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Test 1
Which control measure is designed to prevent unauthorized sales transactions
Reconciliation of sales records
Sales order approval process Periodic inventory counts Customer credit checks
Which of the following is not controls activities over the sales system? Segregation of duties Sales commission structure
Authorization of sales transactions
Physical controls over inventory
Which three of the following are risks associated with the purchase system
Unauthorised purchases may be made for personal use
Goods and services might not be obtained on the most advantageous terms
Orders are only made with authorised suppliers.
Goods may be accepted that have not been ordered
Select whether the following system represents a strength or a deficiency of the system?
1. All new customers undergo credit checks prior to being accepted and credit limits
are subsequently set by the receivables ledger clerks who record the new customer
details, assign a unique customer number and set credit limits in the master data file
2. Sequentially numbered four-part sales orders are generated for all orders, after
checking available inventory levels. One copy is retained by the sales ordering team
to enable them to monitor progress of the sales orders, one copy is sent to the
customer, one copy is sent to one of the company's warehouses for despatch and the
final copy is sent to the finance department 1. Strength - 2. Strength 1. Strength - 2. Deficiency 1. Deficiency - 2. Strength
1. Deficiency - 2. Deficiency
Which of the following is not a test of control
Inspection of purchase order documentation to confirm that it has been authorised
Review of monthly bank reconciliations performed by the audit client
Examination of purchase invoices for evidence of mathematical accuracy checks
Agreement of the cost of non-current asset additions to purchase documentation
Which one of the following internal controls is most likely to prevent fictitious
employees from being added to the payroll?
Payroll standing data periodically printed out and checked on a line-by-line basis to
independently held employee details
Use of hierarchical passwords over standing data files
Pre-authorisation of all amendments to payroll standing data by an independent official
Supervision of the wages payout by an independent official
Which two of the following are objectives of the purchase ordering part of the purchase system?
Orders are only made with authorised suppliers.
Orders are made at competitive prices.
All goods and services received are used for the company’s purposes, and not private purposes.
Goods and services are only accepted if they have been ordered, and the order has been authorised.
Which internal control helps ensure that sales are recorded accurately and completely? Regular inventory audits
Implementation of a customer relationship management (CRM) system
Reconciliation of sales invoices with shipping documents
Offering discounts to encourage early payment Which one
of the following controls would have prevented the risk that the entity has
been paying invoices in respect of goods which had been returned as faulty before acceptance?
Comparison of supplier statements with payables ledger accounts
Date stamping purchase invoices on receipt
Matching of purchase invoices with goods received records
Matching of purchase invoices with orders
Select the most likely consequence which might arise as a result of the following dificiency
Purchase of goods from unauthorised suppliers
Payment to fictitious suppliers Purchase of inferior goods
Prompt payment discounts not obtained Which three
of the following are control activities relating to the purchases system?
Order forms prepared only when a pre-numbered purchase requisition has been received
Safeguarding of blank order forms
Review security arrangements over blank orders.
Comparison of goods received records with purchase orders Which one
of the following control procedures is most likely to ensure that customers
are invoiced for goods despatched
Use of pre-printed sequentially numbered sales order documentation
Matching of sales orders with despatch records
Matching of despatch records with sales invoices
Requiring customers to sign for goods received
Which of the following best describes segregation of duties in the sales system?
Having one employee responsible for all sales-related tasks
Assigning different employees to handle sales, billing, and cash receipts
Allowing multiple employees access to customer data
Consolidating all sales functions under the finance department
Which three of the following are risks associated with the sales system
Orders may be taken from customers who are not able to pay
Goods may be despatched but not invoiced
The full credit period offered might not be taken
Money might be received at the premises but not banked
Which two of the following control activities will reduce the risk that the different
elements of pay might not be recorded correctly in the payroll
One for one checking of payroll details back to independently maintained personnel records
Segregation of duties throughout the payroll department
Reconciliation of total pay and deductions between one pay day and the next Encryption of data
For the following deficiency, select the risk which is most likely to arise
Details of wages are not regularly checked to the personnel file.
Pay might not be recorded correctly in the general ledger
The company may pay employees who have left
The various elements of pay might not be calculated correctly
Payments might be made incorrectly
Which TWO of the following controls would best ensure that employees are only paid
for work they have performed
Maintenance of personnel records and regular checking of wages and salaries to details in personnel records.
Recording of hours worked by timesheets, clocking in and out arrangements
Obtain evidence that staff only start being paid when they join the company, and are
removed from the payroll when they leave the company
Reconciliation of total pay and deductions between one payday and the next.
Check a sample of hours worked to original clock cards
For each process, select whether it represents a strength or a deficiency of the system
1. The warehouse department agrees the receipt of goods from suppliers to a copy of
the purchase order and confirms the quantity and quality of the goods received and
signs the goods received notes (GRNs) to evidence the checks
2. Supplier statement reconciliations are undertaken on a monthly basis and these are
reviewed by the financial controller 1. Strength - 2. Strength
1. Strength - 2. Deficiency 1. Deficiency - 2. Strength 1. Deficiency - 2. Deficiency
Which two of the following internal controls are most likely to prevent services being
used for the private purposes of employees?
Purchase orders are processed by the buying department following authorisation by the production director
Purchase requisitions must be signed by two team members for any given project
Purchase orders should only be placed with authorised contractors
Purchase invoices are matched to authorised purchase orders
One of the control objectives of the sales system of B Co is to ensure that goods and
services are sold to credit-worthy customers. Which of the following control activities
would assist B Co in achieving this objective?
All sales orders are based on authorised price lists.
Credit limits are checked before sales orders are accepted.
Overdue debts are chased each month by the credit controller.
The aged-debt listing is reviewed by the finance director on a monthly basis Test 2
When determining a sample size for TOC, there is a number of factors which an auditor
should take into account. If there is an increase in the number of invoices in the population,
select whether the above factor would cause the sample size to increase, decrease or to have negligible effect 4/4 Increase Decrease Negligible effect
Which THREE of the following statement are correct? When using analytical procedures, assurance providers should: 4/4
consider the source of the information and whether it is reliable
consider the knowledge gained during previous assurance engagements
not use information that has been internally generated at the entity
consider whether the information they might require will available
There is an opinion as follows: “Audit software makes use of the client’s specialized software
to run audit procedures”. Is it true or false in respect of computer-assisted audit techniques? 4/4 True False
Which ONE of the following statements is incorrect in respect of reliability of audit evidence? 4/4
An original copy of a lease agreement is more reliable than a photocopy
A sales invoices is more reliable than a purchase invoice
A bank statement is more reliable than the cash at bank nominal ledger account
Which TWO of the following statements are incorrect? 0/4
Analytical procedures is compulsory at the planning stage of an audit
Inspection of assets confirms rights and obligations
Inspection of a purchase invoice confirms existence
Inquiry of third parties gives better evidence than inquiries of entity insiders
Which TWO of the following procedures describe tests for understatement? 4/4
Selecting a sample of items of vehicles from the asset register and physically verifying their existence
Selecting a sample of sales invoices and tracing these to a matching dispatch record
Selecting a sample of dispatch records and tracing these to a matching sales invoice and entry in the sales account
Selecting a sample of items of equipment physically verified by the assurance provider and
tracing these to an entry in the asset register
In which THREE of the following situations could audit software appropriately be used? 4/4
When extracting all invoices to specific customers
When testing controls over invoice processing
When checking calculations on a selection of invoices
When extracting a sample of invoices over a certain value
Which TWO of the following procedures NOT describe tests for understatement? 0/4
Selecting a sample of items of equipment physically verified by the assurance provider and
tracing these to an entry in the asset register
Selecting a sample of items of vehicles from the asset register and physically verifying their existence
Selecting a sample of sales invoices and tracing these to a matching dispatch record
Selecting a sample of dispatch records and tracing these to a matching sales invoice and entry in the sales account
For the following description: “Mary is checking whether purchase invoices have been
authorized for payment. She has selected all the December purchase invoices as her sample
and has reviewed them for an authorization signature”. Which ONE of the below selections is described? 4/4 Block selection Monetary unit sampling Systematic selection
Which ONE of the following is purpose of a written representation letter from management? 4/4
Confirmation that all representations made by management in the course of the audit
Confirmation that management understands the terms of the engagement
Confirmation that management has received the signed audit repor
Confirmation that management has recorded and reflected all transactions in the financial statements
On which TWO of the following matters should an auditor seek written representations? 4/4
Whether plant and equipment held on the client’s premises exists
Whether there are any undisclosed subsequent events
Whether there are plans to abandon product lines that will result in obsolete inventory
The existence (or not) of reconciling items between the cash balance in the accounts and the bank statement balance
Which TWO of the following procedures are most appropriate to confirm the valuation of trade receivables? 4/4 Review of sales invoices
Review of the receivables ledger
Direct confirmations with customers Review of cash paid after date
Which ONE of the following NOT provide evidence to support the rights and
obligations assertion in relation to non-current asset? 4/4 Title deeds Purchase invoices Sales invoices Vehicle registration documents
Which of the following audit procedures to prove the assertion of valuation of inventory? 4/4
Attending inventory count and carrying out sample count on a number of items
Comparing cost on a number of inventory items to sales invoices subsequent to the year end
Perform purchase cut-off and sales cut-off test
Which ONE of the following describes how an auditor would check the completeness
assertion for a non-current asset? 4/4
Trace an entry in the financial statements to the physical item
Trace an entry in the non-current asset register to the financial statements
Trace an entry in the non-current asset register to the physical item
Trace the physical item to the non-current asset register
Which ONE of the following types is the general procedure that auditor normally use in test of
controls relating to payroll system? 4/4
Inspection, External confirmation, Observation, Recalculation
Inspection, Enquiry, Observation, Re-performance
Inspection, Observation, Analytical procedures, Re-performance
Inspection, Observation, Recalculation, Re-performance
The results of substantive audit tests at Blue plc discovered that no misstatements
found. The materiality threshold set for these tests was £ 1,000. For above result,
select the action which should be taken by the audit senior: 4/4 Draw conclusion Refer to senior colleague Extend sample
Which THREE of the following statements are correct relating to tests of controls and substantive procedures? 0/4
Sending confirmation letter for trade receivable is a type of substantive procedure
Observing dispatch procedures is a type of substantive procedure
Comparing this year’s sales figures to those of previous years is a type of substantive procedure
Examining the instructions issued for a year-end physical inventory count is a type of test of control
Management should compare cost and NRV for each item of inventory. Which TWO of the
following circumstances could result in NRV being lower than cost? 4/4 Trade discounts from suppliers An increase in selling price
An increase in the cost of raw materials which cannot be passed on to the customer
An increase in production overheads
Which TWO of the following circumstances would reduce the reliability of the results
of analytical procedures? 4/4
Budgeted figures in the past have proved to be highly optimistic
Reliable industry data are available
Detailed information is available analysed by department
Significant deficiencies in the internal control system have been identified in the past
Which TWO of the following statements identify an appropriate source of information for audit
work directed towards the stated risk associated with tangible non-current assets? 0/4
Physical inspection of the assets themselves by the auditor may generate evidence in
relation to the risk of the company not actually owning the assets
Sales invoices for assets sold within the year may contain evidence in relation to the risk of
the company not actually owning the assets
Purchase invoices for assets purchased within the year may contain evidence in relation to
the risk of omission of assets owned by the company
Valuations carried out by third party valuers may contain evidence in relation to the risk of the
assets being incorrectly presented in the financial statements
Which ONE of the following statements is incorrect relating to tests of controls and substantive procedures? 4/4
Recalculating the depreciation expenses is a type of substantive procedure
Sending confirmation letter for trade receivable is a type of substantive procedure
Comparing this year’s sales figures to those of previous years is a type of substantive procedure
Re-performing a control activity of audited entity is a type of substantive procedure
When audit the wages system of Green Ltd, auditor discovered that there are no procedures
for dealing with non-routine matters. Which ONE of the following risks is most likely to arise from the above deficiency? 4/4
The company may pay employees who have left
Pay might not be recorded correctly in the general ledger
Which TWO of the following are risks associated with recording phase in the sales system? 4/4
Goods may be despatched but not invoiced
Invoiced sales might not be properly recorded
Credit notes might not be properly recorded
Orders may not be recorded properly and therefore not fulfilled and customers may be lost
The auditor of Green Ltd has identified the following deficiencies within the payroll system:
“Many employees work overtime but there is no system for authorizing the level of overtime
claimed”. Which of the following is the most likely consequence which might arise as a result of that deficiency? 4/4
Payroll payments are only made to bona fide employees
Total payroll cost are not matched to budgets
Employees may be paid at wrong amount
The computerised payroll may contain miscalculations Test 3
Which TWO of the following statements are incorrect in respect of procedures to obtain evidence? ···/4
Recalculation is a strong form of evidence as it is created by the assurance provider
Physical examination of property, plant and equipment confirms existence
Inquiry is always an unreliable means of obtaining evidence
Physical examination of property, plant and equipment confirms ownership
The assurance provider is using statistical sampling. Which THREE of the following methods
would be most appropriate to use to select a sample of accounts receivable? ···/4 Monetary unit selection Haphazard selection Systematic selection Random selection
Which ONE of the following procedures describe tests for overstatement? ···/4
Selecting a sample of sales invoices and tracing these to a matching dispatch record
Selecting a sample of items of vehicles from the asset register and physically verifying their existence
Selecting a sample of dispatch records and tracing these to a matching sales invoice and entry in the sales account
Selecting a sample of items of equipment physically verified by the assurance provider and
tracing these to an entry in the asset register
Which TWO of the following are NOT factors that an auditor should take into account when
determining the sample size for a test of details? ···/4
The skill of the team member assigned to carry out the test
An increase in the level of expected misstatement
A decrease in the auditor’s assessment of the risk of material misstatement
The time available to complete the test
The auditor of Grey Ltd has carried out a test on a sample of receivables and has discovered
a higher than expected number of misstatements. Which ONE of the following steps would
be an inappropriate response to this? ···/4
Consider the effect of the misstatements on other parts of the audit
Estimate the probable overall misstatement by extrapolating the results
Increase the tolerable misstatement
Investigate the nature and cause of the misstatements
Written representations may be sought as audit evidence. Which TWO of the following
are valid circumstances in which written representations may be required? ···/4
Where information which would normally be expected to be available is unavailable
To support other evidence about the suitability of accounting policies
To support inspection of board minute introducing the directors’ intention to sell a material investment
When the alternative audit procedures would be too time consuming
Which TWO of the following are purposes of a written representation letter? ···/4
Provision of details of proposed modifications to the auditor’s report
Provision of evidence in respect of material items where other evidence is available
Acknowledgement that management has fulfilled its responsibility for the preparation of the financial statements
Recognition by management of its belief that the aggregate of uncorrected misstatements
are immaterial to the financial statements
Which ONE of the following procedures would provide evidence of valuation of motor vehicles? ···/4
Review of purchase invoices for motor vehicles acquired in the period
Vouching a sample of motor vehicles in the asset register to registration documents
Confirmation that calculations on the non-current asset schedule are correct in respect of motor vehicles
Physical inspection of motor vehicles
Which TWO of the following statements are correct? ···/4
When testing for understatement, the assurance provider will test items from the accounting
records to the supporting documents
When testing for overstatement, the assurance provider will test items from the accounting
records to the supporting documents
When testing for understatement, the assurance provider will select items from outside the
accounting records and trace to the records
When testing for overstatement, the assurance provider will select items from outside the
accounting records and trace to the records
Which of the following statements about the nature and extent of test of controls are
true?: (1) Inquiry alone is not sufficient to test the operating effectiveness of controls;
(2) If the control environment is assessed as strong, the auditor will decide to perform
test the effectiveness of relevant controls ···/4 Both statements are true Both statements are false Statement (1) is false Statement (2) is false
Which TWO of the following statements are correct relating to tests of controls and substantive procedures? ···/4
Re-performing a control activity of audited entity is a type of substantive procedure
Recalculating the depreciation expenses is a type of substantive procedure
Sending confirmation letter for trade receivable is a type of substantive procedure
Examining the instructions issued for a year-end physical inventory count is a type of substantive procedure
Direct confirmations from suppliers are not always used by auditors. Under which two of the
following circumstances are supplier confirmations necessary? ···/4
Where the auditor suspects that the client is deliberately trying to understate payables
Where supplier invoices and supplier statements are available and part of the standard
documentation of a purchases cycle
Where there is a pressure on the auditor to complete his audit on time
Where the client refuses to provide supplier statements to the auditor
The results of substantive audit tests at Blue Ltd discovered that damaged items of inventory
have not been written down to net realizable value. For the above circumstances, which ONE
of the following assertions would be affected? ···/4 Occurrence Classification
Accuracy, valuation and allocation Cut-off
Which TWO of the following are factors that an auditor should take into account when
determining the sample size for a test of details? ···/4
An increase in the level of expected misstatement
A decrease in the auditor’s assessment of the risk of material misstatement
The time available to complete the test
The skill of the team member assigned to carry out the test
When audit the wages system of Blue Ltd, auditor discovered that the audited entity does not
perform the reconciliations of the payroll to timesheets regularly. Which ONE of the following
risks is most likely to arise from the above deficiency? ···/4
The company may pay employees who have left
The various elements of pay might not be calculated correctly
Pay might not be recorded correctly in the general ledger
Which ONE of the following types is the general procedure that auditor normally use in test of
controls relating to payroll system? ···/4
Inspection, External confirmation, Observation, Recalculation
Inspection, Enquiry, Observation, Re-performance
Inspection, Observation, Analytical procedures, Re-performance
Inspection, Observation, Recalculation, Re-performance
Which ONE of the followings is NOT true in respect of internal control over payroll? ···/4
Changes in pay rates should be authorised by board of directors
Overtime hours should be reviewed by the production supervisor prior to payment, to ensure
that only previously authorised overtime is paid for
Requiring employees to clock in and out of work (using swipe cards) to ensure that they are
paid for the work they performed
Re-performance of calculations is unnecessary where the payroll is computerised and is
automatically generated from the system
The auditor of Green Ltd has idendified the following deficiencies within the purchase
system: “Purchase ledger clerks permitted to amend standing data on the payables master
file”. Which of the following is the most likely consequence which might arise as a result of that deficiency? ···/4
Payment to fictitious suppliers Purchase of inferior goods
Prompt payment discounts not obtained
Green Ltd operates a number of control procedures in its sales system. Assuming that all
controls are operating effectively, which one of the following control procedures is most likely
to ensure that customers are invoiced for goods despatched? ···/4
Use of pre-printed sequentially numbered sales order documentation
Matching of sales orders with dispatch goods
Matching of dispatch records with sales invoices
Requiring customers to sign for goods received
The auditor of Green Ltd has idendified the following deficiencies within the purchase
system: “Invoices are not checked to original orders”. Which of the following is the most likely
consequence which might arise as a result of that deficiency? ···/4
Accepting inferior quality goods False invoices could be paid
Services provided are not accurately recorded
Prompt payment discounts not obtained
Which THREE of the followings are internal audit functions? ···/4
Examining financial and operating information
Implementing internal controls in the purchase department
Reviewing the economy, efficiency and effectiveness of operations
Reviewing compliance with laws, regulations and other requirements
Which TWO of the following documents would be held on a current audit file? ···/4 Lease agreements
Details of the history of the client’s business Communications with experts Audit file review notes
Which THREE of the following are control activities relating to the purchases system? ···/4
Safeguarding of blank order forms
All orders are authorised by a senior staff member
All goods and services received are accurately recorded
Order forms are sequentially pre-numbered
Which TWO of the following are risks associated with recording phase in the sales system? ···/4
Goods may be despatched but not invoiced
Invoiced sales might not be properly recorded
Credit notes might not be properly recorded
Orders may not be recorded properly and therefore not fulfilled and customers may be lost
Which THREE of the following are likely to be kept on a current audit file? ···/4 Planning memorandum Time budgets and summaries Engagement letter
Previous year’s signed financial statements Review notes EXAM 2
When determining a sample size for TOC, there is a number of factors which an auditor
should take into account. If there is an increase in the number of invoices in the population,
select whether the above factor would cause the sample size to increase, decrease or to have negligible effect 4/4 Increase Decrease Negligible effect
Which THREE of the following statement are correct? When using analytical procedures, assurance providers should: 4/4
consider the source of the information and whether it is reliable
consider the knowledge gained during previous assurance engagements
not use information that has been internally generated at the entity
consider whether the information they might require will available
There is an opinion as follows: “Audit software makes use of the client’s specialized software
to run audit procedures”. Is it true or false in respect of computer-assisted audit techniques? 4/4 True False
Which ONE of the following statements is incorrect in respect of reliability of audit evidence? 4/4
An original copy of a lease agreement is more reliable than a photocopy
A sales invoices is more reliable than a purchase invoice
A bank statement is more reliable than the cash at bank nominal ledger account
Which TWO of the following statements are incorrect? 4/4
Analytical procedures is compulsory at the planning stage of an audit
Inspection of assets confirms rights and obligations
Inspection of a purchase invoice confirms existence
Inquiry of third parties gives better evidence than inquiries of entity insiders
Which TWO of the following procedures describe tests for understatement? 4/4
Selecting a sample of items of vehicles from the asset register and physically verifying their existence
Selecting a sample of sales invoices and tracing these to a matching dispatch record
Selecting a sample of dispatch records and tracing these to a matching sales invoice and entry in the sales account
Selecting a sample of items of equipment physically verified by the assurance provider and
tracing these to an entry in the asset register
In which THREE of the following situations could audit software appropriately be used? 4/4
When extracting all invoices to specific customers
When testing controls over invoice processing
When checking calculations on a selection of invoices
When extracting a sample of invoices over a certain value
Which TWO of the following procedures NOT describe tests for understatement? 4/4
Selecting a sample of items of equipment physically verified by the assurance provider and
tracing these to an entry in the asset register
Selecting a sample of items of vehicles from the asset register and physically verifying their existence
Selecting a sample of sales invoices and tracing these to a matching dispatch record
Selecting a sample of dispatch records and tracing these to a matching sales invoice and entry in the sales account
For the following description: “Mary is checking whether purchase invoices have been
authorized for payment. She has selected all the December purchase invoices as her sample
and has reviewed them for an authorization signature”. Which ONE of the below selections is described? 4/4 Block selection Monetary unit sampling Systematic selection
Which ONE of the following is purpose of a written representation letter from management? 4/4
Confirmation that all representations made by management in the course of the audit
Confirmation that management understands the terms of the engagement
Confirmation that management has received the signed audit repor
Confirmation that management has recorded and reflected all transactions in the financial statements
On which TWO of the following matters should an auditor seek written representations? 4/4
Whether plant and equipment held on the client’s premises exists
Whether there are any undisclosed subsequent events
Whether there are plans to abandon product lines that will result in obsolete inventory
The existence (or not) of reconciling items between the cash balance in the accounts and the bank statement balance
Which TWO of the following procedures are most appropriate to confirm the valuation of trade receivables? 4/4 Review of sales invoices
Review of the receivables ledger
Direct confirmations with customers Review of cash paid after date
Which ONE of the following NOT provide evidence to support the rights and
obligations assertion in relation to non-current asset? 4/4 Title deeds Purchase invoices Sales invoices Vehicle registration documents
Which of the following audit procedures to prove the assertion of valuation of inventory? 4/4
Attending inventory count and carrying out sample count on a number of items
Comparing cost on a number of inventory items to sales invoices subsequent to the year end
Perform purchase cut-off and sales cut-off test
Which ONE of the following describes how an auditor would check the completeness
assertion for a non-current asset? 4/4
Trace an entry in the financial statements to the physical item
Trace an entry in the non-current asset register to the financial statements
Trace an entry in the non-current asset register to the physical item
Trace the physical item to the non-current asset register
Which ONE of the following types is the general procedure that auditor normally use in test of
controls relating to payroll system? 4/4
Inspection, External confirmation, Observation, Recalculation
Inspection, Enquiry, Observation, Re-performance
Inspection, Observation, Analytical procedures, Re-performance
Inspection, Observation, Recalculation, Re-performance
The results of substantive audit tests at Blue plc discovered that no misstatements
found. The materiality threshold set for these tests was £ 1,000. For above result,
select the action which should be taken by the audit senior: 4/4 Draw conclusion Refer to senior colleague Extend sample
Which THREE of the following statements are correct relating to tests of controls and substantive procedures? 4/4
Sending confirmation letter for trade receivable is a type of substantive procedure
Observing dispatch procedures is a type of substantive procedure
Comparing this year’s sales figures to those of previous years is a type of substantive procedure
Examining the instructions issued for a year-end physical inventory count is a type of test of control
Management should compare cost and NRV for each item of inventory. Which TWO of the
following circumstances could result in NRV being lower than cost? 4/4 Trade discounts from suppliers An increase in selling price
An increase in the cost of raw materials which cannot be passed on to the customer
An increase in production overheads
Which TWO of the following circumstances would reduce the reliability of the results
of analytical procedures? 4/4
Budgeted figures in the past have proved to be highly optimistic
Reliable industry data are available
Detailed information is available analysed by department
Significant deficiencies in the internal control system have been identified in the past
Which TWO of the following statements identify an appropriate source of information for audit
work directed towards the stated risk associated with tangible non-current assets? 4/4
Physical inspection of the assets themselves by the auditor may generate evidence in
relation to the risk of the company not actually owning the assets
Sales invoices for assets sold within the year may contain evidence in relation to the risk of
the company not actually owning the assets
Purchase invoices for assets purchased within the year may contain evidence in relation to
the risk of omission of assets owned by the company
Valuations carried out by third party valuers may contain evidence in relation to the risk of the
assets being incorrectly presented in the financial statements
Which ONE of the following statements is incorrect relating to tests of controls and substantive procedures? 4/4
Recalculating the depreciation expenses is a type of substantive procedure
Sending confirmation letter for trade receivable is a type of substantive procedure
Comparing this year’s sales figures to those of previous years is a type of substantive procedure
Re-performing a control activity of audited entity is a type of substantive procedure
When audit the wages system of Green Ltd, auditor discovered that there are no procedures
for dealing with non-routine matters. Which ONE of the following risks is most likely to arise from the above deficiency? 4/4
The company may pay employees who have left
Pay might not be recorded correctly in the general ledger
Which TWO of the following are risks associated with recording phase in the sales system? 4/4
Goods may be despatched but not invoiced
Invoiced sales might not be properly recorded
Credit notes might not be properly recorded
Orders may not be recorded properly and therefore not fulfilled and customers may be lost
The auditor of Green Ltd has identified the following deficiencies within the payroll system:
“Many employees work overtime but there is no system for authorizing the level of overtime
claimed”. Which of the following is the most likely consequence which might arise as a result of that deficiency? 4/4
Payroll payments are only made to bona fide employees
Total payroll cost are not matched to budgets
Employees may be paid at wrong amount
The computerised payroll may contain miscalculations