1. Which two of the following would be classified as substantive procedures?

(1) Tests of control

(2) Walk-through tests

(3) Analytical procedures

(4) Tests of details

A. (1) and (2)

B. (1) and (4)

C. (2) and (3)

D. (3) and (4)

2. Is the following statement true or false regarding directional testing? An audit

procedure which tests for the understatement of a class of expenditure will
simultaneously test for the overstatement of the related liability.

A. True

B. False

3. The draft financial statements of T Co show the following information:

$'000

Revenue 420

Cost of sales 270

Gross profit 150

Trade receivables 160

Trade payables 130

What is the receivables collection period?

A. 139 days

B. 175 days
C. 758 days

D. 958 days

4. Is the following statement regarding audit sampling true or false? Audit

sampling is the application of audit procedures to less than 100% of items within
a population of audit relevance such that all sampling units have a chance of
selection.

A. True

B. False

5. The auditor of L Co has identified an unexpectedly high deviation rate when

carrying out tests of control on a sample of sales invoices. Which two of the
following would be a satisfactory course of action?

(1) Extend the sample size

(2) Replace the sample

(3) Ignore the deviations as they only affect some of the items tested

(4) Perform alternative substantive procedures

A. (1) and (3)

B. (1) and (4)

C. (2) and (3)

D. (2) and (4)

6. The auditor of P Co is planning the audit work on trade receivables. Which of

the following procedures could not be performed by using computer-assisted
audit techniques?

A. Selection of a sample of receivables for confirmation

B. Calculation of receivables days

C. Production of receivables' confirmation letters

D. Evaluation of the adequacy of the allowance for irrecoverable
receivables

7. Computer assisted audit techniques include test data and audit software. In
respect of which of the following activities would the use of audit software be
most relevant?

A. Tests of online passwords

B. Testing of computerised in-put controls on sales invoices

C. Totalling of the purchase ledger

D. Testing controls over computerised credit-limits

8. Is the following statement regarding audit software true or false? Audit

software is used to assist with substantive procedures.

A. True

B. False

9. Which of the following statements is true regarding an auditor's expert?

(1) The expert must be a partner or member of staff of the audit firm.

(2) Provided that the auditor has assessed the expert to be competent, audit
evidence provided by the expert can be relied upon.

(3) Unless required to do so by law or regulation, the auditor must not refer to
the expert in an auditor's report which contains an unmodified opinion.

A. (1) only

B. (2) only

C. (3) only

D. (1), (2), and (3)

10. X Co has an internal audit function. The external auditor has concluded that
the internal audit function does not apply a systematic and disciplined approach
to its work. How does this affect the extent to which the external auditor can rely
on the work of the internal audit function?

A. The external auditor must not use the work of the internal audit
function.

B. The external auditor can use the work of the internal audit function provided
the individuals have been assessed as competent.

C. The external auditor can use the work of the internal audit function provided
the organisational status of the function supports its objectivity.

D. The external auditor can use work performed by the internal audit function
which relates to low risk areas of the external audit only.

11. Is the following statement regarding the use of internal audit work by the
external auditor true or false? The external auditor must reperform some of the
work carried out by the internal audit function if the work of the internal auditor
is to be relied on.

A. True

B. False

12. The auditor of G Co is performing audit procedures to confirm the

company's ownership of motor vehicles. Which of the following would provide
the most persuasive evidence of this?

A. Physical inspection of the motor vehicles

B. Inspection of vehicle registration documents

C. Checking that the motor vehicles are recorded in the non-current asset
register

D. Review of vehicle insurance documentation

13. Which of the following audit procedures would provide the auditor with
evidence of completeness of inventory?

A. Tracing test counts performed at the inventory count to the detailed

inventory listing

B. Reviewing the physical condition of inventory when attending the inventory

count

C. Casting the inventory listing

D. Vouching the cost of a sample of inventory items to suppliers' invoices

14. Which two of the following statements are true regarding the auditor's
attendance at the inventory count?

(1) It is the auditor's responsibility to organise the inventory count.

(2) The auditor observes client staff to determine whether inventory count
procedures are being followed.

(3) The auditor reviews procedures for identifying damaged, obsolete, and slow-
moving inventory.

(4) If the results of the auditors' test counts are not satisfactory, the auditor
should arrange for the inventory to be recounted.

A. (1) and (2)

B. (1) and (4)

C. (2) and (3)

D. (3) and (4)

15. The auditor of Q Co has performed purchases cut-off procedures and has
identified that in two material instances goods received prior to the inventory
count have not been included on the schedule of 'goods received not invoiced'.
At the period end purchase invoices have not been received. What is the
auditor's conclusion based on this evidence?

A. Inventory is overstated and liabilities are understated.

B. Inventory is understated and liabilities are understated.

C. Inventory is overstated and liabilities are overstated.

D. Inventory is understated and liabilities are overstated.

16. Which of the following statements is/are true regarding direct confirmation
of accounts receivable?

(1) Responses from the customer must be returned directly to the client.

(2) Under the positive method the customer only replies if the amount stated
agrees with the customer's records.

A. (1) only

B. (2) only

C. (1) and (2)

D. Neither (1) nor (2)

17. The key audit risk associated with trade payables is understatement. Which
of the following procedures would provide the most reliable evidence of the
completeness of amounts due?

A. Tracing of amounts due per the payables ledger to purchase invoices

B. Matching of purchase invoices to goods received notes

C. Reconciliation of year-end supplier statements

D. Reconciliation of the payables ledger with the payables ledger control

account

18. Is the following statement true or false in respect of litigation and claims?
When the auditor believes that litigation or claims may exist, the auditor seeks to
communicate directly with the client's legal advisers through a letter of inquiry.

A. True

B. False
19. The auditor of Z Co is auditing share capital. Z Co employs an independent
registrar to deal with its share registration work. Which of the following is the
most reliable evidence of the validity of the issued share capital stated in the
financial statements?

A. The balance on the share capital account in the general ledger

B. A certificate of share capital in issue from the registrar

C. Z Co's incorporation documentation

D. Details of share capital recorded on the previous year's audit file

20. The auditor of F Co is auditing bank and cash at 31 December 20X4 and has
identified a significant number of remittances recorded in the cash book on the
last day of the year which do not appear on the bank statement until late January
20X5. Which of the following steps would the auditor take to help determine
whether F Co is involved in window dressing?

A. Request copies of the cheques from the bank and agree the amounts of the
cheques to the entries in the cash book

B. Agree the bank statement balance to the balance according to the bank
confirmation letter

C. Examine the paying-in slips for the remittances to determine the date
that they were actually paid into the bank

21. The auditor is performing the audit of a charity whose main source of
income is derived from street collections. Which of the following controls would
provide the auditor with evidence of completeness of income?

(1) Numerical controls over collection boxes

(2) Sealing of collection boxes at the end of each shift

(3) Matching of paying-in slip details to the bank statement

A. (1) and (2)

B. (1) and (3)

C. (2) and (3)

22. Is the following statement regarding audit considerations when the entity has
used a service organisation true or false? The user auditor may request a report
from the service auditor which includes a description of the system at the service
organisation and details the design of the controls.

A. True

B. False

23. The auditor of M Co has agreed a sample of non-current assets selected by

physical inspection back to the non-current asset register. For which of the
following assertions does this test provide assurance?

A. Completeness

B. Existence

C. Rights and obligations

D. Accuracy and valuation

24. Which of the following techniques is generally accepted to be the most

efficient to obtain evidence regarding the existence of bank balances?

A. Reperformance

B. Confirmation

C. Analytical procedures

D. Observation

25. Which of the following assertions about classes of transactions and events
for the period under audit is defined below: 'Amounts and other data relating to
recorded transactions and events have been recorded appropriately'.

A. Cut-off

B. Accuracy
C. Occurrence

D. Classification

26. Is the following statement regarding audit evidence true or false?

Appropriateness is the measure of the quality of audit evidence.

A. True

B. False

27. As the audit senior on the year-end audit of Z Co, you have instructed the
audit junior to obtain and inspect supporting sales contracts for large sales
transactions. Which of the following assertions are you seeking to test with this
audit procedure?

A. Cut-off

B. Accuracy

C. Occurrence

D. Completeness

28. Is the following statement regarding direct confirmation of accounts

receivable true or false? The verification of trade receivables by direct
confirmation provides evidence that the debts are recoverable.

A. True

B. False

29. Which of the following sampling methods correctly describes systematic

sampling?

A. A sampling method which is a type of value-weighted selection in which

sample size, selection and evaluation results in a conclusion in monetary
amounts
B. A sampling method which involves having a constant sampling interval,
the starting point for testing is determined randomly

C. A sampling method in which the auditor selects a block(s) of contiguous

items from within the population

30. An audit junior has been assigned to the audit of bank and cash balances of
Howard Co. He has obtained the following audit evidence:

(1) Bank reconciliation carried out by the cashier

(2) Bank confirmation report from Howard's bankers

(3) Verbal confirmation from the directors that the overdraft limit is to be
increased

(4) Cash count carried out by the audit junior

What is the order of reliability of the audit evidence starting with the most
reliable first?

A. (4), (2), (1) and (3)

B. (2), (1), (4) and (3)

C. (4), (3), (2) and (1)

D. (2), (4), (1) and (3)

31. When placing reliance on the work of an expert is the following statement
true or false? In order to place reliance, the auditor is required to evaluate the
work performed by the expert.

A. True

B. False