ACCA Approved Study Text P7 Advanced Audit And Assurance 1st Edition BPP - Solutions

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3 Discuss current developments in emerging technologies, including big data and the use of data analytics and the potential impact on the conduct of an audit and audit quality.
2 Discuss current developments in business practices, practice management and audit methodology and evaluate the potential impact on the conduct of an audit and audit quality.
1 Discuss current developments in auditing standards including the need for new and revised standards and evaluate their impact on the conduct of audits.
5 Which of the following could be reported as key audit matters? Material uncertainties over going concern Explanations of the auditor's view on other information included in the annual report, and which is consistent with the financial statements Explanations of judgements made by the
4 Name four matters which might be covered in a letter to those charged with governance.(1) ............................................................................................................................................................(2)
3 List the main contents of the ISA 700 standard, unmodified report.
2 Complete the definitions:(a) …………………………. information is free from ………………………… and…………………………. and is in compliance with the expected standards and rules.(b) …………………………. is an expression of the relative
1 Name the various opinions auditors may give in their auditor's report.(1) ............................................................................................................................................................(2)
4 The user auditor may refer to the responsibility of the service organisation when giving his opinion in financial statements.True False
3 Complete the table, putting the advantages of outsourcing under the right headings and naming the specific function, if relevant.General advantages Function-specific advantages Cost Keeping pace with technological advance Liability/indemnity Cash flow Specialist service
2 Name five elements of the accounts function which could be outsourced.(1) ............................................................................................................................................................(2)
1 List six factors which the external auditors should consider in relation to the work of internal audit.(1) ............................................................................................................................................................(2)
6 What are the six types of capital detailed in the IIRC's International IR Framework?
5 List six items which should be covered in an assurance report relating to environmental issues.(1) ………………………….(2) ………………………….(3) ………………………….(4) ………………………….(5) ………………………….(6)
4 Give an example of why social and environmental issues might affect all of the following financial statement areas. Provisions Contingent liabilities Asset values Capital/revenue expenditure Development costs Going concern
3 Name three areas of a statutory audit where social and environmental issues are relevant.(1) .......................................................................(2) .......................................................................(3)
2 Management have a duty to monitor risks arising from social and environmental issues as part of their corporate governance.True False
1 Draw a mindmap showing the major stakeholders in a company.
3 State five items that should ideally be included in an expert's report.(1) ....................................................................(2) ....................................................................(3) ....................................................................(4)
2 State three applications of the use of forensic auditing.(1) ....................................................................(2) ....................................................................(3) ....................................................................
1 Define the terms forensic auditing, forensic investigation and forensic accounting.
5 Reporting accountants are responsible for the PFI they are giving an opinion on.True False
4 Complete the definition:…………………… …………………… is assurance of something in the …………………… of any evidence arising to the …………………….
3 Identify whether the following procedures are relevant to profit forecasts, capital expenditure forecasts or cash forecasts. Ensure the timings are reasonable Projected costs should be verified to estimates and quotations Analytical review on income (based on comparable projects)
2 Complete the matters an auditor should consider when undertaking a PFI engagement. The intended …………………… of the information Whether the information will be general or limited …………………… The nature of the …………………… The
1 Complete the definition:A …………………… means PFI prepared on the basis of …………………… as to ……………………events which management expects to take place and …………………… management expects to take as of the …………………… the
5 The assurance report should be in writing.True False
4 When carrying out an assurance engagement the practitioner must assess the appropriateness of the subject matter and the criteria.True False
3 In an assurance engagement, the responsible party can also be an intended user.A Never B If there is more than one intended user C If there are more than ten intended users D In exceptional circumstances
2 Link the review assignment with its description.Review assignment:(a) Attestation engagement(b) Direct engagement Descriptions:(i) The accountant is required to confirm whether:(1) Accounting policies are consistent with those in prior year financial statements(2) Any material modifications to
1 Name the three types of engagement which comprise audit-related services.(1) ....................................................................(2) ....................................................................(3) ....................................................................
7 If two firms undertake a joint audit, they shall be jointly liable in the event of litigation.True False
6 List the eight steps involved in auditing a consolidation.
5 What is a support letter?
4 List five matters which the component auditor should communicate to the group auditor.(1) ............................................................................................................................................................(2)
3 If a component is significant due to its nature or circumstances one of three procedures will be required.List these three procedures.(1) ............................................................................................................................................................(2)
2 Outline the responsibilities of the component auditor regarding co-operation with the group auditor.
1 Define the term 'component auditor'.
9 Auditors do not report on the statement of cash flows (only the statement of financial position and statement of profit or loss and other comprehensive income as recorded in the opinion section of the report).True False
8 Which of the following audit procedures relate to capitalised grants, and which relate to grants put straight to income? Obtain relating documentation and ensure classification is correct Agree value receipt of grant to:– Documentation (above)– Bank statements Consider reasonableness
7 Which of the following is not a reason why revenue is often audited by analytical procedures?(1) Availability of good, comparable evidence(2) Statement of profit or loss and other comprehensive income is not as important as statement of financial position(3) It is quicker than detailed
6 Why is EPS disclosure likely to be material?
5 Link the disclosure issue with the accounting guidance.(a) Segmental information (i) IFRS 15(b) EPS (ii) IFRS 8(c) Discontinued operations (iii) IFRS 5(d) Revenue recognition (iv) IAS 33
4 The auditor may request information directly from the client's solicitors.True False
3 Name three types of contingency often disclosed by companies.(1) ............................................................................................................................................................(2)
2 A small audit client has taken out a lease on an old van. The cost of the right-to-use asset is was £3,000.The client has not recognised the asset (or any corresponding lease liability) on its statement of financial position.Is this treatment admissible in accordance with IFRS 16
1 Complete the definition:A ………………….. lease is one that transfers substantially all the …..………………… and…………………. incident to ownership of an asset.
5 Complete the definition:........................................ ........................................ is property held to earn........................................ or for ........................................ ........................................ or both, rather than for use in
4 Financial assets are recognised initially at their fair value.True False
3 Brands may never be capitalised.True False
2 IAS 41 applies once agricultural produce has been harvested.True False
1 Match the accounting item with the relevant accounting standard(s).(a) Investment properties (i) IFRS 3(b) Intangible non-current assets (ii) IAS 16(c) Tangible non-current assets (iii) IAS 40(iv) IAS 38
8 The 'foreseeable future' is always a period of 12 months.True False
7 Complete the definition:Under the ……………… …………… assumption an entity is viewed as continuing in business for the……………….. ……………….
6 List five enquiries which may be made of management in testing subsequent events.(1) ………………………….………………………….………………………….………………………(2)
5 Name two types of 'subsequent events'.(1) ………………………….………………………….………………………….………………………(2) ………………………….………………………….………………………….………………………
4 Which of the items on the following list are not part of the 'other information' within the scope of ISA 720? Directors' report Financial ratios Statement of cash flows Employment data Auditor's report Financial summaries
3 Where prior period financial statements were unaudited, the auditor should make no reference to the comparatives in their report.True False
2 The auditor will maintain a schedule of uncorrected misstatements. This will include: Specific misstatements identified by the auditors Best estimate of other misstatements True False
1 Name eight items that analytical procedures at the final stage must cover.(1) ………………………… (5) ………………………….(2) ………………………… (6) ………………………….(3) ………………………… (7) ………………………….(4)
7 What is a pre-issuance review?Analytical procedures Computation Deduction Confirmation Inspection Documents Assets Observation procedure Enquiries Management External sources
6 Give three examples of audit evidence which can be obtained from an auditor's expert.(1) ………………………….(2) ………………………….(3) ………………………….
5 Complete the definition.An ................................................ is a person or organisation possessing ................................................in a field other than ................................................ or ................................................
4 Written representations from management might take the form of a letter from the auditors acknowledged and signed by the director.True False
3 Give five reasons why the nature of related party relationships and transactions may give rise to increased risk.(1) ………………………….(2) ………………………….(3) ………………………….(4) ………………………….(5) ………………………….
1 Give five examples of financial statement assertions.(1) ………………………….(2) ………………………….(3) ………………………….(4) ………………………….(5) ………………………….2 Which of the following is not a procedure designed to obtain
8 Identify whether the following matters, which represent potential business risks to the company are financial, operational or compliance risks.Item Potential business risk Going concern Physical disasters Breakdown of accounting systems Loss of key personnel Credit risk Breach of legislation
7 Complete the definition.……………………………………. is an expression of the …………………………………………….or ….………………………………. of a particular matter in the context of financial statements.
6 Complete the matrix.Primary test also gives comfort on Type of account Purpose of primary test Assets Liabilities Income Expenses Assets U O O U Liabilities U O O U Income U O O U Expense U O O U
5 A balance sheet approach should never be combined with a business risk approach.True False
4 When undertaking a cycles approach to auditing, the auditor is ensuring that transactions are processed through the cycle.True False
3 Name four key control objectives for sales.(1) ……………………………………. (3) …………………………………….(2) ……………………………………. (4) …………………………………….
2 What are the effects of a 'top-down' audit approach on:(a) Tests of controls(b) Analytical procedures(c) Detailed testing
1 What is the purpose of an audit strategy document?
8 List five matters which may be referred to in an engagement letter.
7 According to ISQC 1, when considering whether to accept an engagement with a new or existing client, the auditors must consider whether a …………………………. …….. …………………………. arises.
6 List three sources of information about a new client given in ISQC 1.
5 Draw a diagram showing the key stages in a tender, explaining what happens at each stage.
4 List six practical issues that an auditor should consider when approaching a tender.
3 Why should accountants not usually advertise fees?
2 Fill in the blanks:Advertising and promotional material should not: …………………………. the service offered …………………………. …………………………. Be …………………………., either directly or by implication Fall short of the requirements of
1 Name three reasons why an auditor might not seek re-election.
5 ISQC 1 sets out requirements about the nature of the firm's internal culture.True False
4 Who is responsible for the overall quality of an individual audit assignment?(a) Ethics partner(b) Pre-issuance reviewer(c) Engagement partner(d) Managing partner
3 Who reviews audit work in an audit of financial statements?
2 List five issues relating to good engagement performance that should be addressed in an audit firm's procedures manual.(1)(2)(3)(4)(5)
1 The objective of a firm applying ISQC 1 is to:'Establish and maintain a system of ………………… ………………… to provide it with………………… assurance that:(a) The firm and its personnel comply with ...................... standards and ..........................
6 Professional indemnity insurance is insurance against liability arising through any acts of fraud or dishonesty by partners in respect of money held in trust by the firm.True False
5 Name four aspects of litigation avoidance.(1) ........................................(2) ........................................(3) ........................................(4) ........................................
4 What four matters must an injured party satisfy to the court in an action for negligence?(1) ........................................(2) ........................................(3) ........................................(4) ........................................
3 Determine whether each of the following is an example of fraud or of error.Fraud or error?Clerical mistake resulting in overstatement of profit before taxation ……..Theft of cash from the company ……..Failing to consolidate a loss-making subsidiary in order to improve group results
2 Draw a table showing the reporting requirements of ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements.
1 Define fraud.
5 Name four exceptions to the duty of confidentiality in which voluntary disclosure may be made.
4 Complete the definition:………………..…………… are fees calculated on a predetermined basis relating to the outcome or result of a transaction or the result of the work performed.
3 Name four relevant safeguards against a financial interest in a client.(1) ………………………(2) ………………………(3) ………………………(4) ………………………
2 Name five general threats to independence.(1) ………………………(2) ………………………(3) ………………………(4) ………………………(5) ………………………
1 Match the fundamental principle to the characteristic.(a) Integrity(b) Objectivity(i) Members should be straightforward and honest in all professional and business relationships.(ii) Members should not allow bias, conflict of interest or undue influence of others to override professional or
6 It is the responsibility of the auditor to ensure that a client's operations are conducted in accordance with laws and regulations.True False
5 Name four areas of law which might affect a company.(1) ……………………….(2) ……………………….(3) ……………………….(4) ……………………….

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ACCA Approved Study Text P7 Advanced Audit And Assurance 1st Edition BPP - Solutions

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