THEORY QUESTIONS OF F8 / AA (AUDIT AND ASSURANCE)

1. List SIX matters to be included within an audit engagement letter.

2. Identify FIVE sources of information relevant to gaining an understanding of ENTITY and describe
how this information will be used by the auditor.

3. Explain FOUR factors which influence the reliability of audit evidence.

4. Explain the five elements of an assurance engagement.

5. Define audit risk and the components of audit risk.

6. Describe TWO methods for documenting the sales system, and for each explain ONE advantage and
ONE disadvantage of using this method.

7. In line with ISA 220 Quality Control for an Audit of Financial Statements, describe the audit
supervisor’s responsibilities in relation to supervising and reviewing the audit assistants’ work during the
audit.

8. Describe FIVE types of procedures for obtaining audit evidence.

9. Identify what a key audit matter (KAM) is and explain how the auditor determines and communicates
KAM.

10. Describe FOUR different types of control activities and, for each type, provide an example control a
company may implement.

11. Describe the process Audit firm should have undertaken to assess whether PRECONDITIONS for an
audit were present when accepting the audit of Client.

12. Identify THREE main areas, other than audit risks, which should be included within the audit
strategy document, and for each area provide an example relevant to the audit.

13.

Describe substantive procedures the auditor should perform to confirm the redundancy provision at
the year end.

14. Describe auditor’s responsibilities in relation to the prevention and detection of fraud and error.

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 15. Explain why analytical procedures are used during THREE stages of an audit.

16. Explain why it is important for auditors to communicate throughout the audit with those charged with
governance; and Identify TWO examples of matters which the auditor may communicate to those charged
with governance.

17. Define and explain materiality and performance materiality.

18. List Four Control Objectives of Sales and Dispatch System.

19. Define internal control in the context of a limited liability company.

20. In the context of audit planning, define the following terms:

(i) The overall audit strategy; and
(ii) The audit plan.

21. Identify and explain financial statement assertions, about classes of transactions and account balance.

22. identify TWO matters which should be included in it:

(i) Audit engagement letter; and

(ii) Written representations from management.

23. Identify and explain reasons why auditors can provide only reasonable assurance that a
company’s financial statements are free from material misstatement. (Also called inherent
limitations of audit

24. Identify indicators of going concern problems in a company.

25. Identify FIVE component of internal control.

26. State CONTROL OBJECTIVES a purchases and trade payables system.

Explain the Purpose of an audit Engagement Letter.

27. Describe four matters the auditor may consider in determining whether a deficiency in Internal
Controls is significant.

28. Explain why audit evidence in the form of external confirmation is generally deemed to be more
reliable than evidence generated internally by the audit client.

29. Explainthe differences between a positive and a negative confirmation request, as applied to a trade
receivables circularisation.

30. Define audit independence.

31. Identify TWO sources

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other than the existing auditor. (3 marks)
 30. Define audit independence. (4 marks)

31. Identify TWO sources from which an auditor may obtain information about a prospective audit client,
other than the existing auditor.

32. Explain the purpose of audit software. State TWO benefits of using audit software.

33. Explain what is meant by 'professional scepticism' and why it is important that the auditor maintains
professional scepticism throughout the audit.

34. Define 'professional judgement' and describe TWO areas where professional judgement is applied
when planning an audit of financial statements.

35. Describe the substantive procedures the auditor should perform to obtain sufficient and appropriate
audit evidence in relation to the valuation of work in progress.

36. Explain examples of matters the auditor should consider in determining whether a deficiency in
internal controls is significant.

37. Explain the factors that should be considered by an external auditor before reliance can be placed on
the work performed by a company's internal audit department.

38. Explain the factors that should be considered by an external auditor before reliance can be placed on
the work performed by an expert

39. Explain the purpose of, and procedures for, obtaining written representations.

40. Explain the difference between an interim and a final audit.

41. Define the ‘three Es’ of a value for money audit.

42. Describe FOUR benefits of documenting audit work.

43. Describe the audit procedures required in respect of the year-end accrual for tax payable on employment
income.

44. Define what is meant by ‘audit sampling’ and explain the need for this.

45. Explain the benefits of audit planning.

46. Describe FOUR elements of an unmodified auditor’s report and for each explain why they are included.

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47. Explain the factors Auditor should consider when placing reliance on the work of the independent
valuer.

48. Explain the purpose of review engagements and how these differ from external audits; and Describe the
level of assurance provided by external audits and review engagements.

49. Identify and explain FOUR financial statement assertions relevant to classes of transactions and events for
the year under audit.
50. Discuss the importance of assessing risks at the planning stage of an audit(Also called importance of audit
planning)

51 Identify and briefly explain the FIVE components of an entity’s internal control.

52. Identify and explain TWO factors which would indicate that an engagement letter for an existing audit client
should be Revised.

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