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Audit and Assurance Principles Flashcards

7 cards from real ACCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Audit and Assurance Principles flashcards as text

  1. Which sampling method gives every item in a population an equal chance of selection, making it statistically defensible?

    Answer: Random sampling

    Random sampling ensures each item has an equal probability of selection, providing a statistically valid basis for audit conclusions.

  2. An auditor identifies a significant deficiency in internal control over financial reporting. To whom must this be communicated?

    Answer: Those charged with governance

    Significant deficiencies in internal control must be communicated in writing to those charged with governance under ISA 265.

  3. What is 'inherent risk' in the context of the audit risk model?

    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.

  4. Under ISA 570, what is the auditor's responsibility if a going concern assumption is used but substantial doubt exists?

    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.

  5. Which procedure provides the MOST reliable evidence about the existence of recorded accounts receivable?

    Answer: Confirming balances directly with customers

    Direct external confirmation from customers provides third-party evidence and is considered highly reliable for the existence assertion.

  6. A company's management refuses to provide written representations. What is the appropriate auditor response?

    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.

  7. What does the term 'audit evidence' encompass?

    Answer: Information used by the auditor in arriving at conclusions on which the audit opinion is based

    Audit evidence includes all information—documents, records, representations, and observations—used to support the auditor's conclusions.