Practice

Question 1

While computing current ratio, loan payments will be given, what will you do?

Answer 1

Consider the current years loan payment in current liabilities and ignore the previous year one

Question 2

Reconciliations for payables and purchases response

Answer 2

1.Reconcile to verify any differences
2. Increased substantive procedures

Question 3

Can analytical procedures detect MM in the FS figures?

Answer 3

No.
Only helps in identifying areas with potential risk and obtaining an understanding of the client.

Question 4

Best sources of info about company?

Answer 4

1. Client’s system’s procedure manuals
2. Internal audit system’s notes
3. Inquiries made of client’s staff

Question 5

Factors indicating increased audit risk?

Answer 5

1. Dominant CEO
2. Poor internal controls
3. Unusual transactions

Question 6

Qualitative inherent risk factors?

Answer 6

1. Subjectivity
2. Complexity
3. Uncertainty

Question 7

Primarily to report to whom regarding fraud?

Answer 7

TCWG

Question 8

Internal audit’s responsibility regarding fraud/error?

Answer 8

1. Evaluating the effectiveness of IC
2. Evaluating errors that could indicate fraud

Question 9

What can incentivize to conduct fraud?

Answer 9

High expectations of investors.

Question 10

What is the process of comparing two items/balances?

Answer 10

Verification

Question 11

Inherent limitations of internal control

Answer 11

1. Management override
2. Collusion of two or more people
3. Human Error

Question 12

Do we conduct audit procedures for immaterial items?

Answer 12

No.

Question 13

Controls for IT operations

Answer 13

1. Backup and recovering
2. Job scheduling

Question 14

Controls for managing program changes

Answer 14

Data conversion

Question 15

Controls for access control

Answer 15

Deprovisioning

Question 16

When risk of material misstatement is same as inherent risk, there is no need for?

Answer 16

Test of Controls

Question 17

Who approves the amount of dividend paid to equity shareholders

Answer 17

Equity shareholders

Question 18

Assertion to inspect board minutes?

Answer 18

Occurrence

Question 19

Director’s emoluments include:

Answer 19

1. Basic salary
2. Bonus and performance related payments
3. Expense allowances
4. Pension contribution paid

Question 20

Evidence checked for bonus issue?

Answer 20

1. Register of members
2. Minutes of general meeting

Question 21

Procedure that is not required in the non current assets of small companies?

Answer 21

Estimate remaining useful life

Question 22

Significant risk area in NPOs?

Answer 22

Cash

Question 23

Findings in internal control should be directly communicated to?

Answer 23

BOD