ICAEW Assurance Exam Question Bank 2021
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Questions and Answers

What is one requirement for reproducing content from the publication?

  • Content can be reproduced if it is cited correctly.
  • Prior written permission from the publisher is necessary. (correct)
  • Only the introduction can be reproduced without permission.
  • Reproducing for educational purposes is allowed without permission.

What is the significant limitation of relying on the material in the publication?

  • It is only valid for the year of publication.
  • It does not provide professional advice. (correct)
  • It is meant for public sector information only.
  • It serves as a necessary reference for students.

Who issued the International Financial Reporting Standards referenced in the publication?

  • The International Financial Reporting Foundation (IFRF)
  • The International Accounting Standards Board (IASB) (correct)
  • The International Accounting Body (IAB)
  • The British Library

Which edition of the publication was released in 2020?

<p>Fourteenth Edition (C)</p> Signup and view all the answers

What type of information does the British Library Cataloguing-in-Publication Data provide?

<p>It categorizes the publication for library use. (C)</p> Signup and view all the answers

What is a measure of sustainability related to the publication's printing?

<p>Printed on paper obtained from traceable, sustainable sources. (D)</p> Signup and view all the answers

What must be obtained to utilize parts of the publication in translation?

<p>Written permission from the IFRS Foundation. (B)</p> Signup and view all the answers

Which entity is concerned about the loss caused by reliance on the material in the publication?

<p>The IASB and IFRS Foundation (D)</p> Signup and view all the answers

Is an individual eligible for appointment as a statutory auditor if they are a member of a recognized supervisory body?

<p>Yes, if they meet the body's rules. (C)</p> Signup and view all the answers

Can a person act as a statutory auditor for a company if they are an officer or employee of that company?

<p>No, being an officer or employee disqualifies them. (A)</p> Signup and view all the answers

What does assurance primarily refer to?

<p>A high level of satisfaction from an assurance firm on an assertion. (C)</p> Signup and view all the answers

Which of the following options correctly describes one role of an assurance firm?

<p>To enhance the credibility of financial assertions through review. (D)</p> Signup and view all the answers

What must a statutory auditor ensure regarding their relationship with the company?

<p>They cannot have any conflicts of interest. (A)</p> Signup and view all the answers

Which scenario would disqualify someone from being a statutory auditor?

<p>Being an employee of the company they are auditing. (A)</p> Signup and view all the answers

Which of the following is a common misconception about assurance reports?

<p>They guarantee the absolute reliability of financial information. (D)</p> Signup and view all the answers

What is a primary benefit of an assurance report on financial information?

<p>It enhances stakeholder trust in financial data. (A)</p> Signup and view all the answers

Which three options are objectives of audit planning?

<p>To determine the scope of the engagement (A), To ensure appropriate attention is devoted to the important areas of the audit (C), To identify potential problems and resolve them on a timely basis (D)</p> Signup and view all the answers

Which three procedures are required by ISA (UK) 315 for understanding the entity and its environment?

<p>Inquiries of third parties (B), Inquiries of management and others within the entity (C), Analytical procedures (D)</p> Signup and view all the answers

Which three options constitute analytical procedures?

<p>Consideration of comparable information for prior periods (A), Consideration of similar industry information (C), Consideration of relationships between elements of financial information that are expected to conform to a predicted pattern (D)</p> Signup and view all the answers

Which three factors are influenced by the preliminary materiality threshold set by auditors?

<p>Evaluating the need for additional testing procedures (B), Determining the scope of the audit (C), Assessing the risk of material misstatement (D)</p> Signup and view all the answers

Which option is NOT a detail to be included regarding client identification procedures in relation to Money Laundering Regulations?

<p>Sampling methods for errors (A)</p> Signup and view all the answers

Which three elements are part of the reporting framework for the financial statements being prepared?

<p>International Financial Reporting Standards (IFRS) (A), Local Generally Accepted Accounting Principles (GAAP) (B), Comprehensive income classifications (C)</p> Signup and view all the answers

Which control is most effective for ensuring all sales invoices are processed completely?

<p>Issue of pre-numbered sales invoices and internal checking for processing (C)</p> Signup and view all the answers

What is a significant risk when recording transactions in the revenue system?

<p>Sales are included in the wrong customer accounts (C)</p> Signup and view all the answers

Which three aspects must auditors consider when determining the reporting framework applicable for financial statements?

<p>Industry compliance standards (A), Legislative frameworks (B), Historical financial performance (C)</p> Signup and view all the answers

Which option correctly describes a statement required by the Companies Act 2006 regarding auditors?

<p>The auditor’s liability cannot be restricted (A)</p> Signup and view all the answers

Which internal control activity is represented by comparing monthly management accounts to the budget?

<p>Performance review (A)</p> Signup and view all the answers

What consequence might arise from not effectively addressing specific deficiencies in accounting systems?

<p>Improper financial reporting (D)</p> Signup and view all the answers

What purpose do pre-numbered goods despatched notes serve in a sales transaction?

<p>To ensure there are no missed transactions (D)</p> Signup and view all the answers

What could result from issuing credit notes without valid reasons?

<p>Potential fraud and financial inaccuracies (B)</p> Signup and view all the answers

Which factor is essential for managing customer accounts effectively?

<p>Monitoring adherence to credit limits (A)</p> Signup and view all the answers

Which of the following best describes a control that ensures records are properly authorized?

<p>Approval of all sales invoices by the sales manager (B)</p> Signup and view all the answers

Which control procedure is most likely to ensure that customers are invoiced for goods despatched?

<p>Matching of despatch records with sales invoices (A)</p> Signup and view all the answers

What is the most likely consequence of despatch documentation not being sequentially pre-numbered?

<p>Invoices may not be raised for all goods despatched (C)</p> Signup and view all the answers

Which of the following objectives is NOT part of the sales ordering process in the sales system?

<p>Customer satisfaction is ensured (A)</p> Signup and view all the answers

When customers are not required to evidence receipt of goods, what is a likely consequence?

<p>Sales may be made to customers who cannot pay (D)</p> Signup and view all the answers

Identifying deficiencies in a sales system can lead to which of the following issues?

<p>Unrecorded sales transactions (A)</p> Signup and view all the answers

Which process is a potential strength in a sales system at Raffles Ltd?

<p>Immediate order entry after receiving calls (C)</p> Signup and view all the answers

What is the primary risk associated with goods being received but not invoiced?

<p>Loss of revenue for the company (A)</p> Signup and view all the answers

Which of the following options does NOT describe an effective sales system control?

<p>Ensuring invoices are sent after payment is received (A)</p> Signup and view all the answers

Flashcards

Assurance

Level of confidence in the reliability of an assertion by one party for another.

UK Corporate Governance Code

The UK Code outlines key provisions for good corporate governance practices.

Statutory Auditors Eligibility

Statutory auditors must be members of a recognized supervisory body and meet criteria to become auditors.

Auditor Independence

An individual can't be both an auditor and an officer or employee of the company they are auditing.

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Objectives of Audit Planning

Audit planning aims to determine the scope of the audit, identify critical areas, resolve potential issues early on, and allocate tasks effectively.

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Risk Assessment Procedures

Understanding the company's environment and operations through inquiries, analytical procedures, and observation.

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Analytical Procedures

Evaluating past information for trends, analyzing relationships between financial elements, and comparing a company's performance to industry standards.

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Ensuring Completeness in Sales Systems

Matching sales orders to dispatch records to ensure accurate invoicing for customers.

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Impact of Non-Sequential Pre-numbering

Non-sequential pre-numbering in dispatch documentation can lead to incomplete invoicing of goods delivered.

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Revenue Recognition Risks: Customer Account Errors

Incorrectly recording sales in customer accounts may lead to financial mismatches.

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Revenue Recognition Risks: Despatch Without Invoice

Goods shipped without corresponding invoices may affect revenue accuracy.

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Revenue Recognition Risks: Managing Credit Notes

Keeping accurate records of credit notes is crucial for maintaining financial integrity.

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Internal Control Activities: Budget Analysis

Monthly management accounts analysis compared to the budget helps in reviewing company performance.

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Internal Control Activities: Numerical Sequence Checks

Implement numerical sequence checks for effective information processing control, ensuring nothing is lost or duplicated.

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Importance of Governance and Assurance

Effective governance and assurance practices are crucial for maintaining financial integrity and complying with regulations.

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Roles of Auditors and Internal Controls

Understanding the roles and responsibilities of auditors and internal controls helps minimize financial misstatement risks.

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Risk Assessment

A way to assess risks and determine the scope of an audit.

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Completeness and Accuracy

Ensuring that transactions and information are complete and accurate.

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Understanding the Entity and Environment

Procedures used to understand the entity and its environment, like gathering information and asking questions.

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Analytical Procedures

Using techniques to assess financial data for unusual patterns or deviations.

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Completeness of Transactions

Ensuring that all transactions are recorded and that none are omitted.

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Numerical Sequence Checks

Checking for inconsistencies in number sequences, preventing errors or fraud.

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Audit Assurance

The assurance provided by an auditor regarding the accuracy and reliability of financial statements.

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Internal Control System

A system of internal controls designed to prevent and detect fraud and errors

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Internal Control Evaluation

The process of evaluating the effectiveness of the internal control system.

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Internal Audit Function

The activities performed by the internal audit function to provide assurance on the effectiveness of the internal control system.

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Internal Control Framework

A framework for organizations to consider when designing and implementing their internal control system.

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Corporate Governance Code

A set of guidelines and principles designed to promote good corporate governance practices.

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GAAP Compliant Financial Statements

Financial statements that are prepared in accordance with generally accepted accounting principles.

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Financial Statement Audit

The process of ensuring that financial statements are free from material misstatement.

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Study Notes

Assurance and Corporate Governance

  • The Institute of Chartered Accountants in England and Wales (ICAEW) provides resources for students preparing for examinations.
  • Assurance refers to the level of confidence regarding the reliability of an assertion made by one party for the use of another.
  • The UK Corporate Governance Code outlines key provisions for corporate governance practices in companies.

Companies Act 2006 Provisions

  • Statutory auditors must be members of a recognized supervisory body and meet eligibility requirements.
  • An individual cannot act as a statutory auditor if they are an officer or employee of the company.

Objectives of Audit Planning

  • Determine the scope and important areas needing attention during audits.
  • Identify and resolve potential problems in a timely manner.
  • Allocate tasks appropriately to audit team members.

Risk Assessment Procedures (ISA UK 315)

  • Understand the entity and environment through inquiries of management and others.
  • Utilize analytical procedures and observation/inspection for a thorough understanding.

Analytical Procedures

  • Evaluate prior period information for trends.
  • Examine relationships between financial elements, expecting patterns.
  • Review industry information for comparison against a company's performance.

Ensuring Completeness in Sales Systems

  • Control procedures like matching sales orders with dispatch records help ensure that customers are invoiced correctly.
  • Non-sequential pre-numbering in despatch documentation can lead to incomplete invoicing of goods delivered.

Revenue Recognition Risks

  • Sales recorded in incorrect customer accounts can lead to financial discrepancies.
  • Potential despatch of goods without corresponding invoicing may affect revenue accuracy.
  • Maintaining proper credit notes recording is critical to managing financial integrity.

Internal Control Activities

  • Monthly management accounts analysis against the budget aids performance review.
  • Implementing numerical sequence checks contributes to information processing control.

Conclusion

  • Effective governance and assurance practices are essential to uphold financial reporting integrity and compliance with regulations.
  • Comprehending the roles and responsibilities of auditors and internal controls is crucial in minimizing risks related to financial misstatements.

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Prepare for your ICAEW assurance exams with this comprehensive question bank tailored for 2021 candidates. This resource includes a range of practice questions based on the content of the syllabus, ensuring you're well-equipped for your assessments. Revise effectively and boost your confidence ahead of exam day.

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