Tag: Audit

The level of assurance provided by an assurance engagement will depend on the type of engagement.

For each of the following examples, select the level of assurance which would be given: Review of financial information?

Select ONE answer:

1. Absolute
2. Reasonable
3. Limited
4. Unlimited

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == >    A statutory audit provides reasonable assurance, which reflects the comprehensiveness of the audit procedures carried out. No assurance engagement, not even a statutory audit, can give absolute assurance. A review of financial information gives limited assurance, which is a lower level of assurance than a statutory audit, and thus, its conclusion would be worded negatively. A report on profit and cash flow forecasts gives limited assurance because forecasts are, by nature, about uncertain future events and so cannot be made with enough certainty to give a ‘reasonable’ level of assurance.
4. Not correct

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The level of assurance provided by an assurance engagement will depend on the type of engagement.

For each of the following examples, select the level of assurance which would be given – Statutory audit?

Select ONE answer:

1. Absolute
2. Reasonable
3. Limited
4. Unlimited

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct == > A statutory audit provides reasonable assurance, which reflects the comprehensiveness of the audit procedures carried out. No assurance engagement, not even a statutory audit, can give absolute assurance. A review of financial information gives limited assurance, which is a lower level of assurance than a statutory audit, and thus, its conclusion would be worded negatively. A report on profit and cash flow forecasts gives limited assurance because forecasts are, by nature, about uncertain future events, and so cannot be made with enough certainty to give a ‘reasonable’ level of assurance.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

In the context of a statutory audit, which ONE of the following is NOT an example of the expectation gap?

The belief that?

Select ONE answer:

1. the auditor’s report certifies the financial statements as correct
2. the auditor’s principal duty is to detect fraud
3. the auditor is employed by the directors
4. the auditor checks all transactions

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == >    The expectation gap is the gap between what users of financial statements believe the auditor does and what the auditor actually does. The following three are common manifestations of the expectation gap: • the auditor’s report certifies the financial statements as correct • the auditor’s principal duty is to detect fraud • the auditor checks all transactions. The belief that the auditor is employed by the directors is a common misconception but not a manifestation of the expectation gap. (The company employs the auditor, who is appointed by the shareholders in a general meeting.)
4. Not correct

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The following is an extract from an independent accountant’s unmodified report on a profit forecast:

‘Based on our examination of the evidence supporting the assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the forecast.’

Which one of the following best describes the type of assurance provided by this statement?

Select ONE answer:

1. Positive assurance expressed negatively
2. Negative assurance expressed positively
3. High level of assurance expressed negatively
4. Limited level of assurance expressed negatively

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > There are two types of conclusions which can be given: a conclusion expressed in positive terms and a conclusion expressed in negative terms. A conclusion expressed in negative terms is indicated by the phrase ‘nothing has come to our attention’, which indicates the restricted work carried out and hence the fact that the assurance is limited, as opposed to reasonable. Hence, this type of assurance is a limited level of assurance expressed negatively.

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In any assurance engagement, there are a number of parties involved.

Select which party receives the final report?

Select ONE answer:

1. Responsible party
2. Practitioner
3. User
4. The public

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == >    It is the responsible party that prepares the subject matter. The practitioner is responsible for gathering evidence. The user is the party who receives the final report.
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.