Question

Multiple choice question. NEED ANSWERS ASAP PLEASE

Which of the following are not included in a management representations letter?
Select one:
a. All transactions have been recorded and are reflected in the financial statements.
b. Management has provided the auditor with all relevant information and access as agreed in the terms of the audit engagement.
c. Management's acknowledgement that it has fulfilled its responsibility for the audit of the financial statements in accordance with the applicable audit framework.
d. The selection and application of accounting policies are appropriate.

An auditor wishes to perform tests of controls on ABC Ltd's cash disbursements procedures. If the control procedures leave no audit trail of documentary evidence, the auditor most likely will test the procedures by:
Select one:
a. Analytical procedures and confirmation.
b. Reperformance and observation.
c. Recalculation and analytical procedures.
d. Observation and enquiry.

Which of the following is not true of audits of accounting estimates?
Select one:
a. An amount measured at fair value where there is estimation uncertainty.
b. The auditor must obtain an understanding of how management identifies accounting estimates that are needed and how these estimates are made.
c. The auditor must gain an understanding of relevant controls for accounting estimates.
d. Management must base estimates on legal or other expert advice.

Financial statement assertions are claims made by an organization's management regarding its financial statements. Which of the following audit objectives relates primarily to the financial report assertion rights and obligations?
Select one:
a. Inventories are properly classified in the statement of financial position as current assets.
b. Inventories include items billed to customers or owned by others.
c. Inventories exclude items billed to customers or owned by others.
d. Obsolete items included in inventories are properly identified..

Two months before year-end the bookkeeper erroneously recorded the receipt of a long-term bank loan by a debit to cash and a credit to sales. Which of the following is the most effective procedure for detecting this type of misstatement?
Select one:
a. Analyse the accounts payable journal.
b. Analyse the notes payable journal.
c. Prepare year-end balance sheet.
d. None of the given answers are correct.

The successor auditor should communicate to the predecessor auditor any information that the predecessor auditor may need to consider. This is a requirement because the predecessor may be able to provide the successor with information that will assist the successor in determining:
Select one:
a. Whether the engagement should be accepted.
b. Whether the predecessor's assessment of control risk has been high.
c. Whether the internal auditors' work should be utilised.
d. To know the results of the audit undertaken in the past

Every organization faces the risk of financial loss due to fraud, but maintaining an effective audit function can help reduce that risk. An auditor discovers a likely fraud during an audit, but concludes that the effect of the fraud is not sufficiently material to affect the auditor's opinion. The auditor should:
Select one:
a. Disclose the fraud to financial reporting council.
b. Discuss with the reserve bank Australia, the additional audit procedures that will be needed to identify the exact amount of the fraud.
c. Modify the audit program to include tests specifically designed to identify the fraud and its impact on the financial report.
d. Disclose the fraud to the appropriate level of the client's management.

Sampling is a technique of selecting individual members or a subset of the population to make statistical inferences from them. Hence, Audit sampling is the application of an audit procedure:
Select one:
a. Applied to items selected randomly.
b. To less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristics of the balance or class.
c. Using statistical methods to evaluate the propriety of the account balance or class of transactions.
d. On a test basis.

Gaps related to the audit process and results can be further broken down into a number of categories. Therefore, The information gap is:
Select one:
a. The difference between what users believe is needed to make informed investment decisions and what is currently available to them.
b. The difference between what information the auditors know and what they should know when they complete the audit
c. The same as the expectations gap.
d. The difference between what auditors need to issue a limited assurance report and what they need to issue a reasonable assurance report.

Australian Auditing Standards establish requirements and provide application and other explanatory material on auditor's responsibility. Who establishes Australian auditing standards?
Select one:
a. Tax Practitioner Board
b. Australian Auditing and Assurance Standards Board (AUASB)
c. Australian Prudential Regulation Authority (APRA)
d. Australian professional Accounting Bodies

Answer 1

1. (a) All transactions have been recorded and reflected in the financial statements - As it is the duty of auditor to assess whether the financial statements are duly recorded or not and form opinion therein.

2. (b) Reperformance and Observation - Since there is no audit trail, the auditor would require to reperform the audit and observe the materiallity in the transactions exist or not.

3. (c) The auditor must gain an understanding of Relevant controls for accounting estimates - Accounting estimates are made by the management on the financial statement prepared by them. Controls to be applied according to the scope of audit.

4. (a) Inventories are properly classified in the statement of financial position as current assets - As inventories to be valued at cost or NRV whichever is lower and at actual cost in the books of accounts.

5. (c) Prepare Year end Balance Sheet.

6. (d) To know the results of the audit undertaken in the past - By communicating with the predecessor auditor, the present auditor cann know the business and how to audit to be undertaken.

7. (c) Modify the audit program to include tests specifically designed to identify the fraud and its impact of financial report.

8. (b) To less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristics of the balance or class.

9. (b) The difference between what information the auditor know and what they should know when they complete the audit.

10. (b) Australian Auditing and Assurance Standard Board (AUASB)