Deck 16: Other Assurance Services and Advanced Topics

Question 1

An assurance provider who reviews the financial report of a non-reporting entity should issue a report containing the statement that a review:

A) provides negative assurance that internal control is functioning as designed.
B) provides a level of assurance that is less than that given in an audit.
C) is substantially more in scope than a compilation.
D) provides a high level of assurance based on inquiry and analytical procedures.

Answer 1

B

Question 2

Reasonable assurance is provided by:

A) a review engagement.
B) an audit engagement.
C) an assurance engagement.
D) an agreed-upon procedures engagement.

Answer 2

B

Question 3

Which of the following statements, with respect to the auditor's report providing an opinion on a specific item on a financial report is correct?

A) Such a report can only be provided if the auditor is also engaged to audit the entire financial report.
B) Materiality must be related to the specified item rather than to the financial report taken as a whole.
C) The auditor who has issued an adverse opinion on the financial report taken as a whole can never express an opinion on a specified item in that financial report.
D) The attention devoted to the specific item is usually less than it would be if the financial report taken as a whole were being audited.

Answer 3

B

Question 4

Negative assurance is permissible in:

A) reports relating to the results of agreed-upon procedures to one or more specified elements, accounts or items of a financial report.
B) reports based on a performance audit of a government department.
C) reports based upon an audit of the interim financial report of a closely held business entity.
D) reports based upon a review engagement.

Question 5

During a review of the financial report of a non-reporting entity an assurance provider becomes aware of a lack of adequate disclosure that is material and pervasive to the financial report and results in it being misleading. If management refuses to correct the financial report presentations, the assurance provider should:

A) express only limited assurance on the financial report presentations.
B) disclose this departure from accounting standards in a separate paragraph of the report.
C) issue an adverse opinion.
D) issue an 'except for' opinion.

Question 6

The report in a limited assurance engagement provides:

A) positive assurance.
B) negative assurance.
C) a summary of findings.
D) assurance in the form of an audit opinion.

Question 7

The statement that 'nothing came to our attention which would indicate that these statements are not fairly presented' expresses which of the following?

A) Negative assurance.
B) Disclaimer of an opinion.
C) Piecemeal opinion.
D) Negative confirmation.

Question 8

Whenever special reports, filed on a printed form designed by authorities, call upon the independent auditor to make an assertion that the auditor believes is not justified, the auditor should:

A) reword the form or attach a separate report.
B) submit a standard auditor's report with explanations in a separate paragraph of the report.
C) withdraw from the engagement.
D) submit the form with questionable items clearly omitted.

Question 9

Inquiry and analytical procedures ordinarily performed during a review of an entity's half-yearly financial report include:

A) inquiries concerning actions taken at meetings of the board of directors.
B) analytical procedures designed to identify material weaknesses in internal accounting control.
C) inquiries of knowledgeable outside parties such as the client's attorneys and bankers.
D) analytical procedures designed to test the accounting records by obtaining corroborating evidential matter.

Question 10

Assurance services are best described as:

A) the expression of an opinion on the truth and fairness of a general purpose financial report.
B) the preparation of a financial report based on the assumptions of a responsible party.
C) independent professional services that improve the quality of information or its context, for decision makers.
D) services designed for the improvement of operations, resulting in better outcomes.

Question 11

The objective of assurance services is best described as:

A) improving the firm's outcomes.
B) comparing internal information and policies with those of other firms.
C) enhancing decision making.
D) providing reliable information.

Question 12

Which of the following procedures is usually included in a limited assurance engagement?

A) Inquiries concerning the entity's accounting policies.
B) Tests of controls over the sales-accounts receivable-cash cycle.
C) The confirmation of accounts receivable.
D) Attendance at the inventory stocktake.

Question 13

In performing an assurance service, an auditor typically:

A) assesses control risk at a low level.
B) supplies litigation support services.
C) provides management consulting advice.
D) expresses a conclusion about an assertion.

Question 14

Which of the following best describes an auditor's report on a supplementary financial report prepared in accordance with a price-level basis of accounting that has substantial support?

A) An unaudited report on a supplementary report.
B) An assurance report on a supplementary report.
C) A special purpose report on a supplementary report.
D) A limited assurance report on a supplementary report.

Question 15

A review engagement provides:

A) reasonable assurance.
B) high but not absolute assurance.
C) low assurance.
D) limited assurance.

Question 16

Which of the following is not an assurance engagement?

A) A review of historical financial information.
B) An audit of the effectiveness of internal control.
C) A performance audit.
D) A consulting engagement to help an organisation meet its tax obligations.

Question 17

Inquiry of the entity's personnel and analytical procedures are the primary bases for the issuance of a(n):

A) auditor's report on a financial report supplemented with price level information.
B) compilation report on a financial report for a non-public company in its first year of operations.
C) management advisory report prepared at the request of the client's audit committee.
D) half-yearly review report on a comparative financial report for a public company.

Question 18

A compiled financial report should be accompanied by a report stating all of the following except:

A) a compilation has been performed.
B) the accountant does not express an opinion or any other form of assurance on the report.
C) a compilation consists principally of inquiries of company personnel and analytical procedures applied to financial data.
D) a compilation is limited to presenting in the form of a financial report, information that is the representation of management.

Question 19

Which of the following must accompany an unaudited financial report which is prepared by an auditor?

A) Either a disclaimer of opinion or adverse opinion.
B) Only a disclaimer of opinion.
C) Either a disclaimer of opinion or a qualified opinion.
D) None of the given answers.

Question 20

When an auditor performs a review of an interim financial report, which of the following steps would not be part of the review?

A) Inquiry of management.
B) Testing of the computer controls.
C) Reading the minutes of the shareholders' meetings.
D) Review of ratios and trends.

Question 21

An engagement to express an opinion on a system of internal accounting control will generally:

A) increase the reliability of the financial report that has already been audited.
B) require procedures that duplicate those already applied in assessing control risk during a financial report audit.
C) be more limited in scope than the assessment of control risk made during a financial report audit.
D) be more extensive in scope than the assessment of control risk made during a financial report audit.

Question 22

An assurance report on internal control structures is least likely to be issued as a result of a:

A) review of the annual financial report of a large company.
B) performance audit of a government agency.
C) special study of related party transactions.
D) special study of a proposed system involving the internal control structure.

Question 23

Which one of the following is generally more important in a review than in an agreed upon procedures engagement?

A) Obtaining a signed representation letter.
B) Obtaining a signed engagement letter.
C) Gaining familiarity with industry accounting principles.
D) Determining the accounting bases on which the financial report is to be presented.

Question 24

Responding to a question such as 'what would happen if...' is an attribute of which of the following types of engagements?

A) Financial projection.
B) Financial forecast.
C) Financial forecast and financial projection.
D) Review.

Question 25

Which of the following statements is true regarding the performance of an assurance service on an information system's reliability by an auditor?

A) The service will require the auditor to apply all of the auditing standards.
B) The performing of this service does not require suitable criteria to be available.
C) Performing the service must be undertaken in accordance with approved accounting standards.
D) The service may be performed even though there are no standards currently issued by the Australian Auditing and Assurance Standards Board (AUASB).

Question 26

The responsible party for assumptions identified in the preparation of prospective financial statements is usually:

A) a third-party lending institution.
B) the client's management.
C) the reporting accountant.
D) the client's independent auditor.

Question 27

Given one or more hypothetical assumptions, a responsible party may prepare, to the best of its knowledge and belief, an entity's expected financial position, results of operations and changes in cash flows. Such prospective financial statements are known as:

A) financial projections.
B) pro-forma financial statements.
C) financial forecasts.
D) partial presentations.

Question 28

Which of the following statements is true with regards the auditor's likelihood of relying on controls in electronic commerce environments?

A) The auditor is more likely to identify controls they can rely upon in a B2B electronic commerce environment than they are in a B2C electronic commerce environment.
B) The auditor is more likely to identify controls they can rely upon in a B2C electronic commerce environment than they are in a B2B electronic commerce environment.
C) The auditor equally likely to identify controls they can rely upon in a B2B electronic commerce environment as they are in a B2C electronic commerce environment.
D) The auditor is not likely to identify controls they can rely upon in either a B2B electronic commerce environment or a B2C electronic commerce environment.

Question 29

When an auditor is associated with the preparation of forecasts, all of the following should be disclosed except the:

A) character of the work performed by the auditor.
B) sources of information.
C) probability of achieving estimates.
D) major assumptions in the preparation of the forecasts.

Question 30

An auditor's study and evaluation of the internal accounting control system made in connection with an annual audit is usually not sufficient to express an opinion on an entity's system because:

A) the audit cost-benefit relationship permits an auditor to express only reasonable assurance that the system operates as designed.
B) the evaluation of weaknesses is subjective enough that an auditor should not express an opinion on the internal accounting controls alone.
C) only those controls on which an auditor intends to rely are reviewed, tested and evaluated.
D) management may change the internal accounting controls to correct weaknesses.

Question 31

Following is a list of engagements that an assurance provider may undertake:
I)compiling financial reports
II)agreed-upon procedures
III)review of interim financial information.For which of these engagements is assurance not provided?

A) I only.
B) II only.
C) III only.
D) I and II only.

Question 32

Forensic audits include all of the following except:

A) employee fraud.
B) criminal investigations.
C) matrimonial disputes.
D) manufacturers' claims about product quality.

Question 33

Using XBRL, an audit client decides to make their general purpose financial reports continuously available and up-to-date and to have continuous assurance from the auditor. What would be the suitable criteria by which the auditor would judge whether or not there had been a material misstatement?

A) ASAE/ISAE 3000 'Assurance Engagements other than Reports or Reviews of Historical Financial Information'.
B) Extensible mark-up language (XML).
C) There are no generally available suitable criteria for such engagements. The suitable criteria would have to be agreed between and the audit client and the auditor, and these would have to be publicly disclosed.
D) Approved accounting standards.

Question 34

In which of the following scenarios is it more likely that the information provided will be continuously assured?

A) An entity decides to assure its environmental and sustainability report.
B) An entity has to provide a compliance report with regards whether there has been a breach of the rules with regards how confidential credit card details for electronic commerce transactions are stored.
C) An identity identifies that there is a risk that financial investments are not being written down to market value in the financial statements, as is required by accounting standards.
D) Financial information where a client determines to assure the quarterly financial reports as well as the half-yearly financial reports.

Question 35

Which of the following is not a major difference between integrated reporting and existing reporting frameworks?

A) The variety of financial and non-financial metrics covered.
B) The emphasis on internal control.
C) The emphasis on forward-looking information.
D) The reflection of company strategy.

Question 36

Which of the following are suitable criteria for providing assurance on a report of the effectiveness of internal controls?

A) Australian Accounting Standards.
B) AUS 810 'Special Purpose Reports on the Effectiveness of Control Procedures'.
C) ASAE/ISAE 3000 'Assurance Engagements other than Reports or Reviews of Historical Financial Information'.
D) The revised COSO framework.

Question 37

Which of the following would be suitable criteria for undertaking an assurance engagement on an environmental and sustainability report?

A) Australian Auditing Standards/International Auditing Standards.
B) The revised COSO framework.
C) ASAE 3000/ISAE 3000.
D) Global reporting initiative framework.

Question 38

What is the general character of the work conducted in performing a forensic audit?

A) Detecting or deterring fraudulent activity.
B) Determining whether internal control is operating efficiently and effectively
C) Identifying the causes of an entity's financial difficulties.
D) Offering an opinion on the reliability of the specific assertions made by management.

Question 39

ISAE 3410 'Assurance of Greenhouse Gas Statements' is based on which approach to assurance?

A) Risk based approach.
B) Systems based approach.
C) Agreed upon procedures approach.
D) Limited assurance approach.

Question 40

An emission that is associated with the consumption, rather than the production, of electricity by an assurance client should be classed as a(n):

A) scope 1 emission.
B) scope 2 emission.
C) scope 3 emission.
D) emission deduction.