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ACA Assurance with complete solutions graded A+ passed
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ACA Assurance with complete solutions graded A+ passed
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ACA AssuranceWhat are the 5 key elements of an assurance engagement? - correct answer ✔✔CREST
Criteria
Report
Evidence
Subject matter (the thing being checked)
Three party relationship
What are the auditor appointment considerations before acceptance of an engagement? - correct
answer ✔✔MANICS
Management Integrity
Adequate Resources
Nature of Engagement (level of risk)
Identification
Communicate with previous auditor
Stability
What is the letter of engagement? - correct answer ✔✔Sets out the objectives, scopes and
responsibilities of the audit. It outlines the reporting framework and the form of any reports or opinions
which may be given.
What are the key contents of the engagement letter? - correct answer ✔✔ADDS TO FIRMS Fees
Auditors' responsibilities
Directors' responsibilities
Directors' representations
Scope and objectives
Terms agreed
Other services
,Fraud (clarifying that directors are responsible for detecting fraud)
Irregularities
Report to management
Management of the audit (timings)
Specialists (may be required to value large or unusual assets)
Fees
Define audit risk - correct answer ✔✔The risk that the auditor expresses an inappropriate audit opinion
when the financial statements are materially misstated.
AR = IR X CR X DR
What are examples of inherent risk? - correct answer ✔✔- Complex calculations
- Estimates in transactions
- The business may be under pressure to produce good results e.g., directors' bonuses
- External circumstances giving rise to business risks
What is included in the audit strategy? - correct answer ✔✔- Information about the client's industry
- Scope of the audit
- Identification of specific audit risks
- Size of the audit team, requirement to use specialists
- Management, direction and supervision of the audit team (timing of briefing meetings, partner
reviews, manager visits)
What is included in the audit plan? - correct answer ✔✔- More detailed than the audit strategy
- Nature, timing and extent of the specific audit procedures required for each material class of
transactions, account balance or disclosure
Under ISA 315 (Identifying and assessing the risks of material misstatement), what are the key
components of internal control? - correct answer ✔✔CRIME
,Control activities
Risk assessment process of the entity
Information systems
Monitoring of controls
Control environment
Define control environment - correct answer ✔✔The governance and management functions of the
organisation.
What are the responsibilities of the Audit Committee? - correct answer ✔✔- To assess the effectiveness
of the internal audit department
- To monitor the independence of the external auditor
- To make recommendations to the board in relation to the external auditor
According to ISA 315, which 3 aspects are part of an entity's control environment? - correct answer
✔✔1. Attitude of the directors to internal control
2. The awareness of internal control issues in the company
3. The actions of senior management in relation to internal controls
What are some examples of physical controls within a company's internal controls? - correct answer
✔✔1. The finance controller counts petty cash on a monthly basis.
2. There are 2 keys to the locked safe - one held by the finance director and one held by the managing
director.
What would the controls and test of controls be for mis-recorded orders? (Revenue system) - correct
answer ✔✔Control: pre-printed standard order forms, confirm order with customers
Test of control: inspect pre-printed order forms
What would the controls and test of controls be for unfulfilled orders? (Revenue system) - correct
answer ✔✔Control: match customers' orders to GDNs, investigate unmatched orders, staple GDNs to
invoices, sequentially number customer order forms, investigate customer queries.
, Test of control: review unmatched order firms, investigate old unmatched orders
What would the controls and test of controls be for orders accepted at the wrong price? (Revenue
system) - correct answer ✔✔Control: have a standard price list, ensure that discounts are authorised by
appropriate level of management
Test of control: review standard price list, for customers receiving a discount trace back to proof of
discount
Remittances not accorded in the accounting system - correct answer ✔✔Bank reconcilliation
What would the controls and test of controls be for goods despatched but not recorded? - correct
answer ✔✔Control: supervise the warehouse, ensure GDN accompany goods leaving the warehouse,
inventory counts to identify missing goods, regularly update inventory records from GDNs
Test of control: Observation, investigate disrepancies
What would be the controls and test of controls for goods despatched but not invoiced? - correct answer
✔✔Control: sequentially number GDNs, review GDNs for completeness, match GDNs to invoices, review
any unmatched GDNs
Test of control: review GDNs for completeness, check GDNs to invoices
What should you look out for when evaluating whether a system/control is a strength or a deficiency? -
correct answer ✔✔Look for the word 'check'
What are some risks and corresponding control procedures associated with the purchases system? -
correct answer ✔✔- ordering goods that are not required (requisitions should be approved by a
responsible party)
- not buying at the most competitive price (tender procedures)
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