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- 1. Multiple Choice
Which factor should the audit firm consider when determining whether to accept and engagement
Whether the firm is ethically barred from acting
Whether the firm has sufficient resources to carry out the engagement
Whether the firm can make sufficient profit from the engagement
Whether the client is new to the firm
Whether the client gives permission to contact the outgoing auditors
- 2. Multiple Choice
Drew Brothers, chartered accountants, has recently accepted appointment as the auditor of Abysin Ltd. In terms of client due diligence, they should check which two of the following documents?
Certificate of incorporation
Passport
Utilities bill
Annual return
- 3. Multiple Choice
Which three of the following may be contained within the letter of engagement?
Responsibilities of the auditors
Responsibilities of the directors
The names of the staff assigned to the engagement
The scope of the audit
- 4. Multiple Choice
An audit firm must not accept an engagement if the client is not previously known to them
True
False
- 5. Multiple Choice
If a prospective client declines permission to contact the previous auditors, the audit firm should:
Report the client to the Companies Registrar
Contact the previous auditors anyway
Accept the engagement provisionally and continue to request permission
Normally decline the appointment
- 6. Multiple Choice
In accordance with the money laundering regulations, client identification documents should be kept for:
Five years
Five years after the cessation of the relationship with the client
Seven years
Seven years after the cessation of the relationship with the client
- 7. Multiple Choice
An engagement letter is only ever sent to the client before the first audit
True
False
- 8. Multiple Choice
An engagement letter defines the scope of the engagement
True
False
- 9. Multiple Choice
Which two of the following are auditors always required to do on being invited to accept an audit engagement
Ensure they are professionally qualified to act
Ensure they have adequate existing resources to carry out the audit
Obtain references for key personnel within the entity to be audited
Communicate with predecessor auditors to discover any reasons they should not accept appointment
- 10. Multiple Choice
Which two of the following might indicate that an assurance client could have a higher than normal inherent or control risk
Poor recent performance
Strong internal control
Unusual transactions
The existence of an internal audit department
- 11. Multiple Choice
Claret LLP, and insurance firm, has the following two clients among its client portfolio. For each client, select weather the inherent risk is high or low.
1) Tulip Ltd is planning to list on the local stock exchange within the next two years.
2) Dhalia Ltd is currently facing financial difficulties and is seeking alternative forms of finance
Tulip : High risk
Dhalia : High risk
Tulip : High risk
Dhalia : Low risk
Tulip : Low risk
Dhalia : High risk
Tulip : Low risk
Dhalia : Low risk
- 12. Multiple Choice
Which three of the following are benefits of an engagement letter in respect of assurance services?
Clearly defines the extent of the assurance provider's responsibilities
Provide written confirmation of the acceptance of the engagement
Confirms the scope of the engagement
Certifies the assurance provider's opinion
- 13. Multiple Choice
Which three of the following procedures should be carried out after the audit firm has decided to accept the appointment as auditor?
Ensure that the outgoing auditors' removal/ resignation has been properly conducted.
Ensure that a resolution has been passed at the general meeting to appoint the new auditors
Perform checks to ensure that there are no legal or ethical reasons why the new audit firm cannot act as auditor
Submit a letter of engagement to the directors
- 14. Multiple Choice
The engagement letter should be sent before acceptance of appointment
True
False
- 15. Multiple Choice
The engagement letter should be sent after the appointment of auditor but before the commencement of the audit
True
False
- 16. Multiple Choice
The engagement letter should be sent after the commencement of the audit but before the signing of the auditors report
True
False
- 17. Multiple Choice
An engagement letter should be sent to all new clients
True
False
- 18. Multiple Choice
Which one of the following correctly describes the period for which client identification documents must be kept under the money laundering regulations?
For a minimum of five years and until five years has elapsed since the relationship with the client has ceased.
For a minimum of seven years and until seven years have elapsed since the relationship with the client has ceased
For a minimum of five years and until seven years have elapsed since the relationship with the client has ceased
For a minimum of seven years and until five years have elapsed since the relationship with the client has ceased
- 19. Multiple Choice
Which two of the following must be included in the engagement letter
Responsibilities of the auditor
Arrangements regarding the planning and performance of the audit
The form of any reports
Basis on which fees are computed
- 20. Multiple Choice
Which three of the following are purposes of a letter of engagement
Setting out the form of any report to be issued
Providing constructive suggestions to management concerning improvements in internal control
Documenting and confirming acceptance of the appointment
Narrowing the expectations gap
Providing evidence on matters where are the evidence is not expected to exist
- 21. Multiple Choice
Which one of the following best describes professional scepticism
Not believe anything that management tells him
Not believe anything that management tells him, without obtaining supporting evidence
Apply a questioning mind to the information and evidence he obtains
Always assume the worst outcome in cases of uncertainty
- 22. Multiple Choice
Which two of the following must be included in the engagement letter
The scope of the audit
The reporting framework that is applicable for the financial statements being prepared
Details of client identification procedure is to be performed in relation to money laundering regulations
A statement that, in accordance with the Companies Act 2006, the auditor's liability cannot be restricted
- 23. Multiple Choice
Horus LLP, and assurance for, has the following two clients among its client portfolio. For each client, select whether inherent risk is higher or lower.
1) Osiris LTD is planning to list on the local stock exchange within the next year.
2) Set LTD has made one third of its finance department redundant as part of an efficiency drive.
Osiris LTD: High risk
Set LTD: High risk
Osiris LTD: High risk
Set LTD: Low risk
Osiris LTD: Low risk
Set LTD: High risk
Osiris LTD: Low risk
Set LTD: Low risk
- 24. Multiple Choice
Marnie LLP, an audit firm, has been asked by Opportunity LTD to accept the 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
Contact Kim LLP in writing in any case and then accept the appointment
Telephone Kim LLP in order to obtain the information sought and then accept the appointment
Contact Kim LLP's other clients to try and gain access to Kim LLP, and then accept the appointment
Make no communication with Kim LLP or the other clients and should normally decline the appointment
- 25. Multiple Choice
Under which three of the following circumstances must a firm decline, or should normally decline, an appointment as auditor to a company?
The prospective client refuses to grant the firm permission to contact the previous auditor
The prospective client refuses to grant permission to the previous auditor to communicate with the firm
The prospective client still owes audit fees to the previous auditor
The client is one for which your firm is ethically barred from acting
- 26. Multiple Choice
In order to comply with 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
For a minimum of seven years and for seven years of the relationship with the client has ceased
For a minimum of five years and for five years after the relationship with the client has ceased
For minimum of five years and for seven years of the relationship with the client has ceased
There is no requirement to hold records on client identification for more than one year
- 27. Multiple Choice
The engagement letter provides an opportunity for management to set out in writing their opinion on subjective areas in the financial statement
True
False
- 28. Multiple Choice
The engagement letter clarifies the rules and responsibilities of auditors and directors
True
False
- 29. Multiple Choice
The engagement letter contains documentation on the preliminary client risk assessment
True
False
- 30. Multiple Choice
The engagement letter contains the auditor's opinion on the financial statements
True
False
- 31. Multiple Choice
Which one of the following is not a right that an auditor has under the Companies Act 2006
The right of access to the companies' accounting records
The right to receive all necessary information and explanations
The right to see all minutes of management and shareholders meetings
The right to disclose confidential information in every circumstance without the permission of the client
- 32. Multiple Choice
The client is experiencing financial difficulties
High inherent risk
Low inherent risk
- 33. Multiple Choice
Three firms of auditors has resigned from the client in the past five years
High inherent risk
Low inherent risk
- 34. Multiple Choice
The company carries out very few unusual transactions
High inherent risk
Low inherent risk
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