Performance (value-for-money) audit examines the:
The three Es are economy, efficiency and effectiveness.
Auditing MCQs
Prepare Auditing MCQs covering the scope and objectives of auditing, types of audit, audit planning, audit programmes, audit evidence, working papers, verification of assets and liabilities, internal controls, investigation of accounts, fraud detection, IT audit and computer-assisted audit techniques. Also study the rights, powers, duties and liabilities of auditors.
Computer-assisted audit techniques (CAATs) are used by auditors to:
CAATs, such as audit software, help the auditor test entire populations of transactions efficiently.
Which of the following is an example of a substantive procedure?
Confirmations of balances directly test account balances; the others are control-related procedures.
An audit committee is mainly responsible for:
An audit committee is a board committee, usually of non-executive directors, that oversees financial reporting and audit.
Key Audit Matters (KAMs) under ISA 701 are:
ISA 701 requires KAMs to be communicated in the report for listed entities (and when otherwise decided).
An audit to determine whether an entity has followed applicable laws, rules and regulations is called a:
A compliance audit tests adherence to specified laws, regulations and policies.
Professional skepticism means the auditor:
Professional skepticism includes a questioning mind and alertness to conditions suggesting misstatement.
Audit working papers generally belong to:
Working papers are the property of the auditor, subject to confidentiality and legal requirements.
Observation of the client’s physical inventory count mainly provides evidence of:
Attending the count helps verify that inventory exists and is in the condition reported.
The cut-off assertion is concerned with whether:
Cut-off tests make sure transactions near the year end are recorded in the correct period.
The management assertion of completeness means that:
Completeness concerns omissions, i.e. understatement.
The assertion ‘rights and obligations’ means that:
This assertion addresses ownership or control of assets and the entity's obligations for liabilities.
An auditor’s report on the financial statements of a company is generally addressed to:
The report is addressed as required by circumstances, usually to the shareholders or members.
The date of the auditor’s report should be:
ISA 700 requires the report date to be no earlier than when sufficient appropriate evidence has been obtained.
Subsequent events are events occurring:
ISA 560 deals with events after the reporting date up to the auditor's report date, and facts discovered after it.
Which of the following is an adjusting event after the reporting period?
Adjusting events provide evidence of conditions that existed at the reporting date.
The key difference between fraud and error is that fraud is:
Fraud is intentional; error is unintentional.
Who has primary responsibility for the prevention and detection of fraud?
The auditor obtains reasonable assurance but primary responsibility lies with management and those charged with governance.
Compared with an external auditor, an internal auditor is mainly:
Internal audit is an internal appraisal function; the external auditor reports independently to shareholders or members.
An auditor who prepares the client’s accounting records and then audits them faces which threat?
Auditing one's own work creates a self-review threat.
A long association of the same audit partner with a client mainly creates which threat?
Over time the auditor may become too sympathetic to the client's interests, a familiarity threat.
Which of the following is NOT a component of internal control in the COSO framework?
COSO components are control environment, risk assessment, control activities, information and communication, and monitoring.
The main purpose of segregation of duties is to:
Separating incompatible duties reduces the chance of error and fraud going unnoticed.
Sampling risk is the risk that:
Sampling risk arises because only part of the population is examined.
Statistical sampling is characterized by:
Statistical sampling uses random selection and probability theory to measure sampling risk.