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ISA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing
The objectives of an auditor under ISA 200 are to Obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Here on MCQs.club we have prepared easily understood Multiple-Choice Questions (MCQs) on ISA 200 that fully cover ISA 200 revised, the summary of ISA 200 and these SA 200 MCQs are a basis for conclusions for ISA 200. These MCQs are useful for accountancy exams, Business management exams and Competitive exams.
- The purpose of an external audit engagement is to ‘enhance the degree of confidence of intended users in financial statements.’
- True
- False
- The Purpose of an external audit engagement is achieved by the auditor expressing an opinion on whether the financial statements:
- Give a true and fair view (or present fairly in all material respects).
- Are prepared, in all material respects, in accordance with an applicable financial reporting framework.
- Both A&B
- None
- The objectives of an auditor under ISA 200 are to:
- Obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error.
- Express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.
- Report on the financial statements, and communicate as required by ISAs, in accordance with the auditor’s findings.
- All of the above
- ISA 200 requires the auditor to:
- comply with all ISAs relevant to the audit
- comply with relevant ethical requirements
- plan and perform an audit with *professional skepticism
- exercise professional judgement in planning and performing an audit
- obtain sufficient appropriate audit evidence to allow him to obtain reasonable assurance
- All of the above
- (I) (III) and (IV) only
- (I) (IV) and (V) only
- None
- Professional skepticism –An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.
- The above statement is correct
- The above statement is incorrect
- Sufficient appropriate audit evidence- Sufficiency is the measure of the quantity of audit evidence. Appropriateness is the measure of the quality of audit evidence in terms of its relevance and reliability.
- The above is correct
- The above is incorrect
- One of the main requirements of the audit is for the auditor to obtain sufficient appropriate evidence to reduce audit risk to an acceptably low level.
- True
- False
- Which of the following is correct?
- Audit risk is the risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated.
- Audit risk comprises the risk of material misstatement and detection risk.
- Both A&B
- None
- Risk of material misstatement is the risk that the financial statements are materially misstated prior to the audit. For example, due to fraud or error.
- True
- False
- In conducting a thorough assessment of risk, auditors will be able to:
- Identify areas of the financial statements where misstatements are likely to occur early in the audit.
- Plan procedures that address the significant risk areas identified.
- Reduce the risk of issuing an inappropriate audit opinion to an acceptable level.
- Minimise the risk of reputational and punitive damage.
- All of the above
- The risk of material misstatement comprises
- inherent risk
- control risk.
- Both A&B
- None
- Inherent risk –
- is the susceptibility of an assertion about a class of transaction, account balance or disclosure to misstatement that could be material, before consideration of any related controls.
- is the risk that a misstatement that could occur and that could be material will not be prevented, or detected and corrected on a timely basis by the entity’s internal controls.
- is the risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material.
- None
- Which of the following is correct?
- When inherent risk is high, this means that there is a high risk of misstatement of an item in the financial statements.
- Inherent risk operates independently of controls. It cannot be controlled. The auditor must accept that the risk exists and will not “go away”.
- Both A&B
- None
- Control risk –
- is the susceptibility of an assertion about a class of transaction, account balance or disclosure to misstatement that could be material, before consideration of any related controls.
- is the risk that a misstatement that could occur and that could be material will not be prevented, or detected and corrected on a timely basis by the entity’s internal controls.
- is the risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material.
- None
- Which of the following is correct?
- Complex accounting treatment is an example of an inherent risk.
- Inherent risk may arise due to the nature of the industry, entity or the nature of the balance itself.
- Control risk may be high either because the design of the internal control system is insufficient in the circumstances of the business or because the controls have not been applied effectively during the period.
- All of the above
- Deduction Risk –
- is the susceptibility of an assertion about a class of transaction, account balance or disclosure to misstatement that could be material, before consideration of any related controls.
- is the risk that a misstatement that could occur and that could be material will not be prevented, or detected and corrected on a timely basis by the entity’s internal controls.
- is the risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material.
- None
- Detection risk comprises sampling risk and non-sampling risk.
- True
- False
- Which of the following is correct?
- Detection risk can be lowered by carrying out more tests in the audit.
- The detection risk can be managed by the auditor in order to control the overall audit risk.
- Inherent risk cannot be controlled.
- Control risk can be reduced by improving the quality of internal controls.
- All of the above
- Professional scepticism requires the auditor to be alert to:
- Audit evidence that contradicts other audit evidence.
- Information that brings into question the reliability of documents and responses to enquiries to be used as audit evidence.
- Conditions that may indicate possible fraud.
- Circumstances that suggest the need for audit procedures in addition to those required by ISAs.
- All of the above
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2 Responses
nice question.
Hey! Thanks for the feedback buddy.