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» ISA 300 Planning an audit of financial statements MCQs
» ISA 315 Identifying and assessing the risks of material misstatement MCQs
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» ISA 330 The auditor’s response to assessed risks MCQs
» ISA 402 Audit considerations relating to an entity using a service organization MCQs
ISA 330, The auditor’s response to assessed risks
The objective of ISA 330 is to gather adequate appropriate audit evidence about assessed risks of material misstatement, by designing and putting in place appropriate responses to the risks. Here on MCQs.club we have designed easily understandable Multiple-Choice Questions (MCQs) on ISA 330 revised IFAC that cover the ISA 330 summary, ISA 330 MCQs with answers. These MCQs are a basis of conclusion and Analysis of ISA 330 and Mapping Document. These MCQ on SA 320 are helpful for Competitive exams, Professional accountancy exams and Business management exams.
- The objective of ISA 330 is to gather adequate appropriate audit evidence about assessed risks of material misstatement, by designing and putting in place appropriate responses to the risks.
- True
- False
- The auditor must amend the audit approach in response to risk assessment to ensure they detect the material misstatements in the financial statements. They can achieve this by:
- Emphasising the need for professional scepticism.
- Assigning more experienced staff to complex or risky areas of the engagement.
- Incorporating additional elements of unpredictability in the selection of further audit procedures.
- Making changes to the nature, timing or extent of audit procedures
- All of the above
- The higher the risk of material misstatement, the more likely it is that the auditor may decide it is more effective to perform substantive procedures nearer to, or at, the period end rather than at an earlier date.
- The above statement is correct
- The above statement is incorrect
- A number of key benefits may arise from spreading the work across interim and final audit such as:
- More flexible resource planning within the firm
- Earlier identification of significant matters
- Shareholders and other users receive audited accounts earlier
- Increased audit efficiency
- All of the above
- Typical interim audit procedures include:
- Understanding the entity, assessing inherent risk and identifying significant matters which will be reflected in the subsequent audit strategy and audit plan.
- Recording, evaluating the design and testing the entity’s system of internal control.
- Performing substantive testing to ensure the books and records are a sound basis for performing the year end audit.
- All of the above
- Which of the following is correct regarding the impact of interim audit work on the final audit?
- If the controls tested at the interim stage provided evidence that control risk is low, fewer substantive procedures can be performed.
- If substantive procedures were performed at the interim stage, fewer procedures will be required at the final audit in general.
- Both A&B
- None
- Typical final audit procedures include:
- Substantive testing.
- Analytical review and subsequent events review
- Obtaining written representations
- All of the above
- Which of the following procedures ISA 330 specifically states that can only be performed at or after the period end?
- Agreeing the financial statements to the accounting records
- Examining adjustments made during the course of preparing the financial statements
- Procedures to respond to a risk that, at the period end, the entity may have entered into improper sales contracts, or transactions may not have been finalized
- All of the above
- For an initial audit engagement, additional matters the auditor may consider in establishing the overall audit strategy and audit plan include:
- Unless prohibited by law or regulation, arrangements to be made with the predecessor auditor, for example, to review the predecessor auditor’s working papers
- The audit procedures necessary to obtain sufficient appropriate audit evidence regarding opening balances
- Both A&B
- None
- Audit risk –
- The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
- Audit risk is a function of the risks of material misstatement and detection risk.
- Both A&B
- None
- Auditors can obtain assurance from:
- Tests of control
- Substantive procedures
- Both A&B
- None
- Tests of control –
- are designed to evaluate the operating effectiveness of controls in preventing or detecting and correcting material misstatement.
- are designed to detect material misstatement at the assertion level.
- Both A&B
- None
- Substantive procedures –
- are designed to evaluate the operating effectiveness of controls in preventing or detecting and correcting material misstatement.
- are designed to detect material misstatement at the assertion level.
- Both A&B
- None
- Substantive procedures are audit procedures performed to detect material misstatements in the figures and presentation & disclosures reported in the financial statements.
- True
- False
- Substantive procedures include:
- tests of detail on transactions, account balances and disclosures
- analytical procedures.
- Both A&B
- None
- In order to be able to rely on Internal controls the auditor will need to:
- Determine the impact on the audit approach for specific classes of transactions, account balances and disclosures.
- Ascertain how the system operates
- Assess the design and operating effectiveness of the control system
- All of the above
- Substantive procedures consist of:
- Tests of detail – to verify individual transactions and balances.
- Substantive analytical procedures – analysing relationships between information to identify unusual fluctuations which may indicate possible misstatement.
- Both A&B
- None
- The auditor must always perform substantive testing on material balances in the financial statements.
- True
- False
- Identify the circumstances where the auditor may rely solely on substantive testing:
- where it is considered to be a more efficient or more effective way of obtaining audit evidence, e.g. for smaller organisations.
- where the client’s internal control system cannot be relied on.
- Both A&B
- None
- ISA 330 requires that, whatever level of substantive procedures are carried out, the auditor must carry out procedures such as:
- Agree or reconcile the financial statements to the underlying accounting records.
- Examine material journal entries.
- Examine other adjustments made during the course of preparing the financial statements.
- All of the above
- If control risk is low –
- The auditor can place more reliance on internal controls and evidence generated internally within the entity.
- This increases the appropriateness of interim audit testing and allows the auditor to reduce the quantity of detailed substantive procedures performed at the final audit stage.
- The audit strategy and plan will be updated to reflect that fewer substantive procedures may be required or smaller sample sizes can be tested at the final audit stage.
- All of the above
- If control risk is high –
- Increase the volume of procedures conducted at and after the year-end.
- Increase the level of substantive procedures, in particular, tests of detail.
- Increase the locations included in the audit scope.
- All of the above
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