CHAP 4

1. Which of the following procedures must the auditor use to obtain an

understanding of the entity and its environment in accordance with ISA 315
Identifying and assessing the risks of material misstatement through
understanding the entity and its environment
(1) Analytical procedures
(2) Inquiry
(3) Confirmation
(4) Reperformance
A.1, 2 and 3
B.1 and 2
C.2, 3 and 4

2. What are the two elements of the risk of material misstatement at the assertion
level?.
A.Inherent risk and dêtction risk
B.Audit risk and detection risk
C.Inherent risk and control risk
D.Detection risk and control risk

3. Which of the following statements about materiality are correct?

(1) Information is material if its omission or misstatement could influence the
economic decisions of users of the financial statements.
(2) Materiality is based on the auditor's experience and judgement.
(3) Materiality is always based on revenue.
(4) Materiality should only be calculated at the planning stage of the audit.
A.1, 2 and 3
B.1, 3 and 4
C.1 and 2
D.2 and 4

4. Is the following statement regarding the interim audit true or false?

The higher the risk of material misstatement the more likely it is that the auditor
will decide to perform substantive procedures during the interim audit rather than
at the period end
False

5. What are the purposes of planning the audit?

(1) To ensure appropriate attention is devoted to different areas of the audit
(2) To identify potential problem areas
(3) To facilitate delegation of work to audit team members
(4) To ensure the audit is completed within budget and time restraints
 (1), (2) and (3)

6. Which of the following statements is/are true with respect to analytical

procedures?
(1) Analytical procedures can be used throughout the audit.
(2) Analytical procedures must be used as risk assessment procedures
(1) and (2)

7. Which of the following can increase the level of inherent risk for a company?
(1) Operating in fast paced industry
(2) Lack of segregation of duty
(3) Many cash based transactions
(4) Complex accounting treatment.
(1) (3) (4)

8. Which of the following is not an analytical procedure that could help identify
areas of risk?
A.Calculation of gross profit margin and comparation with prior year
B.Recalculation of depreciation charge
C.Recalculation of depreciation charge
D.Comparision of revenue month by month
E. Comparision of expenditure for current year with prior year

9. Which of the following is not purpose of planning the audit?

A. To enable the audit to be performed effectively and efficiently
B. To enable appropriate audit team to be assigned
C. To ensure the audit is as profitable as possible
D. To ensure appropriate attention is devoted to different areas of the audit

10. Which of the following will not be included in the audit strategy?
A.Risk assessment and materiality
B.Communication with the client
C.Specific audit procedures to respond to the risks assessed.

CHAP 5
1. Which TWO of the following would be used in understanding the entity in
accordance with ISA 315?
A. The results if tests of details
B. Objectives and strategies related to the business risks
C. Nature of the entity, including selection and application of accounting
policies
D. The results of a review of events after the date of the financial statement

2. Which THREE of the following would normally be included in the overall audit
strategy?
A. Identification of specific audit risks
B. Details of economic factors and industry conditions
C. The results of initial analytical procedures
D. Confirmation of management’s responsibility for the financial statement
E. Detailed plan of audit procedures

3. Which THREE of the following statements about materiality are incorrect?

A. Materiality is based on the auditor’s experience and judgement
B. Materiality is always based on revenue
C. Once established, the materiality level initially set cannot be revised during
the course of the audit
D. Information is material if its omission or misstatement could influence the
economic decisions of users of the financial statements.
E. Once established, the materiality level initially set cannot be revised during the
course of the audit

4. Which THREE of the following statements in respect of risk are true?

A. Auditors should provide suggestions for companies to overcome business risks
Auditors can impact on inherent risk, to bring audit risk to an acceptable audit
risk
B. Identifying business risks is part of the company's risk assessment processes
C. Inherent and control risks are components of audit risk
D. Risk of material misstatement is organized by inherent and control risks

5. The auditor of Yexmarine Co assessed that risk of material misstatement is high

and wishes to reduce audit risk. Which TWO of the following actions could the
auditor take to achieve this?
A.Reduce control risk
B.Reduce inherent risk
C.Increase sample sizes
D.Assign more experienced staff to the engagement team
 6. If you want to gain an understanding of the specific business operations of the
audited entity, which ONE of the following matters would an auditor need to
consider?
A.Leasing of propert, plant or equipment for use in the client’s business (đi thuê tài
sản là hoạt động financing)
B.Products or services and markets of the client's business
C.Accounting principles and industry specific practices relevant to the client’s
business (không liên quan)
D.Acquistions or disposals of the client’s business activities (hoạt động mua hoặc
thanh lý là hoạt động invessting)

7. When implementing the analytical procedures on the financial statements of

Yexmarine Co, you have identified that the entity’s quick ratio has fallen from
1.8/1 to 1.2/1. Which ONE of the following might help to explain this decline
A.Inventory levels have fallen
B.Credit control has been poor
C.The allowance for rêcivables has been reduced (tài sản tăng)
D.The entity has purchased a property for cash (current asset giảm -> giảm
quick ratio)
E.The entity has purchased a batch of inventory for cash

8. The extracted data from financial statements of Yexmarine as follow:

Revenue: $6,00000
Total assets: $9,000,000
Profit before tax: $600,000
At planning phase, auditor have auditor have assessed the ROMM at low level
decided BASE ON TOTAL ASSETS to define overall materiality level. Which ONE of
the following could be suitable materiality level set for the financial statements
for the company?
A. $24,000
B. 48,000
C. 90,000
D. 180,000 (vì ROMM at low level nên có thể increase level set -> chọn 180,000
thay vì 90,000)

[Lecture note]
1. Which of the following is the purpose of planning the audit?
a. To clearly identify the management’s responsibility.
b. To determine the scope of the engagement.
c. To facilitate the direction, supervision, and review of work.
d. To ensure the audit is completed within budget and time restraints.

2. According to ISA 315 “Identifying and Assessing the Risks of Material

Misstatement”, Which of the following are elements of business risk?
a. Financial risk
b. Operational risk
c. Compliance risk
d. Sampling risk

3. According to ISA 315, in the planning phase, Auditor must understand the entity
and its environment to assess the risks of material misstatement at the financial
statement level and at the assertion level. Which of the following statements in
respect of risk is false?
a. Risk of material misstatement is organized by inherent and control risks.
b. Identifying business risks is part of the company's risk assessment processes.
c. Inherent and control risks are components of audit risk.
d. Auditors should provide suggestions for companies to overcome business
risks.

4. You are planning for the audit of the financial statements of Yexmarine Co, a
non-listed company, for the year ended 31 September 20X2. You realized the
unusual transactions and suspected that there are overtrading operations. Which
TWO of the following options are signs of overtrading?
a. Receivables increasing.
b. Non - current assets decreasing.
c. Cash decreasing.
d. Payables decreasing.

5. You are planning for the audit of the financial statements of Yexmarine Co, a
non-listed company, for the year ended 31 September 20X2. The extracted data
from financial statements of Yexmarine Co as follows:
Revenue: $5,560,000
Total assets: $8,680,000
Profit before tax: $480,000
At the planning phase, the auditor assessed the ROMM at a low level and auditor
decided based on profit before tax to define overall materiality level. Which ONE
of the following could be suitable materiality level set for the financial statements
for Yexmarine Co?
a. $48,000 = 480000x10%
b. $24,000
c. $20,000
d. $86,800

6. In order to identify the risks of material misstatement in the financial

statements the auditor is required to obtain an understanding of:
A. their clients
B. their clients’ environments
C. their clients’ internal controls
D. Relevant auditing standards

7. According to the audit risk model: When inherent risk is high and control risk is
high, detection risk will be _____ and the level of substantive procedures required
will be _____.
Which of the following fills the blanks to complete the sentence correctly?
A. high, increased
B. high, decreased
C. low, increased
D. low, decreased

8. This is the audit risk that an assertion about a class of transaction, account
balance or disclosure is susceptible to a misstatement that could be material,
either individually or when aggreated with other misstatements before
consideration of any related controls.
A. Inherent risk
B. Control risk
C. Audit risk
D. Detection risk

9. Which of the following is NOT true regarding Performance Materiality?

A. Performance materiality levels are higher than the materiality for the
financial statements as a whole.
B. Performance materiality is used for testing individual transactions, account
balances and disclosures.
C. The aim of performance materiality is to reduce the risk that the total of errors
in balances, transactions, and disclosures does not in total exceed overall
materiality.
D. The aim of performance materiality is to compensate for any unforseen
circumstances of risks that may appear during the audit.
E. Setting performance materiality ensures that auditors can find other smaller
errors in the FSs
10. The auditor of A Co wishes to reduce audit risk. Which of the following
actions could the auditor take to achieve this?
(1) Increase sample sizes
(2) Reduce control risk
(3) Assign more experienced staff to the engagement team
a. (1) only
b. (2) only
c. (1) and (3)
d. (2) and (3)

11. Which of the following would NOT contribute to inherent risk?

a. Poor supervision of accounting staff
b. A new computerized accounting system
c. Complex transactions
d. The company intents to IPO next year

12. Which of the following example illustrates Detection Risk?

a. Director’s pay related to company’s profitability
b. The company operates in a slow-moving, stable industry
c. Senior management regularly override the internal control system
d. Sample sizes have been calculated incorrectly by the auditor and are too small

CHAP 6
1. Which of the following controls of a sales system ensure that all goods
despatched are completely and accurately invoiced
A.Good despatched notes are matched to sales invoices
B.Sales invoices are sequentially numbered
C.Sales invoices are matched to customer orders

2. Which of the following procedures are TESTS OF CONTROL an auditor should

perform in testing the inventory cycle of their client whilst attending the inventory
count?
(1) Observe whether the client’s staff are following the inventory count
instructions
(2) Review inventory present in the warehouse for evidence of damage or
obsolescence (mục đích của cái này là để thu thập bằng chứng cho valuation of
inventory -> sai)
(3) Obtain a sample of the last goods received notes and goods despatched notes
and follow through to ensure inclusion in the correct accounting period (thu thập
evidence for cut off -> sai)
(4) Inspect and review management’s inventory count instructions
A.2 and 3
B.1 and 4
C.1 and 2
D.3 and 4

3. One of the control objectives of the sales system of B Co is to ensure that goods
and services are sold to credit-worthy customers. Which of the following control
activities would assist B Co in achieving this objective?
A.All sales orders are based on authorised price lists
B.Credit limits are checked before sales orders are accepted.
C.Overdue debts are chased each month by the credit controller
D.The aged-debt listing is reviewed by the finance director on a monthly basis

4. Which of the following controls helps to ensure that payroll payments are only
made to bona fide employees?
1) Personnel records maintained for all employees
(2) Comparison of bank transfer listing with payroll
(3) Segregation of duties between staff involved in human resources and payroll
functions
(4) Reperformance of the calculation of a sample of payroll deductions
A.(1) and (2)
B.(1) and (3)
C.(2) and (4)
D.(3) and (4)

5. B Co maintains perpetual inventory records. Which of the following control

activities would contribute to the auditor's confidence that inventory recorded in
the financial statements exists?
(1) Procedures to identify obsolete and damaged inventory (mục đích:
revaluation)
(2) Physical safeguards to protect inventory from theft
(3) Sequential numbering of goods dispatched notes (mục đích: completeness)
(4) Reconciliation of inventory records to results of inventory counts
A.1 and 2
B.1 and 3
C.(2) and 3
D.(2) and (4)

6. Which of the following is not a test of control?

A.Inspection of purchase order documentation to confirm that it has been
authorised
B.Review of monthly bank reconciliations performed by the audit client
(information processing)
C.Examination of purchase invoices for evidence of mathematical accuracy checks
D.Agreement of the cost of non-current asset additions to purchase
documentation

7. Which of the following substantive procedures provides evidence over the

EXISTENCE of non-current assets?
A.Select a sample of assets included in the non-current asset register
and physically verify them at the client premises
B.Review the repairs and maintenance expense account to identify any items of a
capital nature
C.For assets disposed of, agree the sale proceeds to supporting documentation and
cash book

8. Which of the following statements is/are true with respect to analytical

procedures?
(1) Analytical procedures can be used throughout the audit.
(2) Analytical procedures must be used as risk assessment procedures.
A.1 only
B.2 only
C.1 and 2
D.Neither 1 nor 2

9. Which two of the following would be classified as substantive procedures?

(1) Tests of control
(2) Walk-through tests
(3) Analytical procedures
(4) Tests of details
A.1 and 2
B.1 and 4
C.2 and 3
D.3 and (4)

10. The auditor of G Co is performing audit procedures to confirm the company's

ownership of motor vehicles. Which of the following would provide the most
persuasive evidence of this?
A.Physical inspection of the môtr vehicles
B.Inspection of vehicle registration documents
C.Checking that the motor vehicles are recorded in the non-current asset register
(completeness)

11. Which of the following audit procedures would provide the auditor with
evidence of completeness of inventory
A.Tracing test counts performed at the inventory count to the detailed
inventory listing
B.Reviewing the physical condition of inventory when attending
C.Vouching the cost of a sample of inventory items ti suppliers’ invoices

12. Which of the following assertions about classes of transactions and events for
the period under audit is defined below: 'Amounts and other data relating to
recorded transactions and events have been recorded appropriately'
A.Cut-off
B.Accuracy
C.Occurance
D.Classification

[Lecture note]
1. In which TWO of the following circumtances leading you to undertake full
substantive testing?
a. The auditor’s initial assessment is that controls are not strong.
b. The controls are evaluated and the result shows that the controls are strong.
c. It is cost – effective to test controls.
d. There is a lack of evidence that controls are in operation.

2. Which of the following factors that the external audit should consider in the
assessment of inherent risk when planning the audit of the financial statement of
Yexmarine Co, ltd.
a. Significance of cash donation and complexity of regulation.
b. Accounting treatment of grants and revenue grants.
c. Control activities over grants and donations.
d. Complexity of tax rules.
CHAP 7
1. Which of the following must be included in an auditor’s report
A.A statement that the auditor believes the audit evidence obtained is sufficient and
appropriate
B.Title indicating the report is that of the independent auditor
C.Description of the meaning of materiality
D.A statement that the auditor is independent of the entity and has fulfilled

2. According to ISA 701, which of the following should be included in the ‘Key
Audit Matters’ paragraph in the auditor’s report
A.Matters which required significant auditor attention
B.Matters which required significant auditor attention
C.All matters which were communicated to those charged with governance
D.All matters which are considered to be material to the financial statements

3. Events after the reporting date are categorised as either being an adjusting
event and a non-adjusting event . An adjusting event provides evidence of
conditions that existed at the reporting date. Which of the following should be
classified as adjusting event
A.Bankruptcy of a major customer
B.Major purchases of assets
C.Commencing a court case arising out of events after the reporting period
D.Announcing a plan to discontinue an operation

4. Events after the reporting date are categorised as either being an adjusting
event and a non-adjusting event. Non-adjusting events are not incorporated into
the financial statements, although they may be disclosed. Which of the following
should be classified as a non-adjusting event?
A.Bankruptcy of a major customer
B.Sole of inventory held at the end of the reporting period for less than cost
C.Discovery of fraud or error affecting the financial statement
D.The insolvency of a customer with a debt owing at the end of the reporting
period which is still outstanding
E.A fire destroying some of the company's inventory (the company's going
concern status is not affected)
(còn lại là adjusting event)

5. ISA 700 Forming an opinion and reporting on financial statements sets out the
basic elements of an auditor's report. Which of the following is not included in an
unmodified auditor's report?
A.Management's responsibility for the financial statements
B.Auditors' responsibilities
C.Audit opinion
D.Deficiencies of internal controls

6. ISA 705 Modification to the opinion in the independent auditor's report

identifies three possible types of modification. In which of the following
circumstances would a disclaimer of opinion be issued
A.The auditor has not been able to obtain sufficient appropriate audit evidence on
which to base an opinion but has concluded that the possible effects of any
undetected misstatements could be material but not pervasive.
B.The auditor concludes that the financial statements include misstatements which
are both material and pervasive to the financial statements
C.The auditor concludes that the financial statements include misstatements which
are material but not pervasive to the financial statements
D.The auditor has not been able to obtain sufficient appropriate audit
evidence on which to base an opinion and has concluded that the possible
effects of any undetected misstatements could be both material and pervasive.

7. The statement of financial position of R Co includes a material amount of

$200,000 in respect of costs capitalised in the year as development expenditure.
The auditor has concluded that these costs are research expenditure. If the
auditor is to issue an unmodified opinion which financial statements will require
adjustment?
A.Statement of financial position only
B.Statement of profit or loss only
C.Statement of financial position and statement of profit or loss
D.Neither the Statement of financial position nor the statement of profit or loss

8. The fiscal year of Green Ltd is 30 June 20X9. Your audit firm was appointed as
auditor of Green Ltd on 15 July 20X9, therefore auditor did not attend the
inventory count which was carried out on 30 June 20X9. No alternative audit
procedures could be performed in this case. The inventory balance of Green at
reporting date 30 June 20X9 is $250,000. The draft financial statements show a
profit before tax of $1.7 million. Which of the following is the most appropriate
form of audit opinion that auditor should issue if the issue remains unresolved?
A.An Adverse opinion and an explanation of circumstances in the "Basis for
adverse opinion section
B.A qualified opinion and the reason for the modification should be outlined
in the paragraph “Basis for qualified opinion”
C.An unmodified opinion with an "Emphasis of matter paragraph"
D.An unmodified opinion

9. The directors have now agreed to include going concern disclosures, while
continuing to use the going concern basis of accounting. You agree with the
client's management that the going concern basis of accounting is appropriate
under the circumstances. You have reviewed the draft disclosures and believe
they are correct and adequate. Indicate which form of audit opinion would be
appropriate and how the going concern issue would be disclosed in the auditor's
report
A.An unmodified opinion and describe the nature of the going concern
uncertainty in the “Material Uncertainty Related to Going Concern” section
B.An unmodified opinion and describe the nature of the going concern uncertainty
in the "Key Audit Matters" section
C.An adverse opinion and describe the nature of the going concern uncertainty in
the "Basis for Adverse Opinion" section
D.A qualified opinion describe the nature of the going concern uncertainty in the
"Basis for qualified Opinion" section

10. Maison's computerised wages program is backed up daily, however for a

period of two months the wages records and back-ups have been corrupted, and
therefore cannot be accessed. Wages and salaries for these two months are
$1.1m. Profit before tax is $10m. Based on the above information Which of the
following correctly summarises the effect of the issue relating to the wages
balance in the financial statements of Maison
A.Material misstatement related to “proper accounting records have not been
kept
B.Material misstatement related to "Liabilities to tax authorities may be
understated
C.Material misstatement related to "Profit may be overstated
D.Immaterial misstatement related to wages and salaries

11. Which of the following could be key audit matters as required in ISA701
“Communicating Key Audit Matters in the Independent Auditor’s Report
A.Areas of high audit risk
B.Areas in relation to which the auditor express a separate opinion
C.The matter is deemed to be fundamental to the users understanding of the
financial statements

[Lecture note]
1. Subsequent events procedures should be performed between the date of the
financial statements and WHICH DATE?
A. The date the subsequent events review is performed
B. The date of approval of the financial statements
C. The date of the auditor’s report
D. The date the financial statements are issued

2. Which of the following statements, relating to the auditor’s responsibilities

regarding subsequent events, if any, is/are correct?
(1) Auditors do not have a responsibility to perform procedures to identify
subsequent events after the date of the auditor’s report
(2) Where a material adjusting subsequent event is identified after the financial
statements are issued, but prior to approval by the shareholders, the auditor
should include a qualified opinion in their audit report if management refuses to
adjust the financial statements for the event
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2

3. The financial statements of ABC have been produced on the going concern basis
but the auditor believes that there is no realistic chance of the company surviving
for more than a few months. The notes refer to going concern matters but the
directors refuse to change the basis on which the FS have been prepared. Which
of the following correctly describes the auditor’s report?
A. A qualified opinion
B. An unmodified opinion and a separate section headed “ Material uncertainty
related to going concern”
C. An adverse opinion
D. A disclaimer of opinion

4. Which of the following statements about OTHER MATTERS paragraph in an

auditor’s report is true?
A. It may be used to draw attention to matters of most significance to the audit
B. It may be used to refer to information in the director’s report that conficts
with the FS
C. It is alternative name for “Emphasis of matter” paragraph
D. It is used to draw attention to matters that is appropriately disclosed in the FS

5. In the auditor’s judgement, management’s use of the going concern basis of

accounting is apporpriate and the material uncertainty has been adequately
disclosed in a note to the FS What form of auditor’s report should be issued?
A. A qualified opinion with a “Material uncertainty relating to going concern’”
section
B. An unmodified opinion with a “Material uncertainty relating to going
concern” section
C. A qualified opinion on the basis of insufficient audit evidence about the
company’s ability to continue trading
D. An adverse opinion.

6. In the auditor’s judgememt, management’s use of going concern basis of

accounting is appropriate but the material uncertainty has NOT been adequately
disclosed in a note to financial statements. What form of auditor’s report should
be issued?
A. An unqualified opinion with “Material uncertainty relating to going concern”
section
B. An adverse opinion
C. A qualified opinion on the basis of insufficient audit evidence
D. A qualified opinion on the basis of material misstatement.

7. Auditor has discovered a $5,000 calculation error in the depreciation expense

for the year. The directors have refused to adjust the financial statements. The
carrying amount of non-current assets is $1m and draft profit for the year is
$150,000 What is the most appropriate form of audit opinion?
A. Qualified opinion on basis of insufficient evidence
B. Qualifed opinion on basis of material misstatement
C. Unmodified opinion with an emphasis of matter paragraph to draw attention to
the error
D. Unmodified

8. Which of the following is NOT a form of audit opinion in an auditor’s report? A.

Disclaimer
B. Qualified
C. Emphasis of matter
D. Unmodified

9. Which of the following is NOT part of the financial statements on which an

auditor reports?
A. Notes to the financial statements
B. Statement of financial position
C. Director’s report
D. Cash flow statement

10. On 25 Jan 20X8, a company’s warehouse is destroyed by fire How should this
be treated in the financial statements for the year ended 31 December 20X7? A.
Adjust the financial statements to write off the warehouse and explain the event
in a note to the financial statements
B. Only adjust the financial statements to write off the warehouse
C. No adjustment or disclosure is required
D. Only explain the event in a note to the financial statements.

11. On 25 Jan 20X8, a company’s warehouse is destroyed by fire How should this
be treated in the financial statements for the year ended 31 December 20X7? A.
Adjust the financial statements to write off the warehouse and explain the event
in a note to the financial statements
B. Only adjust the financial statements to write off the warehouse
C. No adjustment or disclosure is required
D. Only explain the event in a note to the financial statements.

12. On 25 Jan 20X8, a customer who owed a material amount went into
liquidation and announced that there would be no payments to creditors. How
should this be treated in the financial statements for the year ended 31 December
20X7
A. Only explain the event in a note to FS
B. No adjustment or disclosure is required
C. Adjust the FS to write off the receivable balance in the FS and explain the
event in a note to FS
D. Only adjust the FS to write off the receivable balance.
13. After the FS with an unmodified audit opinion have been issued to members,
the auditor becomes aware that they contain a material misstatement. What
should be the auditor’s next step?
A. Discuss how management intends to address the matter
B. Seek legal advice
C. Carry out audit procedures on the necessary amendments
D. No action is needed because the audit has been completed.

14. Which of the following is a necessary characteristic of a non-adjusting event?

A. It relates to conditions that arose after the reporting date
B. It relates to events which occurred before the reporting date
C. It relates to evidence which existed before the reporting date
D. It relates to conditions that existed at reporting date.

15. Which of the following actions would NOT be an appropriate response to

management’s refusal to provide a requested written representation?
A. Revaluate the integrity of management
B. Determine the possible effect this may have on the auditor’s report
C. Seek legal advice
D. Discuss the matter with management.