ACA Assurance
Statutory audit - correct answer ✔✔A legally required review of the accuracy of a company's or
government's financial statements and records
Financial statement assertions - correct answer ✔✔Claims of accuracy and valuation, existence,
completeness, rights and obligations, and presentation and disclosure made implicitly in the financial
statements by the preparer
Remittance (?) - correct answer ✔✔Any transfer of payment which completes a business transaction
Company memorandum (?) - correct answer ✔✔A legal statement signed by all initial shareholders or
guarantors agreeing to form the company
Tolerable error - correct answer ✔✔The maximum error in the population that the auditor would be
willing to accept and still conclude that the result from the sample has achieved the audit objective.
Reconciliation vs verification - correct answer ✔✔Verification is before, reconciliation is after?
Sampling risk - correct answer ✔✔The risk that the auditor's conclusions based on a sample may be
different from the conclusion if the entire population were the subject of the same audit procedure.
Lodgement - correct answer ✔✔Cheques deposited but not yet credited
Management representation letter - correct answer ✔✔A form letter written by a company's external
auditors, which is signed by senior company management (EXAMPLES)
Casts - correct answer ✔✔Totals
, Lower of cost - correct answer ✔✔Valuing inventory at whichever is lowest of its historical cost and
current market value
Net realisable value - correct answer ✔✔Expected selling price - total cost of selling
Board of directors - correct answer ✔✔A group of individuals elected by a public company's
shareholders to provide the expert and experienced guidance and oversight to ensure a company's
profitability and sustainability
Analytical procedure - correct answer ✔✔Evaluations of financial information through analysis of
plausible relationships among both financial and non-financial data
Role of internal audit - correct answer ✔✔To provide independent assurance that an organisation's risk
management, governance and internal control processes are operating effectively (EXAMPLES)
Fee dependency limits - correct answer ✔✔10% for listed companies and 15% for non-listed companies
Payroll summary - correct answer ✔✔The total wages, taxes, deductions, entitlements and employer
expenses for each selected employee
Current ratio - correct answer ✔✔The ratio of *current* assets to *current* liabilities where current
means short term (< 1 year)
Audit risk - correct answer ✔✔The risk that the auditor expresses an inappropriate opinion when the
financial statements are materiality misstated. There are 3 types:
- Detection risk
- Control risk
- Inherent risk
Rules on long association between auditor and client for listed company - correct answer ✔✔5 years for
engagement partners (then wait 5)
7 years for key partners (then wait 2) and reviewing partners (then wait 5)
Statutory audit - correct answer ✔✔A legally required review of the accuracy of a company's or
government's financial statements and records
Financial statement assertions - correct answer ✔✔Claims of accuracy and valuation, existence,
completeness, rights and obligations, and presentation and disclosure made implicitly in the financial
statements by the preparer
Remittance (?) - correct answer ✔✔Any transfer of payment which completes a business transaction
Company memorandum (?) - correct answer ✔✔A legal statement signed by all initial shareholders or
guarantors agreeing to form the company
Tolerable error - correct answer ✔✔The maximum error in the population that the auditor would be
willing to accept and still conclude that the result from the sample has achieved the audit objective.
Reconciliation vs verification - correct answer ✔✔Verification is before, reconciliation is after?
Sampling risk - correct answer ✔✔The risk that the auditor's conclusions based on a sample may be
different from the conclusion if the entire population were the subject of the same audit procedure.
Lodgement - correct answer ✔✔Cheques deposited but not yet credited
Management representation letter - correct answer ✔✔A form letter written by a company's external
auditors, which is signed by senior company management (EXAMPLES)
Casts - correct answer ✔✔Totals
, Lower of cost - correct answer ✔✔Valuing inventory at whichever is lowest of its historical cost and
current market value
Net realisable value - correct answer ✔✔Expected selling price - total cost of selling
Board of directors - correct answer ✔✔A group of individuals elected by a public company's
shareholders to provide the expert and experienced guidance and oversight to ensure a company's
profitability and sustainability
Analytical procedure - correct answer ✔✔Evaluations of financial information through analysis of
plausible relationships among both financial and non-financial data
Role of internal audit - correct answer ✔✔To provide independent assurance that an organisation's risk
management, governance and internal control processes are operating effectively (EXAMPLES)
Fee dependency limits - correct answer ✔✔10% for listed companies and 15% for non-listed companies
Payroll summary - correct answer ✔✔The total wages, taxes, deductions, entitlements and employer
expenses for each selected employee
Current ratio - correct answer ✔✔The ratio of *current* assets to *current* liabilities where current
means short term (< 1 year)
Audit risk - correct answer ✔✔The risk that the auditor expresses an inappropriate opinion when the
financial statements are materiality misstated. There are 3 types:
- Detection risk
- Control risk
- Inherent risk
Rules on long association between auditor and client for listed company - correct answer ✔✔5 years for
engagement partners (then wait 5)
7 years for key partners (then wait 2) and reviewing partners (then wait 5)
