Question 1

Which of the following are areas normally covered during the wrap-up of an audit engagement?
A)Reconsider the assessments of internal control at the entity level and the risk of fraud
B)Perform subsequent events procedures
C)Consider the amount used for materiality
D)All of the above

Accepted Answer

All of the choices listed are areas normally covered during the wrap-up of an audit engagement. Reconsidering the assessments of internal control and fraud risk, performing subsequent events procedures, and considering materiality are all important steps in ensuring that the audit has been thorough and accurate.

Question 2

Procedures used by an auditor when conducting a subsequent events review include:
A)reading minutes of the meetings of the board of directors.
B)assessing continued compliance with borrowing limits and loan covenants.
C)enquiring of those charged with governance as to whether any subsequent events have occurred that may affect the financial report.
D)All of the above

Accepted Answer

All of the options listed (reading board minutes, assessing compliance with borrowing limits and loan covenants, and enquiring about subsequent events from those charged with governance) are procedures that an auditor would typically use when conducting a subsequent events review. Therefore, the correct answer is D.

Question 3

The auditor's responsibility for the financial report includes selecting and applying appropriate accounting policies.

Accepted Answer

The auditor's responsibility is to provide an opinion on whether the financial report presents fairly, in all material respects, the financial position, performance, and cash flows of the entity in accordance with the applicable financial reporting framework. Selecting and applying appropriate accounting policies is the responsibility of management.

Question 4

The uninsured loss of inventory as a result of fire subsequent to year-end is an example of a type 2 subsequent event.

Accepted Answer

A type 2 subsequent event is an event that occurs after the balance sheet date but before the issuance of financial statements and has a material impact on the financial statements. The loss of inventory due to fire is a type 2 subsequent event as it occurred after year-end but before the financial statements were issued, and it has a material impact on the financial statements.

Question 5

The final phase of an audit is to assess all of the audit evidence obtained and determine whether it is sufficient and appropriate.

Accepted Answer

This statement is true. The final phase of an audit is called the audit conclusion, and it involves evaluating all of the audit evidence gathered to determine whether it supports the auditor's opinion on the financial statements. The auditor must assess the quality and quantity of the evidence obtained and determine whether it is sufficient and appropriate to support the conclusions drawn.

Question 6

Generally,the further into the future an event is likely to take place,the greater the uncertainty surrounding the event.

Accepted Answer

This is because there are more factors that can potentially affect the outcome of the event, leading to more unpredictability and uncertainty. Additionally, as time passes, new information and developments may arise that can alter the likelihood of the event occurring or its impact.

Question 7

A type 1 subsequent event provides evidence with respect to conditions that developed subsequent to year-end.

Accepted Answer

A type 1 subsequent event provides evidence about conditions that existed at the balance sheet date, not conditions that developed after the year-end.

Question 8

Subsequent events procedures are normally performed through to and including the date of the auditor's report.

Accepted Answer

Subsequent events procedures are performed until the date of the auditor's report to ensure that any important events that occurred after the balance sheet date are appropriately disclosed or recognized in the financial statements.

Question 9

An unqualified audit report with an emphasis of matter should be issued if a subsequent event has occurred that has resulted in a new auditor's report being prepared on a revised financial report.

Accepted Answer

An unqualified audit report with an emphasis of matter is appropriate when there is a need to draw attention to a matter affecting the financial statements that is already disclosed in the financial statements or the notes to the financial statements. If a subsequent event occurs that requires the preparation of a revised financial report, a new auditor's report will be issued, and if the revised financial report is unqualified, the auditor's report will also be unqualified with an emphasis of matter if necessary. Therefore, Option A is correct.

Question 10

An error is an intentional misstatement in the client's financial report.

Accepted Answer

An error is an unintentional misstatement in the client's financial report. Intentional misstatements are considered fraud.

Question 11

As soon as practicable,the auditor should communicate weaknesses in internal controls to management or those charged with governance.

Accepted Answer

This is a requirement under auditing standards to ensure that appropriate remedial actions can be taken to address the weaknesses and improve the effectiveness and efficiency of the organization's internal control system.

Question 12

Under the going concern assumption:
A)an entity is viewed as continuing in business for the foreseeable future.
B)an entity is viewed as not likely to continue in operation for the foreseeable future.
C)an entity's assets and liabilities are recorded at liquidation values.
D)an entity is considered to be a separate legal entity from its owners.

Accepted Answer

The going concern assumption assumes that the entity will continue to operate in the foreseeable future, which means it will not be liquidated or dissolved anytime soon. This assumption guides the financial reporting and presentation of the entity's financial statements.

Question 13

Under section 311 of the Corporations Act,auditors are required to report to ASIC any actual or suspected contraventions of the Act within 28 days of an event.

Accepted Answer

This statement is true. Under section 311 of the Corporations Act, auditors must report any actual or suspected contraventions of the Act to ASIC within 28 days of becoming aware of the event. This reporting requirement helps to ensure that ASIC can take appropriate action to enforce compliance with the Act and protect the interests of investors and other stakeholders.

Question 14

A limitation on the scope of the auditor's work could result from an inability to perform procedures or an imposition by the entity.

Accepted Answer

The scope of the auditor's work can be limited if they are unable to perform certain procedures or if the entity imposes restrictions on the auditor's access to information or areas of the organization. These limitations can impact the auditor's ability to gather sufficient and appropriate evidence to support their opinion on the financial statements.

Question 15

Which of the following statements is regarding a type 1 subsequent event?
A)they may be of such significance as to require disclosure in the financial report.
B)they are events that do not result in changes to amounts in the financial report.
C)they occur before the end of the client's financial year.
D)the financial report is adjusted for any material changes in estimates from these types of events.

Accepted Answer

Type 1 subsequent events provide additional evidence about conditions that existed at the balance sheet date, requiring adjustments to the financial statements for any material changes.

Question 16

Matters of governance that the auditor may wish to discuss with those charged with governance include any practical difficulties encountered in performing the audit.

Accepted Answer

The statement is true. Matters of governance that the auditor may wish to discuss with those charged with governance include any practical difficulties encountered in performing the audit.

Question 17

Which of the following factors is not relevant when management is assessing the going concern assumption?
A)The nature and condition of the entity's business
B)Whether the auditor specialises in the client's industry
C)The time into the future that an event is likely to take place
D)The size and complexity of the entity

Accepted Answer

Whether the auditor specializes in the client's industry is not relevant when assessing the going concern assumption. The other factors listed - the nature and condition of the entity's business, the time into the future that an event is likely to take place, and the size and complexity of the entity - are all relevant in assessing the entity's ability to continue operating as a going concern.

Question 18

The client's compliance with contractual requirements of operating agreements is an example of a qualitative factor that may cause misstatements of quantitatively immaterial amounts to be considered material.

Accepted Answer

Compliance with contractual agreements may be deemed necessary for the integrity and accuracy of financial statements, even if the dollar amounts involved are not significant. Therefore, failure to comply with such agreements may be considered material.

Question 19

Sufficiency relates to the quality of audit evidence gathered.

Accepted Answer

The answer of Sufficiency relates to the quality of audit...

Question 20

Breaches of accounting standards are not considered to be significant contraventions of the Corporations Act.

Accepted Answer

Breaches of accounting standards are considered to be significant contraventions of the Corporations Act, as they can impact the accuracy of financial reporting and potentially mislead investors and stakeholders. Failure to comply with accounting standards can result in penalties and legal action being taken against the company and its officers.

Quiz 12: Completing and Reporting on the Audit

Which of the following are areas normally covered during the wrap-up of an audit engagement?

Procedures used by an auditor when conducting a subsequent events review include: