Tag: Topic 2

For each of the following situations, select the most appropriate approach which should be used by the assurance firm in the given circumstances.

-The audit of a client where controls have been assessed as strong

Select ONE answer:

1. A mix of tests of controls and substantive procedures
2. Some light analytical review
3. Substantive procedures only
4. Tests of controls only

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 1

1. Correct – is correct, as where controls have been assessed as strong, this means that they can be relied upon. In this way, tests of controls are carried out coupled with limited substantive procedures.
2. Not correct
3. Not correct
4. Not correct

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

For the following example, select the level of assurance you would expect to be given.

-Report on review of interim financial information

Select ONE answer:

1. Reasonable
2. Absolute
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 – The review engagements provide limited assurance. No engagement provides absolute assurance.
4. Not correct

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

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

For the following example, select the level of assurance you would expect to be given.

-Report on prospective financial information

Select ONE answer:

1. Reasonable
2. Limited
3. Absolute
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 – The review engagements provide limited assurance. No engagement provides absolute assurance.
3. Not correct
4. Not correct

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

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

For the following example, select the level of assurance you would expect to be given.

– Statutory Audit

Select ONE answer:

1. Reasonable
2. Limited
3. Absolute
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 1

1. Correct – It is only the statutory audit that provides reasonable assurance. No engagement provides absolute assurance.
2. Not correct
3. Not correct
4. Not correct

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

Which ONE of the following describes a manifestation of the expectations gap?

Select ONE answer:

1. Users are discovering that the directors refuse to cooperate in providing the auditor with the evidence he requests
2. Shareholders approve the appointment of the auditor at an annual general meeting
3. Users are blaming the auditors for a fraud discovered in a company after an audit has taken place
4. Users do not just rely on the audited financial statements as a fair valuation of the company

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 responsibility for preventing fraud primarily lies with company management, including the CEO and CFO, who must ensure accurate financial reporting and establish strong internal controls. Additionally, the Board of Directors and the Audit Committee play crucial roles in overseeing management and ensuring an ethical corporate culture.
4. Not correct

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