ICAB Assurance Question Analysis Knowledge Level from June 2010 to Dec 2015

ICAB Assurance Question Analysis Knowledge Level from June 2010 to Dec 2015

1. Concept of and need for Assurance

1. Define Assurance engagement in any audit function. (Dec-2015) (Marks-3) (Page-5)
2. What are the types of engagement as per definition given by IFAC? Explain(Dec-2015) (Marks-5) (Page-5)
3. What is the meaning of Auditors’ normal express of ‘true and fair’ in any audit report which denotes a reasonable assurance? (Dec-2015) (Marks-4) (Page-9)
4. What are the key benefits of Assurance in any audit done by the Auditors? List down the subsidiary benefits those are provided by the assurance providers. (Dec-2015) (Marks-10) (Page-5)
5. ‘Certificate of absolute assurance or correctness’ cannot be provided due provided due to some limitations. What are those(Dec-2015) (Marks-5) (Page-11)

6. An auditor requires relevant and reliable information from the management in order t satisfy himself that he has obtained sufficient and appropriate audit evidence on the basis of which he can from his audit/ assurance opinion.

1. Define assurance services, attestation services and auditing services with example(June-2015) (Marks-2+2+2=6) (Page-5 and Suggested answer)
2. What are the factors, which make a person ineligible for being a company auditor as per the companies act, 1994? What non-audit services are prohibited to be carried out by Auditor? (June-2015)(Marks-2+2=4)(Manual page-9 and suggested answer)
3. ABC Co. is a private limited company. The company is planning to go for IPO in September 2015. The Managing Director of the company asked you, as auditor for last 3 years, to give an absolute assurance report for last 5 years that his company is showing increasing trend in sales and profits. Can you as a practitioner give absolute assurance? Give reasons for your answer. (June-2015)(Marks-5)(Manual page-6 and suggested answer)
4. (i) For the purpose of giving opinion you have t follow Bangladesh Standards on Auditing (BSA). Discuss the terms `Reasonable assurance engagement’ and `Limited assurance engagement’ as mentioned in the BSA. (June-2015)(Marks-3)(Manual page-7)
5. (ii) How can you minimize expectation gaps which arise from a misunderstanding of the role and purpose of an audit/ assurance engagement? (June-2015)(Marks-3)(Manual page-11)

7. Define assurance engagement. (Dec-2013)(Marks-2)(Manual page-5)
8. What are the types of engagement as per definition given by IFAC? What conclusions are given against those engagements? (Dec-2013)(Marks-2+4)(Manual page-7)
9. The auditor normally expresses his audit opinion by reference to the ‘true and fair view’, which is an expression of reasonable assurance. Define the term ‘true and fair.

(Dec-2013)(Marks-4)(Manual page-9)

10. The key benefit of assurance is the independent and professional examination carried out by the auditor during the course of the audit. In addition, assurance gives some subsidiary benefits. List subsidiary benefits those are provided by the assurance providers. (Dec-2013)(Marks-5)(Manual page-10)
11. What are the limitations of assurance services for which the auditor cannot give a certificate of absolute assurance or correctness? (Dec-2013)(Marks-5)(Manual page-11)
12. List the key elements of an assurance engagement. (June-2013)(Marks-5)(Manual page-5)
13. In addition to audit, users want some other assurance services. Give few examples. (June-2013)(Marks-5)(Manual page-8)
14. Briefly explain the key elements of an assurance engagement and what are the types of assurance engagement as per the International Framework for Assurance engagements. (June-2012)(Marks-10)(Manual page-5,7)
15. A key issue for accountants is that there are limitations to assurance services, and therefore there is always a risk involved that the wrong conclusion will be drawn. What are the limitations of assurance services? (June-2012)(Marks-10)(Manual page-11)
16. Audit and Assurance are always used together. What is the exact difference between these? (Dec-2011)(Marks-6)(Manual page-)
17. Under the “International Framework for Assurance Engagements,” how many types of assurance engagement a practitioner is permitted to perform? Define all. (Dec-2011)(Marks-3+6)(Manual page-6)
18. What is assurance engagement? What are the key elements of an assurance engagement? (June-2011)(Marks-4+8)(Manual page-5)
19. ‘Assurance can never be absolute’. Discuss the limitation of assurance. Which three of the following are benefits of assurance work? (Dec-2010)(Marks-7+3)(Manual page-10, 11)

• An independent professional opinion
• Additional confidence given to other related parties
• Testing as a result of sampling is cheaper for the responsible party
• Judgments on estimates can be conclusive
• Assurance may act as a deterrent to error or fraud

20. In Bangladesh, the auditor will normally express his audit opinion by reference to the ‘true and fair view’, which is an expression of reasonable assurance. Briefly define the terms ‘true’ and ‘fair’. (June-2010)(Marks-3)(Manual page-9)
21. You are an Accountant who has been approached by Mr. X, who wants to invest in company ABC Ltd. He has asked you for assurance whether the most recent financial statements of company ABC Ltd. are a reliable basis for him to make his investment decision.

Identify the key elements of an assurance engagement in this scenario, if you accepted the engagement. (June-2010)(Marks-5)(Manual page-5)

2. Process of assurance: obtaining an Engagement

22. Write down short notes on the following terminology

c. Audit Engagement Letter. (Dec-2014)(Marks-5)(Manual page-25)

23. What are the objectives of Audit Engagement Letter? (June-2014)(Marks-6)(Manual page-25)
24. The code of ethics of ICAB and IFAC sets out some rules under which auditors should accept new appointments. What procedures should the new auditors follow to comply with the above set of rules? (June-2013)(Marks-5)(Manual page-20)
25. The audit firm considers whether the client is likely to be high or low risk to the firm in terms of being able to draw an appropriate assurance conclusion in relation to that client. Distinguish between two clients considering high and low risk. (June-2013)(Marks-6)(Manual page-21)
26. The form and contents of audit Engagement Letter may vary for each client, but they would generally include some basic contents. Write in brief those basic contents of an Engagement Letter. (June-2013)(Marks-5)(Manual page-25)
27. Write down the purpose of issuing audit engagement letter. Discuss the situations where it is necessary to issue audit engagement letter each year even for repetitive audits. (Dec-2012)(Marks-10)(Manual page-25)
28. What are the factors a practitioner must consider before accepting an assurance engagement and what are low risks and high risks for assurance? (June-2012)(Marks-10)(Manual page-21)
29. What are the purposes of an engagement letter? Should a practitioner send an engagement letter to existing clients? (June-2012)(Marks-5)(Manual page-25)
30. What forms and contents will normally be contained in a letter of engagement? (Dec-2011)(Marks-4)(Manual page-25)
31. You own an accounting firm. XYZ Ltd. is your prospective client. However it declines permission to contact the previous auditors, what should be your course of action? (Dec-2011)(Marks-3)(Manual page-21)
32. Which three of the following will normally be contained within a letter of engagement? (June-2011)(Marks-6)(Manual page-29)

1. `Responsibilities of the auditors;
2. Responsibilities of the directors;
3. The scope of the audit;
4. The staff assigned to the engagement;

33. What forms and contents will normally be contained in a letter of engagement? (June-2010)(Marks-3)(Manual page-25)
34. You own an accounting firm. XYZ Ltd. is your prospective client. However, it declines permission to contact the previous auditors, what should be your course of action? (June-2010)(Marks-2)(Manual page-21)

3. Process of assurance: Planning of the assignment

35. Materiality- the acceptable error level below which the understanding and interpretation of the financial statements will not be significantly affected, and, on the other hand, the admissible error level that is accepted in order to decide whether the accountants are correct or not.

1. Explain materiality in the context of an audit, from the point of view of an Auditor. (Dec-2014, 2015)(Marks-5)(Manual page-52)
2. How should auditor determine materiality during a financial audit? Is there any golden rule to quantify materiality level? (Dec-2014, 2015)(Marks-4+3=7)(Manual page-53,54)

36. How does materiality assessment and fixation help to control an audit? (Dec-2014,2015)(Marks-4+3=7)(Manual page-53)
37. Distinguish between Audit Strategy and Audit Plan. (June-2014)(Marks-6)(Manual page-40)
38. BSA-320 ‘Audit materiality’ provides guidance on the concept of materiality in planning and performing an audit. Define materiality and describe the relationship between materiality and audit risk and how audit risk can be reduced to an acceptable level? (Dec-2012)(Marks-10)(Manual page-52)
39. What is Audit Risk? What are the different types of Audit Risk? (Dec-2011)(Marks-4+5)(Manual page-55)
40. For each of the following examples, indicate the type of risk: (Dec-2011)(Marks-3+4+4)(Manual page-)

1. Vendor’s payments are processed, booked and reconciled in the system by the same person in the Accounts Department.
2. The assurance firm may do insufficient work to defect material errors.
3. The financial statements contain a number of estimates.

41. Discuss in brief ‘Audit Strategy’ and ‘Audit Plan’. Which three of the following would normally be contained in the overall audit strategy? (Dec-2010)(Marks-7+3)(Manual page-40, 42)

• The contract between the audit firm and the client
• The result of audit risk assessment
• Calculation of preliminary materiality
• Detailed plan of audit procedures to be carried out
• List of staff to be involved with the audit

42. Name five possible of sources of information about the client. (Dec-2010)(Marks-5)(Manual page-49)
43. Define ‘Materiality’ in assurance work. Which factors indicate a risk might be a significant risk? (Dec-2010)(Marks-2+4)(Manual page-52, 59)
44. Which of the following procedures might an auditor use in gaining an understanding of the entity? (June-2010)(Marks-3)(Manual page-61)

• Inquiry
• Recalculation
• Analytical procedures
• Re performance of a control
• Observation and inspection.

45. The audit team is required to discuss susceptibility of the financial statements to material statements. (June-2010)(Marks-2)(Manual page-62)

• True
• False

46. What is Audit Risk? What are the different types of Audit Risk? For each of the following examples, indicate the type of risk illustrated: (June-2010)(Marks-4+4)(Manual page-58)

• Vendors’ payments are processed, booked and reconciled in the system by the same person in the Accounts Department.
• The organization is highly connected with the building trade.
• The assurance firm may do insufficient work to detect material errors.
• The financial statements contain a number of estimates.

47. If control and internal risk are assessed as sufficiently low, substantive procedures can be abandoned completely. (June-2010)(Marks-2)(Manual page-57)

• True
• False

Math Question

1. June 2014 (3-c)

4. Process of assurance: Evidence & Reporting

48. ISA 500 indicates that the reliability of audit evidence is influenced by its source and by its nature, and is dependent on the individual circumstances under which it is obtained. As per ISA 505, depending on the circumstances of the audit, audit evidence in the form of external confirmation received directly by the auditor from parties is considered to be more reliable than evidence generated internally by the entity.

1. What are the generalized principles mentioned in the ISA as regards to greater reliability of audit evidence? (Dec-2014)(Marks-5)(Manual page-71)

49. What do you mean by the term ‘Sufficient and Appropriate audit evidence’? State various factors that help the auditor to ascertain as to what is sufficient and appropriate audit evidence. (Dec-2012)(Marks-10)(Manual page-71)
50. What is Audit Opinion? How is an unqualified opinion written in an audit report? (Dec-2012)(Marks-3+4)(Manual page-75)
51. What three things the auditors are required to state as explicit opinions in their audit report? (Dec-2012)(Marks-5)(Manual page-75)
52. What matters the auditors are required to state by exception as implied opinions in their audit report? (Dec-2012)(Marks-5)(Manual page-76)
53. Who should the auditors address to in their audit report of a company according to BSA 700? (Dec-2012)(Marks-3)(Manual page-)
54. An accountant evaluates financial records based on assertions imbedded in the financial statements. What are the management assertions under different categories? (June-2012)(Marks-4)(Manual page-72)
55. What is the `expectation gap’ in assurance engagement? (June-2012)(Marks-6)(Manual page-77)
56. What are the matters with which the auditors imply satisfaction in an unqualified report under the Companies Act 1994? What basic elements, according to BSA 700, the audit report should include? (Dec-2010)(Marks-4+5)(Manual page-76)
57. Which three of the following are implied opinions given in the audit report? (Dec-2010)(Marks-3)(Manual page-79)

• All information and explanations required for the audit have been received.
• Proper accounting records have been kept.
• The director’s reports is consistent with the financial statements
• The financial statements have been prepared in accordance with the Companies Act 1994.
• The preparation of the financial statements is the responsibility of the company’s management.

58. What includes audit evidence? Briefly explain the procedures to obtain audit evidence. (June-2010)(Marks-6)(Manual page-70)
59. Name six financial statement assertions. (June-2010)(Marks-5)(Manual page-72)

5. Introduction to Internal Control

60. What do you understand by internal controls? (Dec-2015) (Marks-3) (Page-88)
61. As per relevant BSA on internal controls, what are the components of internal controls which have an impact on audit process? (Dec-2015) (Marks-3) (Page-90)
62. What are the two types of controls in any computerized environment? Give example. (Dec-2015) (Marks-3) (Page-95)
63. A sound system of internal control is of great importance for a business enterprise of any size. In the absence of a satisfactory internal control system the owners and management of the business will always find it very difficult to run the company properly and achieve the desired operational result.

1. What is internal control as per BSA 315? What are the 5 interrelated components of internal control? Explain (June-2015)(Marks-2+5=7)(Manual page-88,90,92,93,98)
2. Define with examples the terms `preventive controls’ and `detective controls’. Preventive controls are better than detective controls-do you agree? Answer the question with logic. (June-2015)(Marks-4+2=6)(Suggested answer)
3. Define with example what manual controls and automated or IT controls are. Why is segregation of duties important to ensure effective internal control system? Is segregation of duties preventive control or detective control? (June-2015)(Marks-4+3+1=8)(Manual page-94,95)

64. What is business risk? (June-2014)(Marks-2)(Manual page-92)
65. What is entity’s risk assessment process? (June-2014)(Marks-2)(Manual page-92)
66. What are the objectives of implementing Internal Controls System (ICS)? (June-2014)(Marks-3)(Manual page-89)
67. Name three limitations of Internal Control. (June-2014)(Marks-3)(Manual page-89)
68. What are the five components of Internal Control? Briefly explain. (June-2014)(Marks-5)(Manual page-90)
69. What do you understand by internal controls? (Dec-2013)(Marks-3)(Manual page-88)
70. BSA 315 sets out 5 (five) components of internal control each of which may have impact on the audit process differently. (Manual page-90,92,93,98)
71. Write at least 3 (three) components of internal control. (Dec-2013)(Marks-6)(Manual page-90)
72. The internal control in a computerized environment includes both manual procedures and procedures designed by computer programs. Such manual and computer controlled procedures comprise two types of control. Write down 2 (two) above controls. (Dec-2013)(Marks-4)(Manual page-95)
73. What are the risks that an entity is exposed to, if general controls are not effective? (Dec-2013)(Marks-4)(Manual page-)
74. How will you test general controls and application controls of an entity’s information system? (Dec-2013)(Marks-5)(Manual page-)
75. Can you test automated controls even though you are non-IT person? (Dec-2013)(Marks-4)(Manual page-)
76. What type of assurance is internal control expected to provide? (Dec-2012)(Marks-5)(Manual page-)
77. What is the risk of material misstatement occurring within the entity and its environment? Give two examples. (Dec-2012)(Marks-5)(Manual page-)
78. Why should management establish effective internal control? (Dec-2012)(Marks-5)(Manual page-)
79. What are the objectives of general controls and application controls? (Dec-2012)(Marks-3+3)(Manual page-)
80. Define ‘Audit Committee.’ What are likely to include in the terms of reference of audit committee as required for the companies listed in stock exchange of Bangladesh. (Dec-2011)(Marks-3+6)(Manual page-91)
81. How do certain IT areas and IT general controls (ITGC) affect almost all financial audits? (Dec-2011)(Marks-6)(Manual page-)
82. How do IT system of an entity cause risk of material misstatement? (Dec-2011)(Marks-6)(Manual page-)
83. What is Internal Control? Name its components. What are its importance and limitations? (June-2011)(Marks-2+5+8)(Manual page-88,89,90)
84. Name three broad types of document used in Internal Control Recording. (June-2011)(Marks-3)(Manual page-98)
85. What are IT General and IT Application Controls? List three examples in each area. (June-2011)(Marks-4+6)(Manual page-95)
86. Define ‘Audit Committee’. What are likely to include in the terms of reference of the audit committee as required for the companies listed in the Bangladesh stock exchanges? (Dec-2010)(Marks-2+6)(Manual page-91)
87. What is ‘internal control’? Name the components of an internal control system. What are the limitations of internal control systems? Why smaller companies have problems in implementing internal controls? (June-2010)(Marks-2+3+3+3)(Manual page-88,89)

6. Revenue system

88. Private limited companies are generally blamed for understanding revenue and consequently showing a lower profit to avoid corporate taxes and on the other hand overstating revenue and profit for seeking external financing and attracting investors through IPO.

1. Being an auditor of a private limited company engaged in Fast Moving Consumers Goods (FMCG) business, how do you satisfy yourself as to the accuracy of revenue as reported by the management? (June-2015)(Marks-8)(Suggested answer)
2. Credits Notes become an integral part of Revenue reporting. During your course of Audit what do you check in terms of Credit Notes? (June-2015)(Marks-8)(Suggested answer)
3. During your audit you observed that the company had a substantial amount of Cash Sales. What are the controls clients should have in place in terms of recording of cash sales and collections accounting? (June-2015)(Marks-8) (Manual page-118)

89. What tests of control might be appropriate for Sales day book and Receivables ledger (June-2012)(Marks-10)(Manual page-)
90. What are the control objectives to mitigate risk of not receiving payments from a sales invoice? (June-2012)(Marks-3)(Manual page-)
91. Which tests of control do you think appropriate for sales day book and suggest some controls to safeguard cash in hand and at bank? (June-2012)(Marks-7)(Manual page-)
92. Which three of the following functions should ideally be segregated: (June-2011)(Marks-3)(Manual page-121)

1. Authorization of orders
2. Invoicing
3. Recording cash receipts on receivables ledger
4. Reconciliation of receivables ledger with receivables ledger control account
5. Credit Control

93. As an assurance provider, how will you perform test of controls in relation to Sales? (Dec-2010)(Marks-5)(Manual page-117)

7. Purchase system

94. What are the general controls which can be used to mitigate the risks in any system like purchase system of an organization? Give example (Dec-2015) (Marks-5) (Page-133)

95. A company might recognize some risks when considering goods inward and recording of invoices. What risks are associated with goods inward and recording of invoices? (Dec-2015) (Marks-5) (Page-133)

96. What controls will be put into place in the purchases system depend on the nature of the company and the specific risks associated with the way it operates, but there are some general controls which can be used to mitigate the risks. What are the general controls which can be used to mitigate the risks? (Dec-2013)(Marks-7)(Manual page-131)
97. A company might recognize some risks when considering goods inward and recording of invoices. What risks are associated with goods inward and recording of invoices? (Dec-2013)(Marks-5)(Manual page-133)
98. Write corresponding controls to address the risk mentioned in the following table: (Dec-2013)(Marks-5)(Manual page-)

    Risks	Controls
    Employee may order too much or not enough raw materials.
    Employee may try to misappropriate goods.
    Procurement Department may not use approved vendor (gaining the benefit of negotiated volume discounts).
    Payment sent to wrong address, wrong payee on cheque or cheque may not be signed

99. List four examples of purchase documentation on which numerical sequence should be checked. (June-2011)(Marks-4)(Manual page-141)
100. Give five examples of tests to be performed on the cash payment book. (Dec-2010)(Marks-6)(Manual page-138)

8. Employee costs

101. List six procedures assurance providers should carry out if wages are paid in cash. (June-2011)(Marks-6)(Manual page-153)
102. How should assurance providers confirm that wages have been paid at the correct rate to individual employees? (June-2011)(Marks-3)(Manual page-155)

9. Internal Audit

103. Write down short notes on the following terminology

1. Operational Audit (Dec-2014)(Marks-5)(Manual page-164)

104. List the activities usually undertaken in an internal audit. (June-2013)(Marks-6)(Manual page-163)
105. What does internal audit do? What are the key differences between external and internal audit? (June-2011)(Marks-10)(Manual page-162)
106. 8. What are the key differences between external audit and internal audit? ‘As objectivity is a key issue for internal auditors, they are likely to routinely be involved in operational activities’ do you agree? Explain. (June-2010)(Marks-3+2)(Manual page-163)

10. Documentation

107. While accomplishing an audit engagement, in order to be able to form a suitable opinion, we need to make sure that we gather sufficient amount of evidential matters. Retaining methodically such evidence is a technical task an audit expert must understand.

1. Define Audit documentation. What purpose does audit documentation serve? (Dec-2015) (Marks-5) (Page-172)
2. Briefly discuss about the advantages under automated working papers. (Dec-2015) (Marks-7) (Page-177)
3. Explain the contents of a permanent audit file and current file(Dec-2015) (Marks-5) (Page-177)

108. What purpose does audit documentation serve? What are the additional purposes of working paper? (Dec-2013)(Marks-5)(Manual page-172)
109. What factors auditor must consider in determining the nature and extent of documentations for a particular audit? (Dec-2013)(Marks-5)(Manual page-173)
110. What are the contents of a permanent audit file and a current audit file? (Dec-2013)(Marks-6)(Manual page-177)
111. What are the issues that auditor should take into considerations for retention of audit documentations? (Dec-2013)(Marks-4)(Manual page-178)
112. Classify the following working papers into Current Audit file and Permanent Audit file: Engagement letters, New client questionnaire, Financial statements relating to year under review, Management letter, Accounts checklist, Audit planning memo, Board minutes of continuing relevance, and Accounting system notes. (Dec-2011)(Marks-12)(Manual page-181)
113. List the purposes of audit working papers. (Dec-2010)(Marks-7)(Manual page-172)
114. Classify the following working papers into Current Audit File and Permanent Audit File:
115. Engagement letters, New client questionnaire, Financial Statements relating to year under review, Management letter, Accounts checklist, Audit planning memo, Board minutes of continuing relevance, Accounting system notes. (June-2010)(Marks-4)(Manual page-181)

11. Evidence & Sampling

116. With the advancement in the field of technology, many easy to use and more efficient CAAts tools are available. Accountants of the present business world found these tools very much convenient to use as the new upcoming tools come with the guide book and even are users friendly.

1. What is CAAT? What are the advantages and disadvantages of using CAAT by auditors? (Dec-2014)(Marks-3+5=8)(Manual page-190)
2. What is Test Data? Explain how Test Data are used for assurance. (Dec-2014)(Marks-3+3=6)(Manual page-190)

3. What is audit software? Give 5 (five) examples of support that audit software can extend to the Auditor? (Dec-2014)(Marks-3+3=6)(Manual page-191)

117. Accounting estimates are of particular concern to the auditor as, by their nature, there may not be any physical evidence to support them and they are prone to inaccuracy. They are also subjective and therefore to management bias. If the directors wished to manipulate the accounts in any way, accounting estimates are an easy way for them to do this. The auditor must take care when auditing these estimates, to ensure that these have not been the case.

1. What are accounting estimates as per BSA 8? Give 5 (five) examples. (June-2014)(Marks-6)(Manual page-195)
2. What are the three methods for auditors as per BSA 540 to carry out audit of accounting estimates? Give examples of audit steps for each method. (June-2014)(Marks-6)(Manual page-195)
3. What are the areas that auditor should consider in evaluating the assumptions on which the estimates are based in the preparation and presentation of financial statements by the management? (June-2014)(Marks-3)(Manual page-)

118. Define population as regards to Audit Sampling. (June-2014)(Marks-6)(Manual page-)
119. What is CAAT? What are the stages in the use of test data? (Dec-2012)(Marks-3+4)(Manual page-190)
120. What is audit software? Give examples of what an audit software can do. (Dec-2012)(Marks-3+4)(Manual page-191)
121. Discuss the attributes of evidence as per BSA 500 and list the sources of audit evidence. (June-2012)(Marks-8)(Manual page-188,189)
122. Is 100% examination likely in the case of test of controls? Give examples when 100% examination may be appropriate? (June-2012)(Marks-4)(Manual page-196)
123. There will be an impact on sample size when there is an increase in the auditor’s assessment of the risk of material misstatement. Explain. (June-2012)(Marks-3)(Manual page-198)
124. What is accounting estimate? What will be auditor’s approach to audit of accounting estimates? (Dec-2010)(Marks-2+4)(Manual page-195)

12. Management representation

125. What does a Letter of Representation provide as audit evidence? (June-2013)(Marks-5)(Manual page-212)
126. What actions should the auditor take when no other evidence is available and internal confirmations form significant basis of the opinion? (June-2013)(Marks-5)(Manual page-)
127. What actions should the auditor take when management refuses to provide internal confirmations (representations)? (June-2013)(Marks-5)(Manual page-)
128. What should auditors do when they receive management representations? (June-2013)(Marks-5)(Manual page-)
129. What are management representations? How does a management representation work as audit evidence? When management representations are required? (June-2011)(Marks- 10)(Manual page-213)
130. When Management Representation is required? What do auditors do when receive such representation and in occasions when such evidence does not agree with other evidences? (June-2010)(Marks-2)(Manual page-213)

13. Substantive Procedures-key financial statement figures

131. The Bangladesh Standards on Auditing (BSA) 560 deals with the auditors’ responsibilities relating to subsequent events in an audit of financial statements. Financial statements may be affected by certain events which occur after the date of the financial statements.

1. Define term `Subsequent events’(June-2015)(Marks-5)(Manual page-)
2. What are the auditor’s responsibilities with regard to the ‘events-occurring between the date of the financial statements and the date of auditor’s report? ’
3. What are the auditor’s responsibilities with regard to the ‘Facts which become known to the Auditor after the date of the Auditor’s Report but before the date of the Financial Statements are issued.’

132. ISA 500 indicates that the reliability of audit evidence is influenced by its source and by its nature, and is dependent on the individual circumstances under which it is obtained. As per ISA 505, depending on the circumstances of the audit, audit evidence in the form of external confirmation received directly by the auditor from parties is considered to be more reliable than evidence generated internally by the entity.

2. What is the objective of external confirmation? What do you understand by the term external confirmation? Describe negative confirmation and positive conformation. Does verbal response constitute an external confirmation? Justify. (Dec-2014)(Marks-8)(Manual page-232).
3. Your firm is the auditor of ABC Enterprise, which showed 60% increase in current year’s sales compared with the previous year. When enquired, you found that the company has recently introduced credit sales, which instigated the sharp rise in sales. When you further reviewed sales documents you found that credits sales are concentrated to a small number of corporate buyers. To conform credit sales directly from buyers you arranged to send external confirmation requests as per ISA 505 but management refused to cooperate. What will be your alternative audit procedures in the above circumstances? (Dec-2014)(Marks-7)(Manual page-234).

133. Peter is working on the audit of Alpha Ltd. In the prior year, there had been a large amount of obsolete inventory at the year-end due to a decision by the management to amend the design of their major product to improve safety aspect. Peter wants to ensure that management has no intention of making any similar amendment to their products this year. (June-2014)(Marks-)(Manual page-)

1. What type of audit evidence peter should collect to ensure the management’s intention and why? 6
2. As auditor of ABC Ltd, what are the key issues to be considered during verification of inventory? 7

134. What are the major risks of misstatement of the inventory value in the financial statements? (June-2013)(Marks-5)(Manual page-227)
135. What are the principal reasons for auditors’ attendance at annual physical inventory

(stocktaking)? (June-2013)(Marks-5)(Manual page-)

136. Which of the following analytical procedures is most applicable to inventory; comparison of sales of current and prior years or comparison of gross profit ratios of current and prior years? Why? (June-2013)(Marks-5)(Manual page-)
137. Why do auditors normally record result of their test counts to compare with the final inventory listing during an inventory observation? (June-2013)(Marks-5)(Manual page-)
138. Complete the table, showing which tests on tangible non-current assets are designed to provide evidence about which financial statement assertion:

Completeness	Existence
Valuation	Rights and obligations

(a) Inspect assets (b) Verify the valuation certificate (c) Refer to the title deeds (d) Compare assets in ledger to non-current asset register (e) Review depreciation rates (f) Verify material on self constructed assets to invoices (g) Examine invoices after the year end (h) Review repairs in nominal ledger. (Dec-2011)(Marks-10)(Manual page-245)

139. What does assurance provider check if perpetual inventory counting is used? What will be the Audit plan for perpetual inventory count? In what circumstances is net realizable value likely to be less than cost? (Dec-2010)(Marks-3+3+4)(Manual page-229)
140. What could be the possible reasons for disagreements of Accounts Receivable balances between the client and the customer? Balance confirmation from individual customers is the ideal substantive procedure, what are the alternative procedures to verify existence/rights of Accounts Receivables? (June-2010)(Marks-4+4)(Manual page-234)
141. Complete the table, showing which tests on tangible non-current assets are designed to provide evidence about which financial statement assertion:

Completeness	Existence
Valuation	Rights and obligations

(a) Inspect assets (b) Verify the valuation certificate (c) Refer to the title deeds (d) Compare assets in ledger to non-current asset register (e) Review depreciation rates (f) Verify material on self constructed assets to invoices (g) Examine invoices after the year end (h) Review repairs in nominal ledger. (June-2010)(Marks-6)(Manual page-245)

14. Code of ethics

142. Professional Ethics is of critical importance for accounting professionals. Understanding of those and following are some kind of mandatory ethical code for the members of ICAB. Based on this;

1. What are the key ethical codes which ICAB members are bound to follow? (Dec-2015) (Marks-7) (Page-257)
2. What are the key features of IFAC and ICAB Codes? (Dec-2015) (Marks-6) (Page-255)
3. What are the fundamental principles of IFAC and ICAB Codes? (Dec-2015) (Marks-8) (Page-255)

143. What is the Code of Ethics for Chartered Accountants? Write the fundamental principles pursued by chartered accountants in the context of ICAB Code of Ethics. (June-2015)(Marks-3+4=7)(Manual page-257)
144. What are the threats, as regards independence, encountered by Chartered Accountants? What are the safeguards to minimize those threats? (June-2015)(Marks-4+4=8)(Manual page-256)
145. Can a Chartered Accountant accept contingent fee, referral fee or commission? Explain in brief with reason. (Suggested Answer)
146. What do you understand by independence of mind, independence in fact and independence in appearance? Differentiate these three terminologies used in assurance engagement. (June-2014)(Marks-6)(Manual page-)
147. What are the general sources of threat identified by the IFAC Code? Give one example against each source? (June-2012)(Marks-10)(Manual page-256)
148. What are the fundamental principles a Chartered Accountant shall comply with? (Dec-2011)(Marks-5)(Manual page-255)
149. What are the threats that relationships or circumstances could compromise a member’s compliance with the rules? (Dec-2011)(Marks-5)(Manual page-256)
150. What are the actions or others measures to be taken to eliminate threats or reduce them to acceptable levels? (Dec-2011)(Marks-5)(Manual page-257)
151. What are ‘independence of mind’ and ‘independence in appearance’? (June-2010)(Marks-4)(Manual page-256)
152. The IFAC Code of Ethics applies only to statutory audits. (June-2010)(Marks-2)(Manual page-)

• True
• False

153. As per IFAC Code of Ethics, audit engagement partners of listed companies should be rotated away from the engagement: (June-2010)(Marks-2)(Manual page-)

• Every year
• After 2 years
• After 3 years
• After 5 years
• After 7 years.

15. Integrity, objectivity and independence

154. Write down short notes on the following terminology

b. Advocacy Threat(Dec-2014)(Marks-5)(Manual page-276)

155. What do you mean by integrity, objectivity and independence in assurance engagement? (June-2014)(Marks-6)(Manual page-266)
156. The ABC & Co., an audit firm, is currently in the process of accepting a new client. A review team is considering a number of ethical issues that might hinder acceptance. Write down the meaning, threat type and applicable safeguards for the following threats as per following format: (June-2014)(Marks-3x6= 18)(Manual page-)

Threat	Meaning	Threat Type	Applicable Safeguards
Some firms tendered low billing
Assurer provides valuation service to same client
Assurer recruits senior management for the client
The client is proposing for a contingent fee
Client threatens to sue the assurance firm
Assurer accepts gifts and hospitality from the client

157. Why independence and objectivity matter do so much and what can the auditors do to maintain objectivity? (Dec-2013)(Marks-5)(Manual page-267)
158. A financial interest in a client constitutes a substantial self-interest threat. What are the safeguards to avoid the above threat? (Dec-2013)(Marks-5)(Manual page-169)
159. Accountants in a non-practice environment may face more pressure to behave unethically.

Cite some examples of pressure the accountants (non-practice) may face in carrying out their duties. (Dec-2013)(Marks-5)(Manual page-281)

160. ABC & Co., is a Chartered Accountancy firm and its engagement partner for XYZ Company has been in place for approximately eighteen years and his son has just accepted a job offer from XYZ Company as Chief Financial Officer. If ABC & Co. is appointed as internal and external auditors, then XYZ Company has suggested that the external audit fee should be renegotiated with at least 20% of the fee being based on the profit after tax of the company as they feel that this will align the interests of ABC & Co. and XYZ Company. From the given information, mention the ethical threats which may affect the independence of ABC & Co. in respect of the audit of XYZ Company, and for each threat explain how it may be reduced. (Dec-2012)(Marks-15)(Manual page-)
161. Why do independence and objectivity matter so much? What can the auditor do to preserve objectivity? Name different categories of threats to independence. (June-2010)(Marks-3+3)(Manual page-266)
162. List the different situations of conflict of interest those an accountant in business might face. Monower is a qualified accountant. He has recently moved out of practice and taken up the position of financial controller of a small company, XYZ Ltd. The company has a short‐term cash flow problem. Monower was recently called into the board meeting and asked if he could defer some income from the previous financial year so as to influence when the tax (both VAT and corporate tax) would be due to those sales. The directors were insistent that such deferral was necessary and that he should consider this request more in the nature of an order. What should be Monower’s course of action? (June-2010)(Marks-4+4)(Manual page-282)

16. Confidentiality

163. What is the importance of confidentiality? What are the safeguards to confidentiality? (June-2013)(Marks-3+3)(Manual page-290)
164. What should be your actions if you are compelled by the law that you have to disclose confidential information of your client in the public interest? (June-2013)(Marks-5)(Manual page-291)
165. How will you manage conflict of interest in accepting an assurance client? (June-2013)(Marks-5)(Manual page-293)
166. How an auditor can maintain ‘Chinese Walls’ to safeguard clients’ confidentiality? (June-2013)(Marks-4)(Manual page-293)
167. What should a professional accountant do where there is a conflict of interest and what safeguards are available for a professional accountant in different circumstances? (June-2012)(Marks-7)(Manual page-)
168. What should the professional accountant do if his request for consent to act for another party having conflict of interest is refused by the client? (June-2012)(Marks-3)(Manual page-293)
169. Why is confidentially important? Discuss the security procedures which might be wise to prevent accidental disclosure of information? (Dec-2010)(Marks-3+5 )(Manual page-290)

17. Other

170. Which two control activities are most likely to reduce the risk of payments being made twice for the same liability? June-2011)(Marks-2)(Manual page-)
171. The financial statements of A Ltd. were prepared on going concern basis, although there is a significant doubt about the company’s ability to continue as a going concern. What effects will this situation have on your audit report if the uncertainty over ‘going concern’ is

1. fully disclosed in the financial statements
2. not disclosed in the financial statements 8(June-2013)(Marks-)(Manual page-)

172. Describe the audit procedures you should apply to the following items in the balance sheet of a limited company: (June-2011)(Marks-16)(Manual page-)

6. Stock of finished goods
7. Accounts receivables
8. Bank Balances
9. Fixed deposits

173. A Ltd has a number of long and short terms payables, accruals and provisions in its Balance Sheet.

Required: (Dec-2010)(Marks-7)(Manual page-)

Describe the audit procedures you would apply to the following item including those relating to disclosures. A 10-years bank loan with a variables interest rate and an overdraft (a bank statement with a debit balance on the bank statement) both from the same bank.

174. Explain ‘walk‐through’ test with suitable examples.(June-2010)(Marks-3)(Manual page-)