E3 Planning, risk and sustainability

What is one purpose of customer due diligence at acceptance?

• 1 To set the audit fee
• 2 To identify and verify the client and manage the risk of money laundering
• 3 To choose the audit sample
• 4 To prepare the tax return

Which is a precondition for an audit?

• 1 A low fee
• 2 A new auditor every year
• 3 An acceptable financial reporting framework and management's agreement to its responsibilities
• 4 A positive profit

An auditor looks only for evidence that supports a first impression. Which bias is this?

• 1 Framing
• 2 Availability bias
• 3 Confirmation bias
• 4 Anchoring bias

Which is an example of a sustainability-related business risk that could affect the audit?

• 1 New climate regulation that makes an asset impaired
• 2 The auditor's holiday
• 3 A change in the audit fee
• 4 A new office layout

Target audit risk is 5 percent, inherent risk 60 percent and control risk 70 percent. What is the detection risk?

• 1 42%
• 2 30%
• 3 8.3%
• 4 11.9%

What is done in an interim audit?

• 1 Work on systems and controls and early testing before the year end
• 2 The final analytical review only
• 3 The signing of the report
• 4 The issuing of written representations

What is kept in the permanent audit file?

• 1 This year's inventory count
• 2 The final report only
• 3 Information of continuing relevance, such as the client's constitution
• 4 This year's bank confirmations

Gross margin falls from 36 percent to 30 percent while revenue grows. What should the auditor do?

• 1 Accept that it is the economy
• 2 Investigate possible overstatement of cost of sales or understatement of revenue
• 3 Reduce materiality to zero
• 4 Ignore it