F8 Extra MCQ’s

Q1
You have been assigned to the audit of bank and cash for X Co. X Co has a number of bank accounts and
due to the nature of its business will hold a significant amount of cash at head office at the year end.

Which of the following audit procedures included in the audit programme will test for EXISTENCE
of bank and cash?

A. Agree a sample of accounts detailed on the bank confirmation letters to the trial balance
B. Review all relevant bank statements to verify that the accounts are held under X Co
C. Attend the cash count at the year end and reperform the count
D. Review the disclosure included in the financial statements to verify only bank accounts per the bank
letters are disclosed

Q2
One objective of the final overall review stage of the audit is to ensure that the evidence gathered in the course
of the audit supports the audit opinion.

Which of the following questions, which are answered as part of the final review, support this
objective?

(1) Was the audit plan suitably modified to allow for changing circumstances?
(2) Has the audit firm’s continued independence been considered?
(3) Have all deficiencies in internal control been communicated to management?
(4) Has work been performed in accordance with relevant auditing, legal and professional
standards?

A. 1 and 4
B. 1 and 2
C. 2 and 3
D. 3 and 4

Q3
X Co is a listed company and has an audit committee.

Which of the following responsibilities should be included within the terms of reference for the audit
committee?

(1) Reviewing and monitoring the external auditor’s independence and objectivity
(2) Appointing and removing the external auditors
(3) Evaluating and monitoring the effectiveness of the internal audit function

A. 1, 2 and 3
B. 1 and 2 only
C. 1 and 3 only

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D. 2 and 3 only

Compiled By : Ahmed Mumtaz

 Q4
A & Co is the auditor of Z Co for the year ended 31 December 20X8. The detailed audit work is due to be
completed by 30 June 20X9. The directors are planning to approve the financial
statements on 31 July 20X9 and then issue them to the shareholders on 15 August 20X9. The management of
Z Co has performed an assessment of the company’s ability to continue as a going concern based on a cash
flow forecast prepared to 31 December 20X9.
To which date must A & Co’s assessment cover when evaluating management’s assessment of Z
Co’s ability to continue as a going concern?

A. 30 June 20X9
B. 31 July 20X9
C. 15 August 20X9
D. 31 December 20X9

Q5

Which of the following must be included in an unmodified auditor’s report?

(1) A statement that the auditor believes the audit evidence obtained is sufficient and appropriate
(2) Title indicating the report is that of the independent auditor (3) Description of the meaning of
materiality (4) A statement that the auditor is independent of the entity and has
fulfilled their ethical
responsibilities

A. 1, 2 and 3 only
B. 1 and 3 only
C. 2 and 4 only
D. 1, 2, 3 and 4

Q6
The auditors have discovered that the chairman’s report of XYZ Co, a listed company, is inconsistent with
the financial statements and it has been determined that the material inconsistency is in the chairman’s
report.

Which of the following auditor’s reports will be issued for XYZ Co if the directors refuse to amend the
inconsistency?

A. Qualified opinion with the material inconsistency explained in an other matters paragraph
B. Unmodified opinion with the material inconsistency explained in the other information section
C. Qualified opinion with the material inconsistency explained in an emphasis of matter paragraph
D. Unmodified opinion with the material inconsistency explained in the key audit matters section

Q7
Which of the following details should be disclosed in respect of the revaluation of the head office if the
auditor is to conclude that the disclosures are adequate?

(1) Effective date of the revaluation

(2) Name of the valuer
(3) The amount of the revaluation increase
(4) Carrying amount of the head office under the cost model

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 A. 1, 2 and 3 only
B. 1, 3 and 4 only
C. 2, 3 and 4 only
D. 1, 2, 3 and 4

Q8
All adjustments required by the auditors of X Co have been made to the financial statements with the exception
of an adjustment relating to faulty goods held in inventory at the year end. The audit work concluded that the
cost of this inventory exceeded its net realisable value by $2.9m. The directors dispute the audit team’s
figures and believe that the realisable value of the inventory still exceeds its cost. Profit before tax for the year
was $131.4m.

Which of the following correctly describes the effect of this matter on the auditor’s report?

A. Unmodified opinion with no further disclosure

B. Unmodified opinion with disclosure in an emphasis of matter paragraph
C. Qualified opinion due to material misstatement
D. Qualified opinion due to inability to obtain sufficient appropriate audit evidence

Q9
Which TWO of the following are objectives of the external auditor?

A To consider the adequacy of the accounting records which have been maintained
B To confirm the company will continue trading for the foreseeable future
C To obtain an understanding of the internal control system in place
D To access the books and records of the company

Q 10
X Co has a year ended 30 June 20X8. At the end of June 20X8 the company’s corporate headquarters
building was revalued by a reputable firm of surveyors.

Assuming a reliable valuation is obtained, which of the following procedures should be performed to
obtain sufficient appropriate substantive evidence about the carrying amo unt of X Co’s corporate
headquarters?

(1) Review the board minutes to ensure that the decision to revalue the headquarters was approved by
the board
(2) Agree the revalued amount in the valuation statement to the amount recorded in the non
-current asset register
(3) Recalculate the revaluation adjustment and agree that it is correctly recorded in the revaluation
surplus
(4) Confirm with the directors that all other assets in the same class as the headquarters have been
revalued and agree this to the accounting policy disclosure

A 2 and 3 only
B 1, 2 and 3
C 2, 3 and 4
D 1 and 4

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 Q 11

Which of the following statements summarise the auditor’s responsibilities in relation to going
concern?

(1) Evaluate management’s assessment of the entity’s ability to continue as a going concern
(2) Determine whether or not an entity can prepare its financial statements using the going concern
basis of accounting
(3) Remain alert throughout the audit for events or conditions which may cast significant doubt on the
entity’s ability to continue as a going concern
(4) Obtain evidence to determine whether a material uncertainty exists if events are identified
which may cast doubt on the entity’s ability to continue as a going concern

A 1, 3 and 4 only
B 1, 2 and 4
only
C 2 and 3 only
D 1, 2 3 and 4

Q 12

Which of the following describes the level of assurance, which will be provided by Red & Co following
the review of the five-year profit forecast?

A Limited assurance, positive conclusion

B Reasonable assurance, negative conclusion
C Limited assurance, negative conclusion
D No assurance

Q 13

Which of the following statements relating to codes of professional ethics are correct?
(1) Codes of professional ethics are prescriptive ethical rules which professional accountants should
consider in every situation
(2) A code of professional ethics allows a professional accountant to apply fundamental ethical
principles to a given situation
(3) A code of professional ethics encourages professional accountants to think about more than just
legal compliance
(4) Compliance with codes of professional ethics is a legal requirement for professional accountants

A 1 and 2
B 1 and 3
C 2 and 3
D 3 and 4

Q 14
As a starting point for the audit testing of inventory the audit assistant has carried out ratio analysis on the draft
financial statements of Well Heeled Co.

Which of the following ratios would be useful in relation to testing inventory?

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 A Gross profit margin
B Quick ratio
C Current ratio
D Return on assets

Q 15

Which of the following procedures would NOT test for UNDERSTATEMENT of the wages accrual in
Scarborough Co’s Statement of Financial Position?

A Agree the payment of the final week’s wages from post year-end bank statements to the accrual listing

B Agree the final week’s wage cost from the payroll listing to the accrual listing
C Compare the accrual in the financial statements to the prior year and investigate any significant differences

D Select a sample of employees from the final week’s payroll listing and recalculate deductions

Q 16

One objective of the final overall review is to ensure that the evidence gathered in the course of the audit
supports the audit opinion.

Which of the following questions, which are answered as part of the final review, support this
objective?

(1) Was the audit plan suitably modified to allow for changing circumstances?
(2) Has the audit firm’s continued independence been considered?
(3) Is other information published within the annual report consistent with the financial statements?
(4) Has work been performed in accordance with relevant auditing, legal and professional standards?

A 1 and 4
B 1 and 2
C 2 and 3
D 3 and 4

Q17

Which of the following audit procedures will test for the EXISTENCE of bank and cash?

A Review all relevant bank statements to verify that the accounts are held under the company name
B Attend the cash count at the year end and re-perform the count
C Agree a sample of accounts detailed in the bank confirmation letter to the trial balance
D Review the disclosure included in the financial statements to verify only bank accounts as per the bank
letter are disclosed

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 Q 18

The company issued 100,000 $1 ordinary shares in August 20X7. This is currently not reflected in the
financial statements for the year ended 31 July 20X7.

If no changes are made to the financial statements which of the following audit opinions will be
issued?

A Unmodified opinion as the share issue occurred after the year end
B Qualified opinion as the financial statements are materially misstated
C Qualified opinion as the auditor has not gathered sufficient, appropriate evidence in respect of the share
issue
D Unmodified opinion with an Emphasis of Matter paragraph drawing shareholders’ attention to the share issue

Q 19

Which of the following matters should the auditor consider prior to placing reliance on the work of the expert?

(1) The availability of alternative sources of audit evidence

(2) The technical expertise required to perform the valuation
(3) The availability of audit staff to complete the evaluation of the expert on a timely basis
(4) The extent to which the use of the expert can be referred to in the auditor’s report

A 1 and 2
B 2 and 3
C 1 and 4
D 2 and 4

Q 20

Which of the following procedures should be performed in relation to the revaluation recorded in the year?

(1) Recalculate the depreciation charge for the year using the updated valuation
(2) Verify that all the assets in the same class have been revalued in line with IAS 16 Property,
Plant and Equipment
(3) Agree the value to the expert’s report and recalculate the revaluation adjustment recorded by Gates Co
(4) Agree that the revaluation surplus has been recorded in the statement of profit or loss

A 1, 2 and 3 only
B 1, 2 and 4 only
C 3 and 4 only
D 1, 2, 3 and 4

Q 21

Following discussions with one of your firm’s clients, the audit engagement partner has advised that detailed
testing will need to be performed on the valuation of inventory due to some concerns over the net realisable
value of
certain products.

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 Which of the following matters disclosed by the client is an indicator that net realisable value could be lower
than cost?

A General market prices for individual gemstones have remained static for the last three years
B Demand for certain items of jewellery has increased marginally over the past year
C Trade discounts given by suppliers have increased in the past year
D There has been an increase in the average time taken to manufacture each individual jewellery piece

Q 22
You are an audit senior and have been asked to draft the auditor’s report

Which of the following are elements which should be included in an unmodified auditor’s report for a listed
company as per ISA 700 (Revised) Forming an Opinion and Reporting on Financial Statements?

(1) Basis for opinion paragraph

(2) Other reporting responsibilities
(3) Key audit matters
(4) Other matters paragraph

A 1,3 and 4
B 1,2 and 4
C 1,2 and 3
D 2,3 and 4

Q 23
Which of the following statements regarding an engagement letter are correct?

(1) It must be reissued every year

(2) It includes the exact fees to be charged
(3) It includes the details of the limitations of an audit
(4) It identifies an applicable financial reporting framework

A 1 and 2 only
B 3 and 4
C 1, 2 and 4
D 2 and 3

Q 24
Which of the following represents an indicator which may cast doubt over the going concern status
of a
company?

(1) A significant decrease in the gearing ratio

(2) The loss of a major customer
(3) Taking the full credit period available before paying suppliers
(4) A change from credit to cash on delivery terms by suppliers

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 A 1 and 2 only
B 1, 2 and 4
C 1, 3 and 4
D 2 and 4 only

Q 25
Which of the following should be included in the overall audit strategy document?
(1) Economic factors and industry conditions affecting the company
(2) The nature, timing and extent of audit procedures
(3) Management’s responsibility for the financial statements
(4) Determination of materiality in line with the ISAs

A 1,2 and 4
B 3 and 4
C 1 and 4 only
D 2 and 3

Q 26
Which of the following substantive procedures would test the VALUATION assertion?

(1) Physically inspect a sample of non-current assets for evidence of damage

(2) Recalculate the depreciation charge for a sample of non-current assets
(3) Review board minutes for evidence of disposals and agree removal from non -current asset register
(4) Review the repairs and maintenance account for items of a capital nature

A 2 and 3
B 3 and 4
C 1 and 4
D 1 and 2

Q 27
When evaluating the results of analytical procedures, which of the following factors could explain a reduction
in the gross profit margin?

A An error resulting in the overstatement of closing inventory B A

change in the sales mix
C An increase in trade discounts received from suppliers

Q 28
Which of the following control activities would be appropriate to ensure COMPLETENESS of purchase invoices?

(1) A responsible official reviews and approves each purchase invoice prior to posting into the system.
(2) Use of batch control processing for the entry of purchase invoices.
(3) The purchase clerk recalculates the additions on purchase invoices prior to posting to the system.
(4) Assigning a sequential number to each purchase invoice on receipt and undertaking sequence check
reviews.

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 A 1 and 4
B 2, 3 and 4
C 2 and 4 only
D 1 and 3

Q 29

Which of the following are appropriate audit procedures to test for COMPLETENESS of trade payables at the
year end?

(1) Review outstanding invoices in the purchase ledger greater than three months old and enquire of
management whether they are valid outstanding liabilities
(2) Perform supplier statement reconciliations for a sample of suppliers (3)
Review bank statements for payments made after the year end to identify those payments relating to pre
year-end liabilities (4)
Select a sample of invoices in the purchase ledger at the year end and agree payments made to bank
statements post year end
A 1, 2 and 3
B 3 and 4
C 1 and 4
D 2 and 3 only

Q 30

Amit & Co is finalising the audit of Triangle Co, which is the subject of a litigation claim. This will not be
settled until after the audit report has been signed. If the claim is lost, this could cause doubt over the going
concern status of the company. The directors have correctly disclosed this matter in the financial statements.
The issue is considered material and pervasive.

Which audit opinion should be issued for Triangle Co?

A Unmodified opinion with an emphasis of matter

paragraph B Qualified opinion
C Adverse opinion
D Modified opinion with an emphasis of matter paragraph

Q 31

Which of the following substantive procedures provides evidence over the COMPLETENESS of noncurrent
assets?

A Select a sample of assets included in the non-current asset register and physically verify them at the
client premises
B Review the repairs and maintenance expense account to identify any items of a capital nature C
For assets disposed of, agree the sale proceeds to supporting documentation and cash book

Q 32

Which TWO of the following controls of a sales system ensure that all goods despatched are
completely and accurately invoiced?

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 (1) Good despatched notes are matched to sales invoices
(2) Sales invoices are sequentially numbered
(3) Sales invoices are matched to customerorders
(4) Regular review of unfulfilled orders

A 1 and 2
B 2 and 4
C 2 and 3
D 1 and 4

Q 33
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

Q 34
Which of the following statements, relating to the auditor’s reporting responsibilities for going concern, if any,
is/are correct?

(1) Where management is unwilling to make their assessment of the company’s ability to continue as a
going concern, the auditor should include an emphasis of matter paragraph in the audit report
(2) Where the use of the going concern assumption is inappropriate, the auditor should include a qualified
opinion in the audit report

A 1 only
B 2 only
C Both 1 and 2
D Neither 1 nor 2

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QUESTION 1
It is 1 July 20X5. You are an audit manager at Doge & Co, a medium-sized firm with several offices.
As part of your role, you are responsible for undertaking procedures relating to the acceptance of new
clients. You are currently involved in the acceptance of four new clients
. Bradgate Co
Bradgate Co has invited Doge & Co to perform a limited assurance review of its financial statements.
Doge & Co does not provide any other services to the company.
Trimp Transport Co
The board of directors of Trimp Transport Co have set target key performance indicators (KPIs) to assess
the company's performance for the year ended 31 March 20X5. The board has asked Doge & Co to
perform an assessment of performance to 31 March 20X5 and to prepare a report for the board as to
whether the KPIs have been achieved. The board will provide access to books and records relating to the
KPIs. Doge & Co does not provide any other services to Trimp Transport Co.
Keegan Co
Keegan Co, an existing audit client, is considering setting up an internal audit department. The directors
are unsure whether to hire staff or to outsource the function. Keegan Co has approached Doge & Co to
enquire as to whether it could provide internal audit services.
Lette Co
Doge & Co has recently accepted a new client, Lette Co. The previous auditor, Catt & Co, resigned from
the audit in May 20X5. Doge & Co was appointed on 4 June 20X5. Lette Co is in the early stages of
legal action against Catt & Co for failing to detect a fraud
1- An assurance engagement can provide limited assurance or reasonable assurance.
Indicate, by clicking on the relevant boxes in the table below, whether each of the following
statements is true of limited assurance, reasonable assurance or both.

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2- Which TWO of the following tests would Doge & Co carry out as part of the limited
assurance review of Bradgate Co's financial statements?

A. Enquire of management as to large and unusual items within the financial statements
B. Perform analytical procedures to understand the relationship between items within the
financial statements
C.Perform tests of control to understand the controls that are operating within the company
D.Perform extensive tests of details over all balances

3- The IAASB's Framework for Assurance Engagements (Framework) requires certain elements to be
present in every assurance engagement.
Which of the elements required by the Framework is NOT present in respect of the proposed
engagement for Trimp Transport Co?
A. There must be a three-party relationship
B. There must be appropriate subject matter relevant to the engagement
C. There must be the ability to collect sufficient and appropriate evidence
D.A conclusion must be formed and expressed in a written report
4- Identify, by clicking on the relevant boxes in the table below, whether each of the statements
relating to the possible provision of internal audit services to Keegan Co by Doge & Co is
TRUE or FALSE.

5- Catt & Co's lawyers argued that the firm failed to detect the fraud in Lette Co's financial statements
due to the inherent limitations in the audit and that it had, in fact, obtained sufficient and appropriate
evidence to enable it to detect material misstatements due to fraud.
Which of the following would be an inherent limitation of the audit?
A. Catt & Co was auditing the company for the first time and the business was new to them
B. Due to tight reporting deadlines, Catt & Co had a limited amount of time to complete the audit
C.Catt & Co had relied on the truth of information given to them by the company's staff

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D.Catt & Co had used audit sampling in performing tests of details

QUESTION 2
It is 1 July 20X5. You are an audit supervisor of Willow & Co and you are involved in the audit of
Ash Co for the year ended 31 May 20X5. You have been allocated responsibility for the audit of bank
and cash and share capital.
Bank and cash
Ash Co has various accounts with two banking institutions. It holds a number of longstanding accounts
with Silver Oak bank and a number of new accounts have been opened during the year with
Moneytree bank. However, the management of Ash Co has refused to grant Willow & Co permission
to obtain a bank confirmation letter from Moneytree bank. You have asked for an explanation but
have not received a satisfactory response.
The area of bank and cash has been deemed as high risk due to a number of errors which were found
during the prior year audit. The audit engagement partner has therefore emphasised the importance of
the procedures performed in this area of the financial statements.
Share capital
During the year to 31 May 20X5, Ash Co issued 100,000 $1 equity shares. Ash Co maintains all of
its own records in this area. The audit engagement partner has raised concerns over whether the
transaction has been carried out in compliance with appropriate laws and regulations
1- You are reviewing the audit plan for Ash Co and have allocated a number of procedures to be
performed on bank and cash to your audit assistant. In order to help your audit assistant perform
the work you want to give them more detail regarding the procedures.
Which type of audit procedure is being demonstrated by each of the following tests included in
the audit plan of Ash Co?

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Your audit assistant has gathered the following audit evidence in relation to bank and cash:
(1) Print out from Ash Co's online banking system provided by the accounts clerk
(2) Bank reconciliation prepared by the audit assistant using client documents
(3) Results of cash count performed by internal audit
(4) Bank confirmation letter received from Silver Oak bank In order to respond to the increased level
of risk you want to make sure you are using the most reliable evidence.
Which of the following options correctly ranks the audit evidence, starting with the MOST
reliable?
A. 2, 4, 1, 3
B. 2, 3, 4, 1
C. 4, 3, 1, 2
D. 4, 2, 3, 1

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3- Which TWO of the following actions should Willow & Co take following Ash Co’s refusal to
allow Willow & Co to seek a bank confirmation from Moneytree bank?
A. The risk of material misstatement including fraud risk needs to be re-evaluated
B. The audit plan must be revised and alternative procedures considered

C. A modified opinion must be issued on the grounds that insufficient evidence is available
D. Send the bank confirmation request without authorisation as the bank communicates directly with
the auditor

4- You have been given the following bank reconciliation prepared by Ash Co:

The following issues have been identified during the testing of the bank reconciliation:
(1) Cheques totalling $300,000 which were not posted until 2 June 20X5 are included in the cash book
at the year end
(2) Customer payments totalling $700,000 which were paid into the bank on 3 June 20X5 are included
in the cash book at the year end
(3) Bank charges for May 20X5 totalling $100,000 were not charged by the bank until June 20X5.

What is the resultant effect on the bank and cash balance as a result of these issues?
A. Bank and cash is overstated by $400,000
B. Bank and cash is understated by $300,000
C. Bank and cash is overstated by $500,000
D. Bank and cash is understated by $400,000

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5- Which of the following procedures would address the audit engagement partner’s concern in
relation to the share issue?
A. Inspect board minutes for evidence of review regarding the terms of and approval of the share
issue
B. Inspect Ash Co's constitution documents for evidence that the share issue is permitted
C. Obtain a written representation from management to confirm that the share issue is in compliance
with laws and regulations
D. Agree the quantity and recipients of the share issue to Ash Co's share register

Question
Financial forecasts
To fund its next growth phase, the directors are applying for a bank loan and have prepared financial
forecasts to support the application. They have asked if Thira & Co can carry out an additional
assurance engagement to review the financial forecasts they have produced.
Internal audit
As the company is growing, it is also considering establishing an internal audit function. The directors
of Kamari Co have asked Thira & Co to provide the company with internal audit services. They have
outlined that one of the first tasks to be completed by internal audit will be to review the procedures
around raising sales orders and the processing of sales invoices as a new system is being used and it
has been identified that procedures in this area could be improved
1- Identify, by clicking on the relevant box in the table below, whether each of the statements about
audit and assurance engagements is true or false:

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2- Which of the following statements about the non-audit services that the directors of Kamari Co
have asked Thira & Co to provide is TRUE?
A. Thira & Co cannot accept both engagements for ethical reasons
B. Limited assurance will be provided by the review of the financial forecasts

C.The intended users in the engagement to review the financial forecasts will be Kamari Co's
shareholders
D.Both engagements will be conducted under International Standards on Auditing
3- Which TWO of the following are potential DISADVANTAGES of Kamari Co outsourcing
internal audit to Thira & Co?
A. A greater range of experience would be brought to the internal audit team
B. It could create a self-review threat during the external audit
C. It could create a conflict of interest with the financial forecast review
D. The internal audit function would have less understanding of the business
4- Which TWO of the following procedures would Thira & Co carry out if it was to accept the
engagement to review the financial forecasts of Kamari Co?
A. Enquire with Kamari Co's bank as to the format of financial forecasts needed to support the
application
B. Perform analytical review on previous year financial statements to ensure the forecasts are
consistent with past trends
C.Obtain a written representation from management stating that they have fulfilled their
responsibilities for the preparation of the financial forecasts
D.Enquire of Kamari Co's directors as to any assumptions which have been made in preparing the
forecasts

5- What type of internal audit assignment does the review of procedures around sales orders
and the processing of sales invoices represent?
A. An operational audit
B. A financial audit
C.A value for money
audit D.An IT audit

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QUESTION
You are an audit supervisor at the firm Pickering & Co, currently working on the audit of Walker Co,
which is a long-standing audit client of your firm. You have been assigned responsibility for auditing
bank and cash and share capital.
Bank and cash
Walker Co operates a number of retail shops in one country, selling outdoor leisure clothes, footwear
and other walking-related accessories. Each shop accepts cash or debit card transactions. As a result,
at any one time, the company holds a significant amount of cash at its head office. Walker Co performs
a year-end cash count to verify the year-end cash balance.
From the audit planning meeting with Walker Co, you have ascertained that it has four bank accounts
with International Bank Co which consist of a current account, a deposit account and two loan
accounts. International Bank Co has provided direct confirmation to Pickering & Co of the balances in
each account at the year end. During the year, Walker Co opened a deposit account with a foreign
bank, Southern Bank Co, and at the year end a material balance is held in this account. Southern Bank
Co provided a letter to the financial controller of Walker Co to confirm the balance at the year end.

Share capital
Walker Co plans to expand its operation into online retailing next year and has undertaken a rights
issue in the current year to fund the new venture
1- Auditors use a variety of methods to obtain evidence, using procedures detailed within ISA 500
Audit Evidence.
Which of the following statements demonstrates the use of the audit procedure 'enquiry' when
auditing bank and cash?
(1) The auditor watches the cashier performing the daily bank reconciliation process
(2) The auditor reviews year-end bank balances against prior year total to identify significant
fluctuations and discusses any unusual movements with management
(3) The auditor confirms directly with management whether any new bank accounts have been
opened in this financial year
(4) The auditor obtains a standard bank letter from each bank used by the company
A. 2 and 3
B. 3 only
C. 1
D. 2 and 4

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2- In relation to the bank account with Southern Bank Co, which of the following factors will
reduce the reliability of the evidence which can be obtained?
(1) Southern Bank Co issued the standard bank confirmation letter to the financial controller of
Walker Co
(2) The original year-end bank statement has been lost but a photocopy has been provided by the
accounts clerk
(3) The account was only opened in the year and therefore was not subject to prior year audit
procedures .
(4) The year-end bank reconciliation shows an immaterial unreconciled difference which the accounts
clerk has advised will not be investigated
A. 1 and 2 only
B. 2 and 3 only
C. 1, 2 and 4 only
D. 1, 2, 3 and 4
3- In respect of the loan accounts held with International Bank Co, which of the following audit
procedures would provide the best evidence to verify accrued interest at the accounting period
end?
A. Inspect the year-end bank reconciliation and confirm accrued interest is included
B. Agree the interest charges per the cash book to the pre year-end bank statements
C. Inspect the bank confirmation letter to confirm the loan account interest rate is consistent with
prior year
D. Recalculate the accrued interest based on the outstanding loan value, interest rate and accrual
period
4- Which of the following audit procedures included in the audit programme tests for the
EXISTENCE of bank and cash?
A. Attend the cash count at the year end and reperform the count
B. Review all relevant bank statements to verify that the accounts are held under the name of Walker
Co
C. Agree a sample of account balances detailed on the bank confirmation letters to the trial balance
D. Review the disclosure included in the financial statements to verify only bank accounts per the
bank letters are disclosed
5- Which of the following audit procedures provide relevant evidence for the ACCURACY,
VALUATION & ALLOCATION assertion for share capital in the financial statements of
Walker Co?
(1) Review board meeting minutes to identify matters relating to share capital, including ensuring
proper authority was given for any share capital changes
(2) Agree the authorised share capital disclosed in the financial statements to the company's

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constitution documents
(3) Agree closing share capital balances in the trial balance to statutory records and current year draft
financial statements
(4) Inspect cash book to confirm cash receipts from rights issue have been appropriately recorded

A. 1 and 2

B. 1 and 3

C. 2 and 4
D. 3 and 4

QUESTION
The following questions are reviewed with the aim of giving future candidates an indication of the
types of questions asked, guidance on dealing with exam questions and to provide a technical debrief
on the topics covered by the specific questions selected. Candidates are reminded that there will be a
mix of application and knowledge questions in Section A and it is imperative that they ensure their
knowledge of the International Standards on Auditing (ISAs), relevant financial accounting and
important areas of the syllabus such as auditors’ reports is at an appropriate level. Questions may test
specific details of examinable documents including ISAs, ACCA’s Code of Ethics and Conduct and
the UK Corporate Governance Code, therefore candidates must ensure that they have studied these in
sufficient depth. Candidates must also ensure that they have studied all areas of the syllabus. The
syllabus includes audit evidence learning outcomes relating to a wide range of specific items, any of
which may be examined.
1-It is 1 July 20X5. You are an audit supervisor and are conducting the year-end audit of X Co. You
are currently undertaking the audit testing in relation to non-current assets.
Which TWO of the following procedures would provide substantive audit evidence in respect of
the COMPLETENESS assertion for plant and machinery?
A. For a sample of assets held in the factory and warehouse record the asset identity number as
marked on the asset and trace back to the relevant entry in the non-current asset register
B. Review board minutes to confirm that all major items of capital expenditure are noted and have
been authorized
C. Trace a sample of costs recognised in the repairs and maintenance account to invoices and
determine the nature of the expenditure and assess whether any capital items have been expensed
D. For a sample of fully depreciated assets, enquire with management to confirm whether the assets
are still being used in the operations of X Co
3-It is 1 July 20X5. A & Co are the external auditors of B Co for the year ended 31 March 20X5. B
Co has sourced external finance for the first time during the year. The draft financial statements show
non-current liabilities in relation to loan finance of $1.2m.
Which of the following procedures should be performed to confirm the loan liability balance at
the year end?

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(1) Review directors’ board minutes for evidence of approval of the external finance
(2) Agree the loan payments recorded in the general ledger to the bank statement to confirm capital
has been repaid
(3) Agree the year-end loan liability balance to the bank confirmation letter
(4) Compare loan liabilities at the end of the year to balances in the previous year
A. 1 and 2
B. 3 and 4 only
C. 1, 3 and 4
D. 2 and 3

QUESTION
It is 1 July 20X5. You are an audit supervisor at York & Co and you are involved in the audit of
Lancaster Co for the year ended 31 May 20X5. The company owns a significant amount of non-
current assets including a number of properties.
Additions, disposal and depreciation
Lancaster Co depreciates its properties, on the straight-line basis, at a rate of 5% per annum. The draft
depreciation charge on buildings for 20X5 is $2m compared with $1.7m in 20X4.
On 31 May 20X5, Property A was sold for sales proceeds equal to 40% of its original cost. The
property initially cost $6m and had been owned and depreciated for seven years. The audit
programme includes the following tests to be carried out in relation to additions made during the year:
(1) Agree a sample of additions recorded in the non-current asset register to the cash book and
purchase invoice ensuring that the purchase date is accurate and it is recorded at the correct amount
(2) Compare total budgeted additions to actual additions in the year and investigate and corroborate
any significant differences
Revaluation
On 31 May 20X5, the directors had all of the company’s remaining buildings revalued by an external
expert. In the detailed audit approach it states that York & Co will rely on this valuation as part of the
current year audit procedures.
1- Which TWO of the following audit procedures would test for OVERSTATEMENT of
Lancaster Co's non-current assets?
A. Agree disposals recorded in the non-current asset register to cash book and sales invoice
B. Physically inspect a sample of assets selected from the non-current asset register
C. Inspect a sample of assets found at a location and agree to the non-current asset register
D. Inspect the condition of assets held to determine the need for any impairment

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2- Which of the following assertions are tested by the procedures included in the audit programme
for additions?
(1) Completeness
(2) Classification
(3) Existence
(4) Accuracy, valuation and allocation
A. 1 and 3 only
B. 2 and 4 only
C. 1, 3 and 4 only
D. 1, 2, 3 and 4
3- You are now considering substantive audit procedures for depreciation across all categories of non-
current assets held by Lancaster Co.
Which TWO of the following are substantive audit procedures for testing depreciation?
A. Review the non-current asset register to ensure that all assets are assigned a useful life
B. Perform a proof in total for the depreciation charge of $2m included in the financial statements and
investigate any significant differences
C. Review the board minutes for evidence of approval of useful lives
D. Discuss with management the reasons for the $300,000 difference in the current year depreciation
compared to the prior year
4- Recalculate the expected loss on disposal of Property A, giving your answer to ONE decimal place.

$ m
The correct answer is $1.5m
5- In respect of the revaluation, which TWO of the following statements regarding reliance on the
external expert are TRUE?
A. In line with ISA 620 Using the Work of an Auditor's Expert, reliance can only be placed on an expert
appointed by York & Co
B. Obtaining the valuation report would constitute sufficient and appropriate evidence over the carrying
amount of the buildings
C. Reference to the work of the external expert should not be included in the auditor's report
D. The objectivity of the valuer must be assessed before placing reliance on the valuation report

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QUESION

It is 1 July 20X5. You are an audit manager of Brown & Green Co and you are currently working on the
completion stage of the audit of Strawberry Co, a listed company specialising in the manufacture of smart
phone accessories, for the year ended 31 March 20X5. The draft financial statements of Strawberry Co
show revenue for the year of $500m and total assets of $210m.
You are reviewing the outcome of the audit work documented by your team. You have become aware of
the following two issues:
Issue 1 – Reduction in sales
On 18 March 20X5, the board of directors approved a strategic plan which will help it increase the sales
of smart phone chargers in the future. The strategic plan is to upgrade Strawberry Co's manufacturing
facilities, which will allow it to manufacture higher quality and technologically advanced products. To fund
the planned upgrade, the company issued equity share capital to the general public in May 20X5, which
generated cash of $4m.
Issue 2 – Letter from the government environmental agency
Strawberry Co received a letter dated 15 May 20X5, from the government environmental agency advising
that water samples taken from a public lake close to Strawberry Co's manufacturing site have shown
traces of a harmful substance which is produced during its manufacturing process. The agency has
concluded that Strawberry Co is the source of the contamination and is liable for a fine. The board of
directors has denied any responsibility and have forwarded the case to the company’s legal advisers
1- Which of the following statements correctly describes Brown & Green Co's responsibility in
relation to subsequent events occurring between the date on which the auditor's report is signed
and the date on which the financial statements are issued?
A. Brown & Green Co should obtain sufficient and appropriate audit evidence and design audit procedures
to ensure that all subsequent events are identified
B. Brown & Green Co should obtain a list of subsequent events from the directors of Strawberry Co and
include these in the written representation letter
C. Brown & Green Co has no duty to perform any procedures after the date on which the auditor's report is
signed and therefore any subsequent events in this period will be dealt with in next year's audit
D. Brown & Green Co should discuss any subsequent events they become aware of with the directors of
Strawberry Co to determine whether the financial statements need amended
2- Explain, by choosing the relevant boxes in the statements below, how the issue of share capital
should be treated in the financial statements of Strawberry Co

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3- The audit team has performed various substantive procedures in order to obtain sufficient and
appropriate audit evidence relating to the potential fine for environmental damage.
Which TWO of the following are appropriate audit procedures to perform in respect of the letter
from the government environmental agency?
A. Send a letter addressed to the government environmental agency to confirm the matter
B. Examine post year-end board meeting minutes to identify any reference to further developments of the
case
C. Review the correspondence with the company’s legal advisers to assess the probable outcome of the
case
D. Test the effectiveness of the client's internal control systems in relation to the prevention of
environmental damage
4- Assuming ‘Issue 2’ is a material subsequent event, match the relevant audit opinion to the
following two outcomes.

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5- The two issues will be included in a written representation from management. All audit work will be
finished by 31 July 20X5. The auditor's report is due to be signed by Brown & Green Co on 28 September
20X5. Strawberry Co's board plans to issue the financial statements on 21 October 20X5
which will be followed by an annual general meeting on 30 October 20X5. Which of the following
would be the most appropriate date for the directors of Strawberry Co to sign the written
representation?
A. 31 July 20X5
B. 28 September 20X5
C. 21 October 20X5
D. 30 October 20X5

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