of the
replies to the circularisation disagreed with the balance.
For each of these two disagreements, select whether the disagreement would be considered a
misstatement or would not be considered a misstatement for the purposes of evaluating the accuracy
of total trade receivables in the statement of financial position at the year end.
Colchester Ltd disagreed with the balance, stating that the amount owed was £11,100 and not
£15,600 as was written on the confirmation letter. On investigation, the auditor discovered that
invoice number SI 8976 for a total of £1,600 had been recorded by Ilford Ltd as £6,100.
A Misstatement
B Not misstatement
Rainham Ltd disagreed with the balance because their records had cancelled invoice number SI 11493.
This was because Rainham Ltd had returned some goods three days prior to the year end. The auditor
has verified that the goods have been returned and that cut-off with inventory is correct.
C Misstatement
D Not misstatement LO 3g

28 Marianne has obtained a list of items which make up the cash and cash equivalents balance of
£15,350 in the financial statements of Browns Ltd. Materiality has been set at £7,000.
For each item select whether or not Marianne should test it.
Current account balance £14,100:
A Test
B Not test
Petty cash float £250:
C Test
D Not test
Special directors' cash account £1,000:
E Test
F Not test LO 3g
29 Two types of procedures used in gathering evidence are tests of controls and substantive
procedures. For each of the following examples select the type of procedure illustrated.
Carrying out analytical procedures on the income statement:
A Test of control
B Substantive procedure
Reviewing board minutes for evidence of authorisation of major additions to non-current assets:
C Test of control
D Substantive procedure
Reperforming only the year-end bank reconciliation:
E Test of control
F Substantive procedure LO 3b
30 Which three of the following are reasons why an auditor will request a bank letter from all the client's
banks?
A Bank statements held by the client may have been tampered with.
B The bank statements may be less accurate.
C The bank letter contains other information which may be helpful in the audit.
D The bank letter is sent directly to the auditor and is therefore more reliable. LO 3d
Chapter 14: Codes of professional ethics
1 For each of the following statements in relation to guidance on professional ethics select whether
they are true or false.
It is in the public interest for accountants to follow a professional ethics framework.
A True
B False
Ethical guidance from ICAEW is in the form of rules rather than principles.
C True
D False
Rules-based codes offer a more straightforward ethical framework, as they cover specific situations.
E True
F False LO 4a
2 Select whether each of the following statements is true or false.

A principles-based ethical framework encourages auditors to apply general principles to their specific
situation.
A True
B False
A principles-based ethical framework takes the form of a checklist of forbidden items which auditors
can efficiently check off.
C True
D False
A principles-based ethical framework can more effectively accommodate a fast-changing environment.
E True
F False LO 4b
3 Which one of the following is not one of the stated fundamental principles of the IESBA
Code of Ethics?
A Integrity
B Courtesy
C Objectivity
D Confidentiality LO 4d

4 Smith LLP has been approached to audit Tube plc, a listed company which is a public interest entity.
A partner in Smith LLP has shares in Tube plc and another partner's sister is the managing director of
Tube plc.
Which one of the following combinations of threats arises in this scenario?
A Advocacy and intimidation threats
B Advocacy and self-interest threats
C Self-review and self-interest threats
D Familiarity and self-interest threats LO 4k
5 Marr LLP are the auditors of Dreams plc, a listed company. Dreams plc has approached Marr LLP
to help it design and implement a new IT system.
Which one of the following threats is created if Marr LLP accept this assignment?
A Intimidation threat
B Advocacy threat
C Familiarity threat
D Management threat LO 4k
6 Bubbles Ltd, an audit client of Johnson LLP, is unhappy with the way the audit is being carried out
and has threatened to replace Johnson LLP if the firm does not issue the opinion Bubbles Ltd wants.
Which one of the following threats is created by this situation?
A Intimidation
B Advocacy
C Familiarity
D Management LO 4k
7 Whitely LLP are the auditors of East Ltd. East Ltd has approached Whitely LLP to carry out share
dealings on its behalf.
Which one of the following threats to independence is created by this situation?
A Intimidation
B Advocacy
C Familiarity
D Self-interest LO 4k
ICAEW 2021 Chapter 14: Codes of professional ethics 63

8 Which two of the following are among of the stated fundamental principles of the IESBA Code?
A Professional competence and due care
B Professional scepticism
C Professional judgement
D Professional behaviour LO 4d
9 Blue Ltd is applying to its bank for a business loan, and as part of its application it is required to submit
a business plan and forecast financial statements. Believing that it would add credibility to its
application, it has engaged Yellow LLP to provide an assurance report on the forecast financial
statements.
George Cameron, the chief executive of Blue Ltd, has proposed that a fee only be payable to Yellow
LLP if the loan application is successful.
Which two of the following threats are most likely to be present here, in line with the IESBA Code?
A Familiarity threat
B Self-interest threat
C Intimidation threat
D Advocacy threat LO 4k

Chapter 15: Integrity, objectivity and independence
1 Flyby plc is a publicly listed airline. Because Flyby plc is so happy with its assurance firm, March LLP, it
has offered two free flights for every member of the audit team.
Which one of the following should be March LLP's course of action?
A Accept the offer as it is part of auditor-client relations
B Request that the offer be directed to all the staff of the assurance firm and not just the audit
team
C Accept the offer but emphasise to the management of Flyby plc that this will not prejudice any
future audits
D Reject the offer as it is not of insignificant value LO 4f
2 Jude LLP is about to commence the audit of its client, Merry Ltd. However, Merry Ltd still owes fees to
Jude LLP for last year's audit.
Which one of the following should be Jude LLP's course of action?
A Continue to act with safeguards
B Threaten to issue a qualified auditor's opinion if Merry Ltd do not pay
C Consider whether it is necessary to resign
D Accept shares in Merry Ltd to the value of the audit fee LO 4f
3 A partner in Estelle LLP has just inherited a large number of shares in one of the firm's audit clients.
Which one of the following should be Estelle LLP's course of action?
A The partner should dispose immediately of the shares
B The partner does not need to dispose of the shares but can transfer them to his wife
C The partner can transfer the shares into the name of the audit firm
D The partner may keep the shares but must have no involvement in the audit of that particular
client LO 4f
ICAEW 2021 Chapter 15: Integrity, objectivity and independence 65

4 James Smith is a partner at the assurance firm of Jones LLP. His clients include Purple plc, a global
listed company. Purple plc have been very impressed with James Smith's abilities and have offered him
employment as part of their senior management team.
Assuming that he wishes to accept the offer if at all possible, which one of the following should be
James Smith's course of action?
A Accept the offer provided Jones LLP are willing to resign
B Reject the offer
C Accept the offer on the condition that he is placed in a different country
D Accept the offer with the condition that an amount is paid to Jones LLP by way of compensationLO 4f
5 Harry Price has been offered a loan at a commercial rate of interest from a high street bank that
happens to be his audit client.
Which one of the following should be Harry's course of action?
A Accept the offer
B Reject the offer
C Accept the offer after two years have elapsed from the conclusion of the audit
D Accept the offer with the condition that this transaction is disclosed in the auditor's report LO 4f
6 Duncan LLP regularly receives 12% of its gross practice income from the audit of Lilac plc, a listed
company, and 13% of its gross practice income from the audit of Soda Ltd, a private company.
Which one of the following measures should Duncan LLP take with regards to the audits of Lilac plc
and Soda Ltd?
A Implement safeguards in respect of Lilac plc and resign from Soda Ltd
B Implement safeguards in respect of both Lilac plc and Soda Ltd
C Resign from Lilac plc and implement safeguards in respect of Soda Ltd
D Resign from both Lilac plc and Soda Ltd LO 4f

7 Patricia LLP regularly receives 8% of its gross practice income from the audit of Karen plc, a listed
company, and 7% of its gross practice income from the audit of Linda Ltd, a private company.
Which one of the following measures should Patricia LLP take with regards to the audits of Karen plc
and Linda Ltd?
A Implement safeguards in respect of Karen plc and resign from Linda Ltd
B Implement safeguards in respect of both Karen plc and Linda Ltd
C Implement safeguards in respect of Karen plc and take no action with respect to Linda Ltd
D Take no action with respect to either company LO 4f
8 For each of the following situations involving an auditor and their clients, select the action the auditor
should take: accept the offer/request with no safeguards, accept with safeguards or reject the
offer/request.
A client has offered the auditor an audit fee based on a percentage of reported profits.
A Accept with no safeguards
B Accept with safeguards
C Reject
An audit client has requested that the audit partner serve on the board of directors.
D Accept with no safeguards
E Accept with safeguards
F Reject LO 4f
9 For each of the following situations involving an auditor and their clients, select the action the auditor
should take: accept the request with no safeguards, accept the request with safeguards or reject the
request.
A listed company audit client requests that the auditor prepare its accounts in an emergency situation.
A Accept with no safeguards
B Accept with safeguards
C Reject
A private company audit client requests that the auditor prepares its accounts on an ongoing basis.
D Accept with no safeguards
E Accept with safeguards
F Reject LO 4f
10 A private company client has requested that its auditor prepares a valuation for a material portfolio of
shares included in the statement of financial position.
Which one of the following combinations of threats may arise if the auditor agrees to take on this
assignment?

A Self-review and advocacy threats
B Advocacy and familiarity threats
C Advocacy and management threats
D Self-review and management threats LO 4k
11 Julie LLP's client, Beige plc, a listed company, has asked the firm, in its capacity as an accountant and
external auditor, to act as an expert witness in a court case. The outcome of the case could be
material to the amounts in the financial statements, but no significant degree of subjectivity is
involved.
Which one of the following should be Julie LLP's course of action?
A Accept the appointment without implementing safeguards
B Accept the appointment with appropriate safeguards
C Seek the permission of the audit committee and then accept or refuse the appointment
D Refuse the appointment LO 4f
12 Which three of the following are examples of when a familiarity threat might arise?
A The auditor is being sued by the client.
B There are family relationships between the auditor and the client.
C There are personal relationships between the auditor and the client.
D The auditor has acted for the client for a number of years. LO 4k

13 The FRC's Ethical Standard (section 3) requires the audit firm to address the familiarity threat that
arises from the long association of a key partner involved in the audit with a client which is a
listed company.
Which one of the following describes the relevant ethical requirements in this case?
A A key partner involved in the audit should serve for no longer than five continuous years
before being rotated off the client.
B A key partner involved in the audit should serve for no longer than six continuous years
C A key partner involved in the audit should serve for no longer than seven continuous years
D There are no restrictions as to the number of years a key partner involved in the audit can serve
at an audit client. LO 4l
14 Verity is a trainee in the audit department of Jones LLP. For her first client, she has been assigned
the audit of cash and part of the work is to review the year-end bank reconciliation. Verity has
never carried out this review before but she has last year's file and has covered bank reconciliations
in her studies. Although Verity is currently alone at the client, she can call the audit manager at any
time.
Which one of the following should be Verity's course of action?
A Perform the work, consulting the audit manager with any queries
B Refer the matter to her training partner
C Contact the ICAEW telephone helpline
D Take legal advice LO 4g
15 Geoff is a trainee in the audit department of Dickens LLP. For his first client, he has been sent
unsupervised to a small investment bank. He has been assigned the planning and performance of the
audit of the bank and has a deadline to report to the partner in two weeks' time. Geoff's only guidance
is the prior year audit files.
Which one of the following should be Geoff's initial course of action?
A Perform the work
B Refer the matter to his training partner
C Contact the ICAEW telephone helpline
D Take legal advice LO 4g

16 Alison is a qualified accountant working for Harry plc, a listed company. Harry plc has set some
ambitious profit targets for the current year. The board of directors of Harry plc has asked Alison to
find creative ways so that the company can meet its targets. Alison is aware that she will need to
window dress the financial statements in order for the targets to be met.
Which one of the following should be Alison's initial course of action?
A Seek advice from the ICAEW
B Report her concerns to Harry plc's audit committee
C Consult the stock exchange
D Take legal advice
E Resign LO 4m
17 Which one of the following threats arises from long association with an audit client?
A Self-review
B Intimidation
C Familiarity
D Advocacy LO 4k
18 The following are examples of situations in which Meryll LLP, an assurance firm with over 200 listed
and non-listed clients in a wide range of industries, 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.
One of Meryll LLP's clients has requested that the assurance firm provide additional tax services on an
ongoing basis.
A Separate personnel
B Fee threshold not exceeded
C No safeguards possible
Meryll LLP has been asked to step in and prepare the financial statements of a listed client as the
financial controller has been taken ill.
D Separate personnel
E Fee threshold not exceeded
F No safeguards possible LO 4l

19 For each type of audit, select the option that is most appropriate in accordance with the FRC's Ethical
Standard (section 3).
A listed company audit:
A Rotate engagement partner after 5 years
B Rotate engagement partner after 8 years
C Rotate engagement partner after 10 years
A private company audit:
A Rotate engagement partner after 5 years
B Rotate engagement partner after 8 years
C Rotate engagement partner after 10 years LO 4l

Chapter 16: Confidentiality
1 Which two of the following are correct with regard to the disclosure of confidential client information?
A Disclosure can be made to third parties at the discretion of the auditor.
B Disclosure can be made to third parties only where the client has provided consent.
C Disclosure can be made to third parties where there is a public duty to disclose.
D Disclosure can be made to third parties where there is a legal duty to disclose. LO 4j
2 In certain circumstances, auditors have a legal duty to disclose confidential client information to third
parties.
Which three of the following describe such circumstances?
A When the client is involved in terrorist activities
B When the auditor is corresponding with tax authorities
C When the client has breached regulations of the Financial Conduct Authority
D When there is a suspicion of money laundering LO 4j
3 During the audit of Turquoise Ltd, the audit senior comes across a number of unusual transactions that
leads him to suspect that the client is involved in money laundering.
Which one of the following should be the audit senior's next course of action?
A Consult his firm's money laundering nominated officer
B Consult the serious crime authorities directly
C Consult the client and inform them of his suspicion
D Contact the local police for immediate arrest of the client LO 4j
4 Meek LLP has recently been approached to carry out the audit of Yellow Ltd. Yellow Ltd is the major
competitor of Meek LLP's existing client, Green Ltd.
Which one of the following should be Meek LLP's initial course of action?
A Resign from Green Ltd
B Resign from both Green Ltd and Yellow Ltd
C Inform both Green Ltd and Yellow Ltd about the situation
D Do nothing LO 4h/j

5 Within an assurance firm, a number of security measures should be put into place to ensure
that accidental disclosure of confidential client information is prevented.
Which three of the following would be appropriate measures?
A Not discussing client matters in public places
B Not discussing client matters at the assurance firm's premises
C Not discussing client matters with any party outside the assurance firm
D Not leaving working papers unattended at the client's premises
E Not taking working papers off the assurance firm's premises LO 4h
6 Assurance providers need to take particular care in the steps taken where conflicts of interest
arise. For each of the following cases select whether they constitute a conflict of interest or not.
The assurance provider has been approached to provide audit services to a key competitor of an
existing audit client.
A Conflict of interest
B Not a conflict of interest
The assurance provider has been asked to advise a company wishing to acquire a client company.
C Conflict of interest
D Not a conflict of interest
The external auditor has been approached to carry out a review assignment on the interim financial
statements of an existing audit client.
E Conflict of interest
F Not a conflict of interest LO 4h
ICAEW 2021 Chapter 16: Confidentiality 73

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The Institute of Chartered Accountants in England and Wales

For exams in 2021

Electronic Question Bank

i Contents ICAEW 2018

Title Questions Answers

1 Concept of and need for assurance 3 77

2 Process of assurance: obtaining an engagement 7 79

3 Process of assurance: planning the assignment 10 80

4 Process of assurance: evidence and reporting 17 83

5 Introduction to internal control 22 85

11 Evidence and sampling 44 94

13 Substantive procedures – key financial statement figures 53 97

14 Codes of professional ethics 62 100

15 Integrity, objectivity and independence 65 101

ICAEW 2021 Contents iii

ICAEW 2021 Chapter 1: Concept of and need for assurance 3

4 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 1: Concept of and need for assurance 5

6 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 2: Process of assurance: obtaining an engagement 7

8 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 2: Process of assurance: obtaining an engagement 9

3 Which three of the following describe analytical procedures?

10 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 3: Process of assurance: planning the assignment 11

12 Assurance: Electronic Question Bank ICAEW 2021

12 Which one of the following describes control risk?

13 Which one of the following best describes professional scepticism?

ICAEW 2021 Chapter 3: Process of assurance: planning the assignment 13

16 Which two of the following would increase inherent risk?

14 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 3: Process of assurance: planning the assignment 15

16 Assurance: Electronic Question Bank ICAEW 2021

2 To which one of the following does 'sufficiency' of audit evidence relate?

ICAEW 2021 Chapter 4: Process of assurance: evidence and reporting 17

18 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 4: Process of assurance: evidence and reporting 19

20 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 4: Process of assurance: evidence and reporting 21

22 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 5: Introduction to internal control 23

9 Which three of the following are components of a system of internal controls?

24 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 5: Introduction to internal control 25

26 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 5: Introduction to internal control 27

28 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 7: Purchases system 29

9 Which two of the following documents assist in testing sales cut-off?

30 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 7: Purchases system 31

32 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 7: Purchases system 33

34 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 8: Employee costs 35

6 The following are descriptions of internal controls in operation at Josh Ltd.

36 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 8: Employee costs 37

38 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 9: Internal audit 39

7 Internal and external auditors provide a variety of services to companies.

40 Assurance: Electronic Question Bank ICAEW 2021

ICAEW 2021 Chapter 9: Internal audit 41