CPA AA - Audit & Insurance Exam
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Total 80 questions
Question #11 (Topic: )
Jones & Co is the external auditor of Blue plc, a listed company. The directors of Blue plc
have requested that Jones & Co carry out a review engagement assessing the
effectiveness of its corporate governance policies against the UK Corporate Governance
Code.
For the above review engagement, select which part of the engagement description
constitutes the subject matter?
have requested that Jones & Co carry out a review engagement assessing the
effectiveness of its corporate governance policies against the UK Corporate Governance
Code.
For the above review engagement, select which part of the engagement description
constitutes the subject matter?
A. Blue plc’s corporate governance policies
B. The UK Corporate Governance Code
C. Jones & Co
D. The directors of Blue plc
Answer: A
Question #12 (Topic: )
One category of fraud is fraudulent statements. This is usually in the form of falsication of
nancial statements in order to obtain some form of improper benet. It also includes
falsifying documents such as employee credentials.
Which one of the following is correct about risk assessment procedures related to fraud by
the external auditor?
nancial statements in order to obtain some form of improper benet. It also includes
falsifying documents such as employee credentials.
Which one of the following is correct about risk assessment procedures related to fraud by
the external auditor?
A. The auditor has no duty to identify fraud in the organisation, hence no inquiries are required.
B. The auditor shall make inquiries of management, and others within the entity as appropriate, to determine whether they have knowledge of any actual, suspected or alleged fraud affecting the entity.
C. The auditor shall make inquiries of top management only as appropriate, to determine whether they have knowledge of any actual, suspected or alleged fraud affecting the entity.
D. The auditor shall not evaluate any unusual or unexpected relationships that have been identified in performing analytical procedures which may indicate risks of material misstatement due to fraud.
Answer: B
Question #13 (Topic: )
A subsidiary president terminated a controller and hired a replacement without the required
corporate approvals. Sales, cash flow, and profit statistics were then manipulated by the
newcontroller and president via accelerated depreciation and sale of capital assets to
obtain larger performance bonuses for the controller and the subsidiary president.
Which of the following approaches might detect this fraudulent activity?
corporate approvals. Sales, cash flow, and profit statistics were then manipulated by the
newcontroller and president via accelerated depreciation and sale of capital assets to
obtain larger performance bonuses for the controller and the subsidiary president.
Which of the following approaches might detect this fraudulent activity?
A. Analysis of overall management control for segregation of duties.
B. Exit interview for all terminated employees.
C. Periodic changes of outside public accountants.
D. Regular analytical review of operating divisions.
Answer: D
Question #14 (Topic: )
Cates plc is a large organisation with a complex accounting and information system.
Critical to an understanding of the system are the reporting lines and relationships between
different departments.
Which of the following represents inherent limitation of a system of internal controls in
Cates plc?
Critical to an understanding of the system are the reporting lines and relationships between
different departments.
Which of the following represents inherent limitation of a system of internal controls in
Cates plc?
A. Lack of controls over the purchases system
B. Lack of in-depth knowledge of the purposes of controls
C. Lack of staff to ensure segregation of duties
D. The possibility that staff members will collude in fraud
Answer: D
Question #15 (Topic: )
When performing risk assessment procedures and related activities to obtain an
understanding of the entity and its environment, including the entitys internal control,
required by ISA 315, the auditor shall perform certain procedures to obtain information for
use in identifying the risks of material misstatement due to fraud.
Which of the following is not a part of an entitys risk assessment process?
understanding of the entity and its environment, including the entitys internal control,
required by ISA 315, the auditor shall perform certain procedures to obtain information for
use in identifying the risks of material misstatement due to fraud.
Which of the following is not a part of an entitys risk assessment process?
A. Identify relevant business risks
B. Assess the likelihood of occurrence
C. Decide upon actions to manage the risks
D. Report the process to the auditors
Answer: D
