REVISION QUESTION 2021

Nature, Purpose and Scope of Audit

1. Define auditing and describe the key phrases in the definition.

2. What is meant by management assertions? Identify and describe assertions
about classes of transactions and events and assertions about account
balances.
3. State three objectives of auditing.
4. Give five general requirements that the auditor has to meet when conducting
an audit according to ISA 200.
5. Briefly describe the concept of true and fair view in auditing.
6. Identify and describe four causes for the demand of auditing.
7. Describe five benefits of auditing.
8. Describe Operational audit, compliance audit and financial statements audit.
9. Outline the characteristics of financial statements audit.
10. Differentiate between statutory audit and non-statutory audit.
11. Differentiate between internal audit and external audit.
12. Describe four types of auditors.
Regulatory framework: Standards

13. Differentiate between auditing standards and audit procedures.

14. Describe the authority of auditing standards.
15. Outline the stages commonly followed by boards tasked with responsibility of
drafting statements of auditing standards.
16. Explain why auditing firms implement the system of quality control.
17. Outline the elements of system of quality control.
18. Why should the audit firm establish policies and procedures regarding
independence?
19. What are the main matters that the audit firm should consider before
accepting a new audit client?
20. Identify 3 things that audit firm should cover when establishing policies and
procedures about engagement performance.
21. Describe what “monitoring” involve as the element of system of quality control.
22. Distinguish between the existence and completeness management assertions.
State the effect on the financial statements (overstatement or understatement)
of a violation of each in the audit of credit sales.
 23. Explain why it is important for the Engagement Partner to discuss the risk-
related issues with the audit team before audit starts.
24. ISA 220 requires the engagement partner to form a conclusion on compliance
with independence requirements that apply to the audit engagement. How can
this be achieved?
25. What should the Engagement partner consider when deciding to continue
with the existing client?
26. What should be the main consideration when forming an engagement team?
27. According to ISA 220, what should the engagement partner inform the
engagement team as they are preparing to start a new audit engagement?
28. What should be the concerns of the engagement partner regarding
consultation among engagement team?
29. Describe four maters that the engagement partner should include in audit
documentation of a specific engagement?
Regulatory framework: Code of Ethics

30. Describe five fundamental principles of ethics for Professional Accountants.

31. With examples describe the five threats against the compliance with
fundamental principles of ethics.
32. Identify four safeguards given by the professional bodies to assist their
members in adhering to fundamental principles of ethics.
33. Explain 5 engagement-specific safeguards which the Engagement Partner may
implement in order to protect the engagement against the threats to
fundamental principles.
34. Describe a three-stage general process the auditors are required to follow
when dealing with threats against compliance with fundamental principles of
ethics.
35. Differentiate between independence in mind and independence in appearance.
36. Identify 13 specific circumstances that can create threat to auditor’s
independence according to Code of Ethics for Professional Accountants.
37. To determine existence and significance of financial interest that can impair
auditor’s independence in a client entity would depend on three factors.
Explain those factors.
38. Identify at least five persons that are prohibited from having financial interest
in audit client entity.
 39. Discuss the restrictions imposed on an auditor in relation to loans or
guarantees from banks and non-bank institutions in order to protect auditor’s
independence.
40. Discuss the restrictions imposed on an auditor in relation to business
relationship and family or personal relationships to safeguard auditor’s
independence.
Regulatory framework: Statues

41. Describe the procedures of appointing auditors according to Companies Act.

42. What are the duties of an auditor according to Companies Act?
43. Describe five rights of an auditor according to Companies Act.
44. Describe the conditions of removing the auditor who qualifies for
reappointment from office.
45. Discuss the conditions for the resignation of an auditor.
46. What conditions must be fulfilled before for an auditor can acquire a
Practicing Certificate from BICA.
47. An audit firm may register as Certified Auditor to audit Public Interest
Entities. State the conditions that must be fulfilled before a firm can obtain
such registration.
48. Explain how the Companies Act safeguards the independence of the auditor.

Auditors’ Legal Liability

49. Discuss what the auditor must do to prove s/he has exercised a duty of
reasonable care.
50. Give four examples of circumstances under which the client can successfully
sue the auditors.
51. Discuss what the client must establish to succeed a legal action against the
auditor.
52. Identify four defences the auditor may raise against the client’s legal action
against him.
53. Differentiate between foreseen users and foreseeable users of audited
financial statements.
54. Discuss three factors that the contemporary court would try to establish in
determining whether the third party can successfully bring a claim against
the auditor for ordinary negligence.
Materiality

55. Differentiate between overall materiality and performance materiality. How do

they relate to each other?
56. Explain why materiality is important but difficulty to apply in practice.
57. Identify and describe the steps to be followed by the auditor when applying
materiality concept.
58. What is meant by setting overall materiality? Identify the most important
factors affecting the overall materiality.
59. Explain what is meant by making an estimate of the total misstatements in a
segment and in the overall financial statements. Why is it important to make
these estimates? What is done with them?
60. What course of action should the auditor take after establishing that the
estimated combined misstatements exceed the overall materiality?
61. Identify and describe four types of opinion the auditor may use to modify the
unqualified audit opinion.
Audit risk

62. Define the audit risk model and explain each term in the model. Also describe
which two factors of the model when combined reflect the risk of material
misstatement.
63. Discuss the importance of the audit risk model. Explain how each element of
the audit risk model relate to the other and audit evidence
64. Define engagement risk. Identify factors that influences it and discuss how it
related to acceptable audit risk.
65. Which factors make high inherent risk? How does inherent risk relate to
acceptable audit risk and audit evidence?
66. How should the auditor respond after establishing that the risk of material
misstatements in the client is high?
Audit Evidence

67. Identify the four major evidence decisions that must be made on very audit.
68. Describe what is meant by an audit procedure. Why is it important for audit
procedures to be carefully worded?
69. Explain why the auditor can be persuaded only with a reasonable level of
assurance, rather than convinced, that the financial statements are correct.
 70. Identify the six characteristics that determine the reliability of evidence. For
each characteristic, provide one example of a type of evidence that is likely to
be reliable.
71. List the 8 types of evidence and give two examples for each.
72. Explain the importance of analytical procedure as evidence in determining the
fair presentation of the financial statements.
73. Identify the most important reason for performing analytical procedures.
74. Distinguish between attention-directing analytical procedures and those
intended to eliminate or reduce detailed.
Documentation

75. Explain why it is important for audit documentation to include each of the
following: identification of the name of the client, period covered, description
of the contents, initials of the preparer and reviewer, dates of the preparation
and review, and an index code.
76. Distinguish between permanent file and current file and list several types of
information typically included in each file.
77. Who owns the audit files? Under what circumstances can they be used by
other people?
78. Identify and explain 5 purposes of audit documentation.
79. Explain what influences the contents of the audit files.
Internal Control general

80. Identify and explain the components of internal controls.

81. What are the benefits of internal control system in the organization?
82. Why is it important for the auditor that the client company should have
effective internal controls?
83. Discuss three objectives the internal control.
84. Explain what is meant by segregation of duties and give four example of broad
segregation of duties in an organization. Explain the misstatements that may
occur if the segregation of duties you identified is not implemented.
85. Explain what is meant by control activities. Identify and explain five
components of control activities.
86. Explain what is meant by control environment. Identify and explain five
components of control environment.
87. Identify what the auditor should understand when obtaining the
understanding the design of the accounting information system.
 88. Identify and explain six transaction-related audit objectives.
89. Discuss the inherent limitations of internal control.
Internal auditing

90. Discuss the broad role of internal audit function in the organization.
91. Discuss what will influence the external auditor reliance on the work of
internal auditor.
92. Compare and contrast the external audit function and internal audit function.
93. Discuss three main factors that would influence the external auditor reliance
on the work of internal auditor.
94. Internal audit may be provided by in-house staff or an outsourced team.
Discuss the advantages and disadvantages of outsourcing the internal audit
function.
Internal controls in small entities

95. Many of the controls that would be relevant to a large entity are neither
practical nor appropriate for a small entity. Discuss the ways in which the
small entity may achieve some level of the internal control.
96. What is the major control available in a small entity?
97. Discuss the effect of inadequate internal controls on the financial statements
audit of small entities.
98. What should the external auditor do to be able to issue unqualified report on
the accounts of small entities?
99. Give the arguments for and against the small entities having a statutory
external audit.
Chronology of an audit

100. Identify and explain main phases in the audit process.

101. Identify the key procedures under each phase in the audit process.

Engagement letter

102. What is the purpose of the engagement letter?

103. Explain what the auditor should do in to establish whether the
preconditions for an audit exist.
104. Under what circumstances can the auditor reject the audit
engagement according to ISA 210?
105. When should the engagement letter be sent?
106. State the content of the engagement letter.
107. “Engagement letter remains effective from one audit appointment to
another until it is replaced”; remarked the Senior Auditor. Evaluate
the statement.
108. Under what circumstances should the engagement letter be
appropriate in the recurring audit?
109. Identify three reasons that may cause the client management to
request for the change in the engagement letter. Which reasons are
acceptable and which ones are not according to ISA210?