Tag: Topic 2

To gather sufficient and appropriate evidence, the auditor may use external confirmation requests.

For the statement below, select whether it is true, false, it depends on the size of the business, or you should consult a senior colleague

• A positive confirmation request always asks respondents to reply to the auditor to indicate whether they agree with the information provided.

Select ONE answer:

1. False
2. True
3. Depends on the size of the business
4. Consult a senior colleague

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 – False => a positive confirmation may take two forms: requesting a response indicating whether they agree or disagree with the information provided, or requesting the recipient to state the amount owed by/to them.
2. Not correct
3. Not correct
4. Not correct

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The following is an example of a test that an assurance firm might use at the gathering-evidence stage of an assignment.

For the example below, select the type of procedure that the test illustrates.

• Adding the list of year-end receivables

Select ONE answer:

1. Discussion
2. Confirmation
3. Recalculation
4. Reperformance

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 – Recalculation consists of checking the mathematical accuracy of documents or records, therefore casting the list of year-end receivables is a recalculation procedure.
4. Not correct

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Two types of procedures used in gathering evidence are tests of controls and substantive procedures.

For the following example, select the type of procedure that is illustrated below.

• Comparing this year’s sales figures to those of previous years

Select ONE answer:

1. Test of control
2. Substantive procedure
3. Depends on the size of the business
4. Consult a senior colleague

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 – Substantive procedure – remembering that substantive procedures include analytical procedures, which is what this describes
3. Not correct
4. Not correct

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

Two types of procedures used in gathering evidence are tests of controls and substantive procedures.

For the following example, select the type of procedure that is illustrated below.

• Observing dispatch procedures

Select ONE answer:

1. Test of control
2. Substantive procedure
3. Depends on the size of the business
4. Consult a senior colleague

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 – Test of control – that despatch procedures are being properly followed
2. Not correct
3. Not correct
4. Not correct

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

Tick and Bash LLP is considering the preliminary audit strategy for the following new audit client, whose principal characteristics are set out below.

For the new client, select whether Tick and Bash LLP would be likely to rely on internal controls, rely completely on substantive procedures, or it depends on the size of the business, or it should be referred to a more senior auditor.

• Lucy Trading Ltd is an established company with well-documented systems and controls. It has an internal audit function whose principal activity is to monitor the implementation and effectiveness of existing controls.

Select ONE answer:

1. Depends on the size of the business
2. Consult a senior colleague
3. Rely on internal controls
4. Rely completely on substantive procedures

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 – If the auditor cannot rely on the internal controls in place, because they are deficient, he will need to rely completely on substantive procedures. Alex Manufacturing Ltd, a newly formed company without a financial controller, will be unlikely to have effective internal controls therefore the auditor will need to rely completely on substantive procedures. Lucy Trading Ltd is an established company with apparent controls in place so the auditor should be able to test and rely on those controls.
4. Not correct

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