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AISI - Assessments and Answers

The document discusses auditing in specialized industries, highlighting the unique financial reporting standards and accounting policies that apply. It emphasizes the importance of understanding the business environment, assessing risks of material misstatement, and the necessity for auditors to possess appropriate competence and resources. Additionally, it outlines relevant standards and considerations specific to various specialized industries.

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14 views

AISI - Assessments and Answers

The document discusses auditing in specialized industries, highlighting the unique financial reporting standards and accounting policies that apply. It emphasizes the importance of understanding the business environment, assessing risks of material misstatement, and the necessity for auditors to possess appropriate competence and resources. Additionally, it outlines relevant standards and considerations specific to various specialized industries.

Uploaded by

christinemendalla77
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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AUDITING IN SPECIALIZED INDUSTRIES

1. What makes industries specialized is that they are likely to have:


I. specific financial reporting standards applicable to them,
II. distinct accounting policies which have been developed to account for
specialized transactions and balances which are based on the normally-
applied financial reporting standards
A: Either I or II

2. Which of the following are considered important or relevant factors when planning
an audit in specialized industries?
A: all of the above
Obtaining appropriate understanding of the business and its environment.
Specific risks of material misstatement relating to the industry-specific balances
and transactions
Appropriate consideration of the “normal” balances and transactions

3. Consider the following statements related to auditing in specialized industries:


Statement I: Smaller audit firms are likely to meet the competence requirement for
almost any type of industry.
Statement II: Larger audit firms either already possess necessary skill and
competence through having existing clients in the particular industry or have the
resource available to bring in experts and/or provide any necessary staff training.
A: Only statement I is not true

4. Consider the following statements related to auditing in specialized industries:


Statement I: Code of Ethics for Professional Accountants requires, amongst any
acceptance of a new client being in line with ethical principles, that the auditor
should have an appropriate understanding of the nature and complexity of the
client’s business, but not necessarily the knowledge of relevant industrial
regulatory or reporting requirements.
Statement II: PSA 220 (Revised) Quality Management for an Audit of Financial
Statements requires the auditor to assess whether there are sufficient and
appropriate resources to perform the engagement and that there is the ‘appropriate
competence and capabilities.
A: Only statement II is not false

5. Which of the following is/are true regarding auditor’s reliance on expert related to
auditing in specialized industries?
A: The audit firm must adhere to the requirements and principles of PSA
620, Using the Work of an Auditor’s Expert which deals with matters including
the evaluation of the objectivity, competence and capabilities of the auditor’s
expert, determining and communicating the scope and objectives of their work,
and assessing their findings.
6. Consider the following statements related to auditing in specialized industries:
Statement I: Identification of the risk of material misstatement in a specialized
industry should be approached in the same was as in any other audit–by obtaining
appropriate understanding of the business and its environment.
Statement II: To assist audit team members assigned to a specialized industry
client, the audit firm is likely to have additional resources available.
A: Both statements are correct

7. Examples of instances where a specific financial reporting standards is applicable


to a certain industry include:
I. PAS 41 Agriculture for companies operating in the agriculture sector
II. PFRS 7 Financial Instruments: Disclosure for companies operating in the
banking sector
A: Either I or II
8. Examples of specialized industries that require specific or unique application of
accounting standards include:
I. valuation of extracted oil in line with PAS 2 Inventories
II. valuation of apple trees, a bearer plant, under PAS 41 Agriculture
A: Only item I is correct

9. The following are the following relevant standards applicable when auditing in
specialized industries, which is the exception?
A: PSA 800 (Revised and Redrafted) Special Considerations-Audits of Financial
Statements Prepared in Accordance with Special Purpose Frameworks

10. The following are the additional or extra factors to consider by an audit team when
auditing specialized industries, except:
A: Quality of the applicable standards

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