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Which TWO of the following should be included in an audit engagement letter
Please use the space provided on the inside of the Candidate Answer Booklet to indicate your chosen answer to each
multiple choice question.
1 Which TWO of the following should be included in an audit engagement letter?
(1) Objective and scope of the audit
(2) Results of previous audits
(3) Management’s responsibilities
(4) Need to maintain professional scepticism
A 1 and 2
B 1 and 3
C 2 and 4
D 3 and 4
(2 marks)
2 Auditors have a professional duty of confidentiality under ACCA’s Code of Ethics and Conduct; voluntary disclosure of
information may be necessary in certain situations.
For which TWO of the following situations should an auditor make VOLUNTARY disclosure?
(1) If an auditor knows or suspects his client is engaged in money laundering
(2) Where disclosure is made to non-governmental bodies
(3) Where it is in the public interest to disclose
(4) If an auditor suspects his client has committed terrorist offences
A 1 and 4
B 1 and 3
C 2 and 4
D 2 and 3
(2 marks)
3 ISA 580 Written Representations require auditors to obtain written representations to support other evidence.
For which of the following matters would a written representation NOT be suitable as audit evidence?
A That all deficiencies in internal control known to management have been communicated to the auditor
B That subsequent events requiring adjustment or disclosure in the financial statements have been dealt with
appropriately
C That the payroll charge for three months of the year when the accounting records were unavailable is correctly
stated
D That management has fulfilled their responsibility for the preparation and presentation of the financial statements
(2 marks)
2
4 Which TWO of the following substantive procedures provide evidence over the EXISTENCE of trade receivables?
(1) Agreeing a sample of goods despatched notes to sales invoices and to the sales ledger
(2) Undertaking a receivables circularisation
(3) Review of post year-end cash receipts, if these relate to year-end receivables follow through to the sales ledger
(4) Recalculating the allowance for uncollectible accounts
A 1 and 3
B 2 and 4
C 2 and 3
D 1 and 4
(2 marks)
5 Which of the following is NOT a responsibility of the auditor?
A To provide an opinion on the truth and fairness of the financial statements
B To conduct an audit in accordance with International Standards on Auditing
C To express an opinion on the company’s going concern status
(1 mark)
6 Which of the following procedures are TESTS OF CONTROL an auditor should perform in testing the inventory
cycle of their client whilst attending the inventory count?
(1) Observe whether the client’s staff are following the inventory count instructions
(2) Review inventory present in the warehouse for evidence of damage or obsolescence
(3) Obtain a sample of the last goods received notes and goods despatched notes and follow through to ensure
inclusion in the correct accounting period
(4) Inspect and review management’s inventory count instructions
A 2 and 3
B 1 and 4
C 1 and 2
D 3 and 4
(2 marks)
7 Which of the following is NOT an advantage of a company outsourcing its internal audit function?
A There will always be a reduction in costs
B Provides access to specialist skills
C Can provide access to an internal audit team immediately
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