ACCA Audit and Assurance Principles 2 ā Questions and Answers
Question 1: Which sampling method gives every item in a population an equal chance of selection, making it statistically defensible?
- Haphazard sampling
- Systematic sampling
- Random sampling (Correct answer)
- Judgmental sampling
Correct answer: Random sampling
Random sampling ensures each item has an equal probability of selection, providing a statistically valid basis for audit conclusions.
Question 2: An auditor identifies a significant deficiency in internal control over financial reporting. To whom must this be communicated?
- External regulators only
- Those charged with governance (Correct answer)
- The audit committee and external regulators equally
- Only the CFO
Correct answer: Those charged with governance
Significant deficiencies in internal control must be communicated in writing to those charged with governance under ISA 265.
Question 3: What is 'inherent risk' in the context of the audit risk model?
- Risk that controls fail to prevent a misstatement
- Risk that the auditor's procedures fail to detect a misstatement
- Susceptibility of an assertion to misstatement before considering controls (Correct answer)
- Risk arising from the auditor's sampling approach
Correct answer: Susceptibility of an assertion to misstatement before considering controls
Inherent risk is the susceptibility of an assertion to a material misstatement assuming no related internal controls exist.
Question 4: Under ISA 570, what is the auditor's responsibility if a going concern assumption is used but substantial doubt exists?
- Issue a qualified opinion automatically
- Evaluate management's plans and assess adequacy of disclosures (Correct answer)
- Withdraw from the engagement
- Issue an adverse opinion immediately
Correct answer: Evaluate management's plans and assess adequacy of disclosures
The auditor must evaluate management's plans to mitigate the doubt and determine whether financial statement disclosures are adequate.
Question 5: Which procedure provides the MOST reliable evidence about the existence of recorded accounts receivable?
- Reviewing the aged receivables listing
- Confirming balances directly with customers (Correct answer)
- Tracing invoices to the sales ledger
- Inspecting subsequent cash receipts
Correct answer: Confirming balances directly with customers
Direct external confirmation from customers provides third-party evidence and is considered highly reliable for the existence assertion.
Question 6: A company's management refuses to provide written representations. What is the appropriate auditor response?
- Rely on oral representations instead
- Issue a disclaimer of opinion or withdraw from the engagement (Correct answer)
- Reduce the scope of audit procedures
- Accept the refusal if management explains the reason
Correct answer: Issue a disclaimer of opinion or withdraw from the engagement
ISA 580 states that refusal to provide written representations constitutes a scope limitation, leading to a disclaimer or withdrawal.
Question 7: What does the term 'audit evidence' encompass?
- Only documents obtained from third parties
- Information used by the auditor in arriving at conclusions on which the audit opinion is based (Correct answer)
- Written representations from management exclusively
- Only quantitative financial data
Correct answer: Information used by the auditor in arriving at conclusions on which the audit opinion is based
Audit evidence includes all informationādocuments, records, representations, and observationsāused to support the auditor's conclusions.
ACCA Audit and Assurance Principles 2
Which sampling method gives every item in a population an equal chance of selection, making it statistically defensible?