Auditing and Historical Financial Information

Topics: Auditing, 2008, Audit Pages: 11 (1861 words) Published: January 15, 2013
This question paper must be
returned. Candidates are not
permitted to remove any part
of it from the examination room.

STUDENT’S SURNAME........................................... OTHER NAMES......................................................... STUDENT NUMBER.................................................


ACCG340 Auditing and Assurance Services

Time Allowed:

2 hours plus 10 minutes reading time

Total Number of Questions:

FIVE (5)

Answer question 1 on the computer marking sheet provided.
Answer questions 2 to 3 in the space provided in this paper (Paper A). Answer questions 4 to 5 in the space provided in Paper B.
Answer all questions. All booklets must be returned.
Materials permitted:
Dictionaries are not permitted.
Calculators are not permitted.















QUESTION 1 (16 Marks)
MARK THE CORRECT ANSWER ON THE COMPUTER MARKING SHEET PROVIDED 1: To which assurance engagements does the Framework for Assurance Engagement apply? A: Audits of historical financial information
B: Reviews of historical financial information
C: Assurance engagements other than audits or reviews of historical financial information D: All of the above.
2: Which of the following bodies monitors the operation of the Australian Accounting Standards Board?
A: Australian Stock Exchange
B: Financial Reporting Council
C: Australian Securities and Investments Commission
D: Auditing and Assurance Standards Board

3: Ethics requires:
A: Knowledge of moral principles.
B: Skill in applying moral principles.
C: The development of virtues within individuals.
D: All of the above.
4: Common law:
A: Requires that the auditor guarantee their work.
B: Requires that the auditor performs their work with due care. C: Requires that the auditor discovers all fraud.
D: Requires that the auditor check all transactions.
5: Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness?
A: Compare a sample of shipping documents to related sales invoices. B: Observe the client's distribution of payroll cheques.
C: Confirm a sample of recorded receivables by direct communication with the debtors. D: Review standard bank confirmations for indications of kiting. 6: An auditor who finds that the client has committed an illegal act would be most likely to withdraw from the engagement when the:

A: Illegal act affects the auditor's ability to rely on management representations. B: Illegal act has material financial report implications.
C: Illegal act has received widespread publicity.
D: Auditor cannot reasonably estimate the effect of the illegal act on the financial report.


7: Your audit client has a new management incentive scheme in place which includes a bonus calculated on the basis of the increase in net profit over the previous year. The basis of the bonus will remain the same for the next three (3) years. Your client has had a poor year and will not meet its budget or last year's net profit. Which of the following represents an inherent risk? A: Insufficient provisions.

B: Next year's expenses taken up this year.
C: Next year's sales incorrectly taken up this year.
D: Overstatement of debtors.
8: How does the extent of substantive tests required to constitute sufficient appropriate audit evidence vary with the auditor's assessment of control risk? A: Randomly
B: Disproportionately
C: Directly
D: Inversely
9: A procedure that would most likely be used by an auditor in performing tests of controls that involve segregation of functions and that leave no audit trail is: A: Observation.
B: Inspection.
C: Reconciliation.
D: Re-performance.

10: An auditor concluded that no excessive costs for idle plant were charged to inventory. This conclusion most likely...
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