Audit & Assurance Flashcards
6 cards from real ACCA AS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Audit & Assurance flashcards as text
Which of the following is an indicator of a 'going concern' problem?
Answer: Net current liabilities (negative working capital)
Net current liabilities (current liabilities exceeding current assets) indicate potential liquidity problems and are a significant indicator of going concern uncertainty.
Substantive analytical procedures are MOST effective when:
Answer: The auditor expects relationships between data items to be predictable and stable
Analytical procedures are most powerful when the auditor can establish a reliable expectation of a balance, which requires predictable and stable relationships between data (e.g., rent expense vs floor area).
An auditor discovers a material misstatement that management refuses to correct. The auditor should:
Answer: Issue a qualified or adverse opinion
If management refuses to correct a material misstatement, the auditor modifies the audit opinion: a material but not pervasive misstatement results in a qualified ('except for') opinion; a pervasive misstatement results in an adverse opinion.
Which of the following is a responsibility of management (not the auditor) regarding financial statements?
Answer: Preparing financial statements that give a true and fair view
The preparation of financial statements that give a true and fair view is management's responsibility. The auditor's role is to audit those statements and express an opinion.
An 'emphasis of matter' paragraph in an audit report:
Answer: Draws attention to a matter already adequately disclosed in the financial statements that is fundamental to users' understanding
An emphasis of matter paragraph (ISA 706) highlights a matter properly presented and disclosed in the financial statements that the auditor considers fundamental to users' understanding. It does not modify the opinion.
Which of the following is the correct order of the audit risk model?
Answer: Audit risk = Inherent risk × Control risk × Detection risk
Audit risk = Inherent risk × Control risk × Detection risk. The auditor assesses inherent and control risk, then sets detection risk to achieve an acceptable overall audit risk level.