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
The primary objective of an external audit is to:
Answer: Express an opinion on whether the financial statements give a true and fair view
The external auditor's objective (ISA 200) is to obtain reasonable assurance that the financial statements as a whole are free from material misstatement and to express an opinion accordingly.
'Materiality' in audit is best described as:
Answer: Information is material if its omission or misstatement could influence the economic decisions of users
Materiality (ISA 320) is defined by reference to whether omission or misstatement of information could influence users' economic decisions. It is both quantitative and qualitative.
Which of the following is an example of a 'substantive procedure'?
Answer: Confirming year-end trade receivables balances directly with customers
Substantive procedures (ISA 330) include tests of detail (agreeing specific balances or transactions) and analytical procedures, aimed at detecting material misstatements. Circularising debtors is a test of detail.
Which of the following would give the auditor the MOST reliable evidence?
Answer: A bank confirmation letter received directly from the client's bank
Bank confirmation letters sent directly from the bank to the auditor are highly reliable: they are external (not client-generated) and received directly by the auditor.
'Audit risk' is the risk that:
Answer: The auditor expresses an inappropriate opinion when the financial statements are materially misstated
Audit risk (ISA 200) = the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. It comprises inherent, control and detection risk.
Which of the following correctly describes 'detection risk'?
Answer: The risk that the auditor's procedures fail to detect existing material misstatements
Detection risk is the risk that audit procedures will not detect a material misstatement that actually exists. The auditor controls detection risk by adjusting the nature, timing and extent of procedures.