AA A Audit framework and regulation

Written by Fahad Mirza (ACCA)

ACCA · Audit and Assurance · 10 questions

Name: ____________________ Date: ____________

What level of assurance does an audit of financial statements give?
- A No assurance
- B Absolute assurance
- C Reasonable assurance
- D Limited assurance
Who is responsible for preparing the financial statements?
- A The tax authority
- B The audit committee only
- C The external auditor
- D The directors
Which body issues the International Standards on Auditing?
- A The FBR
- B The IAASB
- C The IASB
- D The ISSB
What is the main role of an audit committee in relation to external audit?
- A To set the audit fee without discussion
- B To recommend the appointment of the auditor and help to protect the auditor's independence
- C To perform the audit
- D To prepare the financial statements
Which of these is a fundamental ethical principle in ACCA's Code of Ethics and Conduct?
- A Profitability
- B Loyalty to the client
- C Objectivity
- D Speed
An audit firm's team member holds shares in an audit client. Which threat does this create?
- A Intimidation
- B Self-interest
- C Advocacy
- D Familiarity
An audit firm prepares the financial statements of its audit client and then audits them. Which threat does this create?
- A Intimidation
- B Self-review
- C Familiarity
- D Advocacy
A long-serving audit partner has become close friends with the finance director of a client. Which threat does this create?
- A Advocacy
- B Familiarity
- C Self-review
- D Self-interest
Which of these is a safeguard against a familiarity threat?
- A Rotating the audit partner
- B Appointing the client's finance director to the audit team
- C Increasing the audit fee
- D Taking gifts from the client
Which statement about the limited assurance is correct?
- A It gives no conclusion
- B It gives a negative form of conclusion with a lower level of assurance
- C It is the same as an audit
- D It gives a positive opinion with high assurance

Answer key

1. C, 2. D, 3. B, 4. B, 5. C, 6. B, 7. B, 8. B, 9. A, 10. B

Reasonable assurance is high but not absolute.
The auditor is responsible for the opinion on them.
The IAASB is the international auditing standard setter.
It also reviews financial reporting and internal control.
The five principles are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
A financial interest in the client threatens objectivity.
The firm would be reviewing its own work.
A close relationship can make the auditor too sympathetic to the client.
Rotation breaks long association.
A review is an example.