Assurance & Audit Flashcards
6 cards from real ACA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Assurance & Audit flashcards as text
Under ISA 570, if material uncertainty about going concern exists, the auditor must:
Answer: Include an Emphasis of Matter paragraph if the disclosure is adequate
ISA 570 requires the auditor to include an Emphasis of Matter paragraph drawing attention to the going concern note when management's disclosure is adequate; a modified opinion is issued if disclosure is inadequate.
Which of the following best describes inherent risk in the audit risk model?
Answer: The risk of a material misstatement existing before considering internal controls
Inherent risk is the susceptibility of an assertion to a material misstatement, assuming no related controls; it arises from the nature of the item, the industry, or the entity's circumstances.
Under ISA 600, a group auditor who places reliance on a component auditor must:
Answer: Be involved in the risk assessment and review sufficient appropriate evidence
ISA 600 requires the group engagement team to be involved in the component auditor's risk assessment and to evaluate whether sufficient appropriate audit evidence has been obtained.
An assurance engagement provides the practitioner's conclusion on a subject matter. Which level of assurance results in a 'nothing has come to our attention' conclusion?
Answer: Limited assurance
Limited (or moderate) assurance results in negative assurance — 'nothing has come to our attention to suggest...' — whereas reasonable assurance results in a positive conclusion.
Under ISA 402, when a client uses a service organisation, the auditor should:
Answer: Obtain an understanding of the services provided and controls at the service organisation
ISA 402 requires the auditor to understand the services provided by the service organisation and their effect on the client's controls, possibly relying on a service auditor's report (SOC report).
Which procedure would provide the most reliable evidence about the existence of trade receivables?
Answer: Direct external confirmation from customers
Direct external confirmation (circularisation) is the most reliable evidence for existence of receivables as it comes from an independent third party rather than the client's own records.