Started on Wednesday, 23 October 2024, 2:49 PM
State Finished
Completed on Wednesday, 23 October 2024, 3:34 PM
Time taken 45 mins 1 sec
Grade 26.00 out of 30.00 (87%)
Question 1
Correct
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Question text
There are reasons that an audit firm may not wish to enter a relationship with a prospective
audit client. Which one of the options below does not represent such a reason?
a.
The client’s CEO is being investigated for fraud
b.
The client operates in a very competitive industry
c.
There are indications that the client might be involved in money laundering or other
criminal activities
d.
The firm does not have the necessary capacity and resources to service the client
Feedback
Your answer is correct.
Reference
· SAICA student handbook, Volume 2A (1), ISA 220 paragraphs 22 and A50
· Auditing notes for South African students (2021): 6/11
, AUE2601-S2-24-ASSESSMENT-4
If the client operates in an industry the audit firm does not wish to be associated with, for
example, pornographic material distribution, then the audit firm could decide not to enter a
relationship with the client, but a merely competitive industry does not warrant such a
decision. All other options represent reasons why the audit firm may wish not to enter a
relationship with a prospective audit client as per ISA 220.
The correct answer is:
The client operates in a very competitive industry
Question 2
Incorrect
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Question text
When designing and performing audit procedures, the auditor shall consider the relevance
of the information to be used as audit evidence.
Which one of the options describes evidence gathered by the auditor which will be
relevant for the existence assertion relating to inventory?
1. The auditor selects a sample of inventory items from the inventory records to count
and inspect at the annual inventory count.
2. The auditor recalculates the value of inventory on hand and compares it to the
value per the stock listing.
3. The auditor obtains confirmation about the consignment inventory held at a third
party.
4. The auditor selects inventory items from the floor and traces these back to the
stock listing.
a.
1, 2 and 4
, AUE2601-S2-24-ASSESSMENT-4
b.
1, 3 and 4
c.
1 and 3
d.
2 and 4
Feedback
Your answer is incorrect.
Reference
· SAICA student handbook, Volume 2A (1), ISA 500 paragraph A27
· Auditing notes for South African students (2021): 5/19-5/20
The correct options are 1 and 3. A physical count of inventory as well as obtaining
confirmation from a third party will provide the auditor with audit evidence relating to the
existence of inventory.
Option 2 is incorrect as recalculating the value of inventory will give evidence about the
accuracy, valuation and allocation assertion of inventory.
Option 4 is also incorrect as selecting inventory from the floor and agreeing to the stock
listing gives evidence about the completeness of inventory.
The correct answer is:
1 and 3
Question 3
Correct
Mark 2.00 out of 2.00
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