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6.

Four months after Aiks Aiks & Associates issued an unqualified opinion on the financial statements of Delicious Mushroom (DM) Ltd, Monty Aiks the audit partner discovered that audit team failed to confirm several of DMs material accounts receivable balances. What is Monty required to do first?

a.

Perform alternative procedures to provide satisfactory basis for the unqualified opinion

b.

Assess the importance of the omitted procedures to the auditors ability to support the previously expressed opinion

c.

Request permission of the client to undertake the confirmation of accounts receivable

d.

Enquire whether there are users currently relying, or likely to rely on the unqualified opinion

7.

When the auditor concludes that controls are less effective than they actually are, this is referred to as which type of risk?

a.

Risk of under-reliance

b.

Risk of incorrect acceptance

c.

Risk of incorrect rejection

d.

Risk of overreliance

8.

In assessing the risks of material misstatements for Sticky Treats Ltd, Jay Klaus, the auditor leading uses the audit risk model (AR = IR x CR x DR) to help determine the level of risk. All of the following but one is true about risk detection by the auditor:

a.

A high level of detection risk requires the auditor to adopt a predominantly substantive audit strategy

b.

Where planned detection risk is high, the auditor obtains less evidence from substantive procedures than where planned detection risk is low

c.

When the control risk is less than high, the auditor is confident that the entitys own procedures reduce the likelihood of material misstatement in a particular assertion

d.

A low level of detection risk requires the auditor to adopt a predominantly substantive audit strategy

9.

n the audit of Squeez Meat Ltd, the lead auditor, Mara assigned one of the audit team to collate all audit adjustments identified during the audit. Mara then reviewed the summary of adjustments and decided to pursue these adjustments with management. Which of the following represents the best reason for Maras decision?

a.

the auditor is required to discover all material errors in the financial report under the concept of reasonable assurance

b.

the errors are material in aggregate after considering the reversing effects of passed entries from previous periods

c.

management has properly disclosed the extent of the errors in the footnotes to the consolidated financial report for the year under audit

d.

the lawyers response to audit inquiry includes the statement that he is unaware of any errors and can make no such estimates

10.

Kukua Abereti, the auditor in charge of the audit of Triple X Ltds financial statements is aware that in performing tests of controls, sampling risks may occur. Which of the following conditions will help Kukua make the correct decision on sampling?

a.

Where the assessed levels of control risk based on sample supports preliminary assessment of control risk; the effectiveness of the entitys control structure policy is adequate for assessed level of control risk

b.

Where the sample estimate of account balance or error in account balance supports conclusion that recorded balance is materially misstated; the state of the entitys recorded account balances is not materially misstated

c.

Where the assessed levels of control risk based on sample supports preliminary assessment of control risk; the effectiveness of the entitys control structure policy in inadequate for assessed level of control risk

d.

Where the assessed levels of control risk based on sample does not support preliminary assessment of risk control; the effectiveness of the entitys control structure policy is adequate for assessed level of control risk

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