Question 1:

Which of the following best describes the overall aim of corporate governance?

> To ensure that companies are well run in the interests of shareholders and the wider community.

> To ensure that no executive director is responsible for appraising another executive director.

> To ensure that the company is compliant with laws and regulations.

> To ensure that controls prevent all fraud.

Your answer:

To ensure that companies are well run in the interests of shareholders and the wider community.

Status:
Correct

ID: KA17AC_18_PM_001
Question 2:

For the issues identified in your interview with the CEO, select which TWO of the following
recommendations are appropriate.

>Remove the executive directors from the audit committee and appoint three more non-executive
directors.

>No recommendations as there are no best practice guidelines relating to internal inductions.

>Sandra should step down from her position and assume a role as non-executive director instead.

>Daily meetings of the board should be introduced.

Your answer:

Remove the executive directors from the audit committee and appoint three more non-executive
directors.

Daily meetings of the board should be introduced.

Status:
Incorrect

ID: KA17AC_18_PM_002
Question 3:

Which THREE of Martha Scott's current responsibilities should NOT be performed by her?

>Producing the financial statements

>Deciding on the levels of remuneration for the executive directors.

>Reviewing the effectiveness of the internal controls.

>Chairing the monthly audit committee meetings.

Your answer:

Deciding on the levels of remuneration for the executive directors.

Reviewing the effectiveness of the internal controls.

Chairing the monthly audit committee meetings.

Status:
Correct

ID: KA17AC_18_PM_003
Question 4:

If Edwards Co establishes an internal audit function, which TWO of the following statements are TRUE
in relation to assisting with Martha's duties?

>Internal audit could assist in helping Martha prepare the financial statements.

>Internal audit could review the effectiveness of the internal controls.

>Internal audit should report into the audit committee and not Martha Scott.

>Internal audit could determine the level of remuneration for the executive directors.

Your answer:

Internal audit should report into the audit committee and not Martha Scott.

Internal audit could determine the level of remuneration for the executive directors.

Status:
Incorrect

ID: KA17AC_18_PM_004
Question 5:

Which of the following would be advantages of outsourcing the internal audit function?

1. The cost per hour is likely to be less than appointing internally as they are audit specialists.
2. As specialists they are likely to have more knowledge of Edward Co's business.
3. Edwards Co will have more control over the quality of their work.
4. The independence of the function may be enhanced.

> 2, 3 and 4

> 4 only

> 2 and 3

> 1 and 2

Your answer:

4 only

Status:
Correct

ID: KA17AC_18_PM_005
Question 6:

Which TWO of the following actions should the auditor take as a result of the expansion of Losace Co?

>Send out third party confirmations earlier.

>Document the internal control systems of Losace Co.

>Assign a new engagement partner.

>Perform an interim audit.

Your answer:

Document the internal control systems of Losace Co.

Perform an interim audit.

Status:
Correct

ID: KA17AC_18_PM_006
Question 7:

In relation to the two issues identified in the prior year audit file, choose the most appropriate INITIAL
audit response?

Immaterial fraud in the Change of depreciation

wages department rate
A Carry out substantive procedures Perform analytical procedures
only
B Perform analytical procedures Carry out substantive procedures
only
C Perform tests of control Discuss with management
D Discuss with management Perform tests of control

>A

>B

>C

>D

Your answer:

Status:
Correct

ID: KA17AC_18_PM_007
Question 8:

The terms of the audit need to be reconfirmed with Losace Co.

Apart from simply reminding Losace Co about the terms of engagement which of the following is a
reason for sending a new engagement letter to Losace Co this year?

> To remind Losace Co of specific legislation that must be followed in the aerospace industry.

> To explain the terms of engagement to the new directors.

> To explain that the scope of the audit needs to increase due to the new controls implemented during
the year.

> To explain that accounting policies should be applied on a consistent basis from one year to the next.

Your answer:

To explain that accounting policies should be applied on a consistent basis from one year to the next.

Status:
Incorrect

ID: KA17AC_18_PM_008
Question 9:

Which of the following explains the reason why the auditor should obtain an understanding of the laws
and regulations applicable to Losace Co?

> To consider the risk of material misstatement due to non-compliance.

> To consider the business risk due to non-compliance.

> To report any instances of non-compliance to the industry regulator.

> To report any instances of non-compliance to the police.

Your answer:

To consider the risk of material misstatement due to non-compliance.

Status:
Correct

ID: KA17AC_18_PM_009
Question 10:

Which TWO of the following items will be included in the audit strategy?

>The preliminary materiality level calculated for the audit.

>Sample sizes chosen for inventory testing.

>The number of staff to be included on the audit team and the skills required.

>The audit procedures to be performed.

Your answer:

The number of staff to be included on the audit team and the skills required.

The audit procedures to be performed.

Status:
Incorrect

ID: KA17AC_18_PM_010
Question 11:

Which of the following shows the appropriate impact on the auditor's opinion and report for Daisy Co?

Opinion Report
A Unmodified Unmodified
B Unmodified Include an emphasis of matter
paragraph
C Modified Include a basis for disclaimer of opinion
paragraph
D Modified Include an emphasis of matter
paragraph

>A

>B

>C

>D

Your answer:

Status:
Incorrect

ID: KA17AC_18_PM_011
Question 12:

Which of the following elements would appear in the auditor's report for Daisy Co?

1. Key audit Matters paragraph

2. Basis for opinion paragraph
3. Signature of auditor
4. Other information

> 1 only

> 1 and 2

> 2, 3 and 4

> All of them

Your answer:

1 and 2

Status:
Incorrect

ID: KA17AC_18_PM_012
Question 13:

Which of the following items should be included in the written representation letters for each client?

1. The client believes the effects of uncorrected misstatements are immaterial.

2. Confirmation of the year-end cash balance.
3. Management have prepared the financial statements in accordance with an appropriate financial
reporting framework.
4. All known instances of non-compliance with laws and regulations have been disclosed to the auditor.

> 1, 2 and 3

> 1, 3 and 4

> 3 and 4 only

> 2 and 3 only

Your answer:

3 and 4 only

Status:
Incorrect

ID: KA17AC_18_PM_013
Question 14:

In relation to the refusal of Pansy Co's management to provide a written representation letter which of
the following statements are TRUE.

1 A written representation letter is required if Elm & Co is to be

compliant with auditing standards.
2 Elm & Co should discuss the issue with Pansy Co to understand
why they are refusing to provide the written representation.
3 Elm & Co should consider whether the audit plan and strategy
need to be revised.
4 If Pansy Co still refuse to provide the letter then the key audit
matters paragraph would be removed from the auditor's report.

> 1 and 2 only

> 1, 2 and 3 only

> 3 and 4 only

> 1, 2, 3 and 4

Your answer:

1 and 2 only

Status:
Incorrect

ID: KA17AC_18_PM_014
Question 15:

Which of the following shows the appropriate impact on the auditor's opinion and report for Rose Co?

> The auditor's opinion and report should be unmodified.

> The auditor's opinion should be unmodified but the report should be modified with an emphasis of
matter paragraph.

> The auditor's opinion should be modified on the basis of insufficient appropriate audit evidence.

> The auditor's opinion should be modified on the basis that the financial statements are materially
misstated.

Your answer:

The auditor's opinion should be modified on the basis that the financial statements are materially
misstated.

Status:
Correct

ID: KA17AC_18_PM_015
Question 16:

Required:

Using the information provided:

(a) Identify and explain FIVE deficiencies in Slattery Co's internal controls and
provide a recommendation to address each of these deficiencies.
(10 marks)
(b) Identify and explain FIVE control strengths in Slattery Co's internal controls and
describe a TEST OF CONTROL the auditor should perform to assess if each of these
controls is operating effectively.
(10 marks)
(c) Describe substantive procedures the auditor should perform to obtain sufficient and
appropriate evidence in relation to the INVENTORY balance of Slattery Co.
(6 marks)
The finance director of Slattery Co has now requested that the audit work is completed
and the auditor's report issued two weeks earlier than agreed at the planning meeting. The
director has confirmed that the audit fee will be increased by 20% to cover the extra
expense of meeting this new deadline. The director has indicated that if the deadline is not
met then your firm will not be re-appointed as auditor of Slattery Co next year.

Required
(d) Identify and explain TWO ethical threats resulting from the finance director's
comments and suggest appropriate actions that should be taken by the auditor to
reduce the threat to an acceptable level.
(4 marks)
(Total 30 marks)

Your answer:

ID: KA17AC_18_PM_016
Question 17:

Required

Describe the substantive procedures you will perform to obtain sufficient and
appropriate evidence on the above matters.
The mark allocation is shown against each matter.
(Total 20 marks)

Your answer:

ID: KA17AC_18_PM_017
Question 18:

Required

Header1
(a) Describe SEVEN audit risks and explain the auditor's response to each risk in
planning the audit of Michener Co.
(14 marks)
The time is now towards the end of the audit.
The directors of Michener Co have still not decided on any action regarding the disused
warehouse. The auditor utilised an expert to assess the value of the warehouse. The expert
considers that the warehouse is overvalued by $10million. The chairman has also referred
to the possible new use of the warehouse in his report stating that the value of the
warehouse is therefore more than the value on the statement of financial position.
(b) Explain the impact on the auditor's report if the issues mentioned above are not
resolved.
(6 marks)
(Total 20 marks)

Your answer:

ID: KA17AC_18_PM_018
A summary of your performance appears below.

Total Total Questions Attempted Score Max Score Scaled Score

Total 15 15 14 30 46.67%

Section A 15 15 14 30 46.67%

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