The risk that an auditor concludes that a material misstatement does not exist when it does will result in

an

1. Increased risk that the audit will not be effective

Kelly Pine, the Audit Manager of TANGEMS, a South African mining company. Requires the use of an
expert for the engagement, specifically around the valuation of reserves due to the departure of the
existing expert from the firm. TANGEMS has-been mining tanzanite deposits for more than a decade.
During the past year, the mine experienced a faulty mechanical error which resulted in a disruption to
operations and damage to some existing reserves from May - July. The period under review for the audit
is January 1 - December 31, 2021.

Which assertion and associated evidence gathering technique is of particular importance to test with
regards to the inventory at TANGEMS:

2. Assertion: Valuation and Allocation; Technique: Observation

New CPAs is the auditor of Mat inc, a listed computer software company. The audit team comprises an
engagement partner, a recently appointed audit manager, an audit senior and a number of audit
assistants. The audit engagement partner has only been appointed this year due to the rotation of the
previous partner who had been involved in the audit for seven years. Only the audit senior has
experience of auditing a company in this specialized industry. The previous audit manager, who is a close
friend of the new audit manager, left the firm before the completion of the prior year audit and is now
the finance director of Mat Inc.

In relation to the composition of the current audit team, which of the following correct/y identifies the
fundamental principle which is at risk and provides an appropriate safeguard?

3. 3. Professional competence: provide industry training

Stanley Morgan has learned that it is important to be aware of the attitude and actions of management
and those charged with governance concerning the entity’s internal control and its importance in the
entity. This best describes dealing with:

4. The control environment.

The final stage in the client acceptance and continuance decision process involves:

5. the preparation of an engagement letter.

Kelly Pine, the Audit Manager of TANGEMS, a South African mining company. Requires the use of an
expert for the engagement, specifically around the valuation of reserves due to the departure of the
existing expert from the firm. TANGEMS has-been mining tanzanite deposits for more than a decade.
During the past year, the mine experienced a faulty mechanical error which resulted in a disruption to
operations and damage to some existing reserves from May - July. The period under review for the audit
is January 1 - December 31, 2021.

Assume you reviewing the sampling approach used by the expert to assess the valuation of current
inventory. Which approach you expect the expert to have used:

6. Judgement approach that considered factors as gemstone quality a period of production.

7. which of the following statements about materiality is incorrect?

a) information is considered material if it has no impact on the

Jimmy Bunting, the senior auditor at Yanzhou Coal Mining and Minerals, performed the following tasks:
he used analytical procedures and he had discussions with management. These activities were a basis for
a conclusion on the financial information. What did Jimmy Bunting perform?

8. a review engagement

Kelly Pine, the Audit Manager of TANGEMS, a South African mining company. Requires the use of an
expert for the engagement, specifically around the valuation of reserves due to the departure of the
existing expert from the firm. TANGEMS has-been mining tanzanite deposits for more than a decade.
During the past year, the mine experienced a faulty mechanical error which resulted in a disruption to
operations and damage to some existing reserves from May - July. The period under review for the audit
is January 1 - December 31, 2021.

which of the following is not a consideration for Kelly in use of an expert:

B) developing test procedure for the expert to carry out

10. When gaining an understanding of their client, at which level do auditors not usually
consider the relevant issues?
A) Audit committee level

11. Attitudes and rationalisation to justify a fraud include:

12. when control risk is high the audit strategy is to

A) do litter or no test of control and increase reliance on substantive testing of transactions and
account balances.

13. In the context of financial reporting services, which of the following best describes a compilation
engagement?

c. The preparation of financial statements based on information provided by management without

14. Lenny, CPA and his client sent out a legal letter to their lawyers. The legal letter would have contained
requests for:

b. the lawyer's opinion on the client's legal matters and legal matters that the lawyer is in disagreement
with the client.

15. An auditor with extensive industry experience and knowledge.

d. The auditor’s Spouse works for the client company in a non-financial role unrelated to the audit.

16. Which of the following factors is most likely to increase audit risk?

A consistent track record of minimal errors and misstatement in financial statement.

17. Jane Lawson was given the mandate to deal with the following risks: fraud risks. Complex
transactions, and related party transactions. How would you classify these risks?

Audit Risk

18. Objectivity refers to the obligation that all members of professional bodies

B. not allowing their personal feelings or procedures to influence their professional judgment

19. Michael Fernandez has decided to perform substantive procedures at a major retailer. Which one of
the following is not a substantive procedure?
B. bank confirmations regarding interest rate on borrowings by client.

20. Lucy Smith’s work consisted of reading lease agreements to ensure that leases were disclosed
accurately in the notes to the financial statements. Which assertion was she fulfilling?

D. Classification

22. Where an auditor concludes that the audit client's systems of internal controls are ineffective, he/she
will

c. conclude that the client's system of internal controls cannot be relied upon to detect potential
material misstatements

23. The auditor is concerned about the audit client's closing procedures to ensure

transactions and events have been recorded in the correct accounting period

closing procedures have been correctly applied.

the financial statements accurately reflect the results of the audit client's closing procedures.

All

Confidentiality, Competence, Intimidation, Advocacy, Self-interest, Self-review

Louis Lemon wrote up an advertisement for his firm. In his draft to the local newspaper, he indicated that
the firm was able to provide services that he knew it could not deliver.

- competence ??

Paul Thomas has been an audit manager at Agnew & Dickson, CA’s the past 10 years. 2 years ago. he
performed human resources and internal audit function for 9 months while his client underwent a major
restructuring. His firm has a policy of changing audit partners and managers every 5 to 7 years.

- 熟悉/ Self-review??

When Jamon Jackson, CPA, CA tried to collect last year’s audit fees, he was told that he would receive
the fees for the previous year and the current year upon finishing this year’s work and issuing a “clean”
audit opinion. This was non-negotiable and he was told that if he did not want to go along with it, the
client would get another auditor.

- intimidation

Luanne flash Just joined the firm of Fredrick, Adams, and Newman (FAN). She found out she owns share
in a client company of FAN.

- self-interest
David Lee, the CFO of XYZ corporation suggests to lead auditor, Sarah Miller, that given their history of
successful audits together, Sarah and her team can rely more on the internal controls and assessments

- 熟悉或者 intimidation/ Confidential

25. Kerry performed several procedures, including observation and inspection of the company’s plans
and business strategies. He also made inquiries of those individuals that were involved in the governance
of the company. the internal auditors. and operating personnel. These procedures will help Kerry to

A. gain an understanding of the client.

26. What is the primary purpose of establishing performance materiality in an audit engagement?

To identify material misstatements in specific financial statement accounts or disclosures.

27 Sherry Janssen has reviewed internal controls at a local charitable agency and has deemed control
risk to be high. Which kind of audit strategy may be appropriate?

A. Sub- audit strategy

28. which of the following does not indicate that an organization is NOT a going concern

Reduction in Sales to main cutomers

b. high current Ratio?

Negative monthly cash flow

Withdrawal of credit from some suppliers

29. Which of the following statement regarding confirmations is incorrect:

Positive confirmations ask the recipient to reply in all circumstances.

Negative confirmations ask the recipient to reply only if they disagree with the information provided.

An external confirmation is sent by the client to a third party, who is asked to respond to the auditor.

An external confirmation can be sent to the client's bank, lawyers, lenders and debtors

30. New CPAs is the auditor of Mat inc, a listed computer software company. The audit team comprises
an engagement partner, a recently appointed audit manager, an audit senior and a number of audit
assistants. The audit engagement partner has only been appointed this year due to the rotation of the
previous partner who had been involved in the audit for seven years. Only the audit senior has
experience of auditing a company in this specialized industry. The previous audit manager, who is a close
friend of the new audit manager, left the firm before the completion of the prior year audit and is now
the finance director of Mat Inc.

During the course of the audit of MAT Inc.. a suspicious cash transfer has been identified. The audit team
has reported this to the relevant firm representative as a potential money-laundering transaction. Which
of the following statements is true regarding the confidentiality of this information?

If there is a legal requirement to report money-laundering, this overrides the principle of confidentiality

31. which of the following statements is correct about audit risk?

Audit risk is the risk that an auditor expresses an inappropriate opinion when the financial statements
are materially stated.

It is impossible to completely eliminate audit risk.

All of the options are correct

Audit risk can be reduced at the risk assessment phase of an audit by identifying the key risks faced by
the client.

32. A struggling public accountant was told by a supervisor that they were using a poor form of evidence
as a basis for his conclusions. What type of evidence was referring to?

D. verbal