Question 1

Which one of the items below states that the objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, according to an identified financial reporting framework?

Accepted Answer

The correct answer is B. International Standard on Auditing (ISA) 200, Overall Objective of the Independent Auditor, and the Conduct of an Audit states that the objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, according to an identified financial reporting framework.

Question 2

What is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users?

Accepted Answer

The correct answer is E. In order to collect sufficient evidence, the auditor uses a well-defined methodology of the audit process.

Question 3

Which one of the items below isn’t a main phase in an audit process?

Accepted Answer

The correct answer is D. There are four main phases in an audit process. These phases are: client acceptance, planning, testing and evidence and completing the audit and reporting.

Question 4

What do the procedures and principles that should be conducted in the completing phase of audit are based on?

Accepted Answer

The correct answer is C. Procedures and principles that should be conducted are in the completing phase of audit presented based on international auditing standards.

Question 5

Which one of the items below doesn’t indicate what the auditor do in the final evaluation of evidence before forming an opinion on the financial statements of the client’s entity?

Accepted Answer

The correct answer is D. At the completing phase, auditor review issues especially including uncertainties like contingent liabilities of the entity, subsequent events i.e events after the balance sheet date and transactions regarding related parties.

Question 6

What is defined as an existing condition, situation, or set of circumstances involving uncertainty about a possible loss that will ultimately be resolved when some future event occurs or fails to occur?

Accepted Answer

The correct answer is B. Contingent liability is an existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when some future event occurs or fails to occur.

Question 7

Which one of the items below isn’t an example of contingent liabilities?

Accepted Answer

The correct answer is D. Common examples of contingent liabilities are; pending litigation, income tax disputes, guarantees, and warranty payable etc.

Question 8

Which one of the items below doesn’t indicate what should the auditor use in order to identify contingent liabilities?

Accepted Answer

The correct answer is A. In order to identify contingent liabilities, auditors mostly use inquiry of management, observation, and examination of documents.

Question 9

What is called to an audit inquiry sent to the client’s attorneys in order to obtain or corroborate information about litigation, claims, and assessments?

Accepted Answer

The correct answer is C. Legal letter is an audit inquiry sent to the client’s attorneys in order to obtain or corroborate information about litigation, claims, and assessments.

Question 10

What is described as a transfer of resources, services, or obligations between related parties?

Accepted Answer

The correct answer is B. A related party transaction is described as a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged in International Accounting Standard (IAS) 24 Related Party Disclosures.

Question 11

What is called to the transactions and other pertinent events that occurred after the balance sheet date that affect the fair presentation or disclosure of the statements being audited?

Accepted Answer

The correct answer is C. Events that occur between the balance sheet date and the issuance date of financial statements are called ‘subsequent events’.

Question 12

What is called to the date that management or the recognized authority asserts and makes the statements available to the third parties?

Accepted Answer

The correct answer is D. In many cases the issuance date of financial statements is the date that management or the recognized authority asserts and makes the statements available to the third parties.

Question 13

In most of the firms, when is the Balance Sheet date?

Accepted Answer

The correct answer is E. In most of the firms, the Balance Sheet date is the last day of the year, namely 31st December.

Question 14

It is the loss of the entity’s manufacturing facility after the balance sheet date or loss of assets resulting from a casualty such as a fire or flood. Which one of the items below describes the description?

Accepted Answer

The correct answer is C. Subsequent events are categorized under two main headings: Type I: Adjusting events Type II: Non-adjusting events

Question 15

An important customer’s declaration of bankruptcy is an example of this event and requires adjustments of financial statements. Which one of the items below describes the description?

Accepted Answer

The correct answer is D. Subsequent events are categorized under two main headings: Type I: Adjusting events Type II: Non-adjusting events

Question 16

Which one of the items below indicates in order to obtain sufficient appropriate audit evidence about whether events occurring between the date of the financial statements and the date of the auditor’s report that require adjustment of, or disclosure in, the financial statements are appropriately reflected in those financial statements under the applicable financial reporting framework?

Accepted Answer

The correct answer is B. In some cases, subsequent events may have a material effect on financial statements and the opinion of the auditor. ISA 560 Subsequent Events requires that all events up to the date of the auditor’s report should be identified and included in the financial reports accordingly.

Question 17

I. Whether new commitments, borrowings, or guarantees have been entered into.

II. Whether sales of assets have occurred or are planned.

III. Whether the issue of new shares or debentures or an agreement to merge or liquidate has been made or is planned.

IV. Whether any assets have been appropriated by the government or destroyed, for example, by fire or flood.

Which one of the items below indicates the description above?

Accepted Answer

The correct answer is B. These are the examples of inquiries of management on specific matters ISA 560.

Question 18

What are the name of the auditor’s record of the work performed and the conclusions reached on the audit?

Accepted Answer

The correct answer is E. Working papers owned by the auditor and must be protected and kept confidential by the auditor.

Question 19

They are alone not sufficient audit evidence. These procedures identify areas where additional audit evidence should be collected. Which one of the items below indicates the description?

Accepted Answer

The answer is C. Analytical procedures are used to examine unusual transactions or events and fluctuations in financial statement items in the every phase of the audit process.

Question 20

Which requires firms to establish policies and procedures for the timely completion of the assembly of audit files?

Accepted Answer

The correct answer is B. An appropriate time limit within which to complete the assembly of the final audit file is ordinarily not more than 60 days after the date of the auditor’s report.