Series: NOV 2012

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AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries

This question tests knowledge of reserves that may or may not be reviewed during the audit of a non-life insurance company.

Question

Regarding the audit of a non-life insurance company, which of the following reserves may NOT be reviewed?
A. Reserve for unexpired risks
B. Reserve for outstanding claims
C. Contingent reserve
D. External reserve
E. Statutory reserve

Answer

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Tags: Audit, Non-Life Insurance, Reserves, Specialized Industries
Level: Level 3

Topic: Audit of Specialized Industries
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance

This question identifies assignments that qualify as continuous audit functions.

Question

Which of the following assignments can be regarded as a continuous audit function?
A. Examining the effectiveness, efficiency, and economy of a cement project
B. Evaluating the adequacy of the security and control measures of the information technology
C. Ascertaining the fairness of the annual financial statements and notes to the accounts
D. Reviewing the internal control procedures before commencing the audit
E. Reviewing the company’s compliance with relevant guidance and release of financial information periodically

Answer

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Tags: Compliance, Continuous Audit, Financial Reporting, Internal Control
Level: Level 3

Topic: Internal Audit and Corporate Governance
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting

This question assesses knowledge of the main users of financial reports that auditors focus on.

Question

The main users of financial reports that auditors need to be primarily concerned about are:
A. Management and directors of the company
B. The general public
C. Banks and other financial institutions that provide working capital
D. Suppliers
E. Shareholders of the company

Answer

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Level: Level 3

Topic: Audit Reporting
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

Question

Yakubu Chukwu & Co was sued by one of its clients who alleged that the firm failed to satisfy the auditing standards in identifying substandard and obsolete inventory while attending end-of-year stock take. Which of the following is the firm’s best defence?
A. It is quite impossible to expect the firm to identify substandard and obsolete inventory due to the special nature of the inventory
B. Yakubu Chukwu & Co has to prove that its audit has been carried out with reasonable skill, care, and diligence
C. Auditing standards are not legislated, therefore, the client has no right to sue the firm
D. The contributory negligence of the client
E. Identification of substandard and obsolete stock requires an expert opinion

Answer

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Tags: Audit Standards, Auditor Liability, Defence, Obsolete Inventory
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q16 – Group Audits

This question assesses the appropriate audit procedure for verifying a subsidiary’s accounts before consolidation.

Question

When a client has control over a subsidiary, what is the most appropriate audit procedure to obtain evidence to verify subsidiary accounts before consolidation?
A. Arrange for independent valuation of the assets and liabilities of the subsidiary
B. Be involved in the appointment of the subsidiary auditors
C. Rely on additional work carried out by the internal auditors
D. Send a template of your expectation to subsidiary auditors
E. Provide audit program for the subsidiary auditors

Answer

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Tags: Audit Procedure, Consolidation, Group Audits, Subsidiary Accounts
Level: Level 3

Topic: Group audit
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q15 – Audit Reporting

This question assesses the primary purpose of sending a letter of enquiry to a legal firm regarding client litigation.

Question

The main reasons why auditors send a letter of enquiry to the legal firm handling litigation or claims on behalf of their client is to provide:
A. Auditors with weak position in client litigation and claims
B. Auditors with written submission and statement of claims to the court
C. Information concerning the progress of outstanding cases to date
D. Auditors with corroborative audit evidence
E. Auditors with impact of legal opinion on financial statements

Answer

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Tags: Audit evidence, Legal claims, Letter of Enquiry, Litigation
Level: Level 3

Topic: Audit Reporting
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q14 – Regulatory Framework and Professional Standards

This question assesses knowledge of factors that weaken local auditing standards and identifies an unrelated factor.

Question

Factors that contribute to the weaknesses of local auditing standards include the following EXCEPT:
A. Standard setters being subject to political pressures
B. Having inadequate resources
C. Being insufficiently timed in response to market needs
D. Loss of investment by stakeholders
E. Having sources of fund which raise questions about their independence

Answer

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Tags: Audit Standards, Independence, Local Auditing Standards, Regulatory Framework
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q13 – Environmental and Sustainability Audits

This question assesses the scope of social audit and identifies an area it does not cover.

Question

Social audit has to do with the extent to which a company gets involved and interacts with the society in which it operates. This means that social audit does not extend to ONE of the following:
A. Corporate code of conduct and business ethics
B. Pricing policy, product safety, and quality control
C. Transaction audit
D. Employee health and safety
E. Environmental pollution

Answer

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Tags: Business Ethics, Corporate Responsibility, Environmental audit, Social Audit
Level: Level 3

Topic: Environmental and Sustainability Audits
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q12 – Advanced Audit Planning and Strategy

This question assesses the primary purpose of understanding a client’s internal control system.

Question

Which of the following is the primary purpose for obtaining an understanding of client’s internal control?
A. Provide a basis for making constructive suggestions in a management letter
B. Determine the nature, timing and extent of tests to be performed in the audit
C. Obtain sufficient and competent evidential matter to afford a reasonable basis for an opinion on the financial statements under examination
D. Provide information for communication of internal control related matters to management
E. Obtain sufficient evidence to afford a basis for an opinion on the financial statements

Answer

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Tags: Audit Planning, Audit strategy, Internal Control
Level: Level 3

Topic: Advanced Audit Planning and Strategy
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q11 – Advanced Audit Planning and Strategy

This question tests knowledge of analytical procedures used to produce audit evidence.

Question

Which of the following is an analytical procedure generally used to produce audit evidence?
A. Confirmations mailed directly to the auditor by the client’s customers
B. Physical observation of inventories
C. Relationship among current financial balances and prior balances, forecasts, and non-financial data
D. Detailed examination of external and internal documents
E. Circularisation letters to debtors and creditors of the company

Answer

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Tags: Analytical procedures, Audit evidence, Audit Techniques
Level: Level 3

Topic: Advanced Audit Planning and Strategy
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q13 – Use of Experts in Audits

Defines the use of external specialist teams or consultants to perform tasks that could otherwise be done internally.

Question

The use of external specialist teams or consultants to perform functions which could otherwise be performed in-house is known as …………

Answer

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Tags: Audit strategy, External Consultants, In-house Functions, Outsourcing, Specialists
Level: Level 3

Topic: Use of Experts in Audits
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q12 – Auditor’s Legal Liability

Identifies the type of creditors given priority in payment during a liquidation process.

Question

The creditors given priority payment during a liquidation process are known as …………………. creditors.

Answer

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Tags: Creditors, Insolvency, Legal Liability, Liquidation, Priority Payment
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q11 – Ethical Issues in Auditing

Identifies the nature of ethical standards in the ICAN Code of Professional Conduct.

Question

Ethical standards as contained in the ICAN Code of Professional Conduct for Members are ………….. principles and statements.

Answer

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Tags: Accounting Ethics, Ethical Standards, ICAN Code, Principles, Professional Conduct
Level: Level 3

Topic: Ethical Issues in Auditing
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q10 – Risk Management in Audits

Defines money laundering as an attempt to legitimize the origin of illicit funds.

Question

Money laundering is an attempt to ……………. the origin of the money by making it look legitimate or clean.

Answer

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Tags: Anti-Money Laundering, Compliance, Financial Crime, Legitimization, Money laundering
Level: Level 3

Topic: Risk Management in Audits
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q9 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)

Identifies the valuation methods for non-monetary government grants under IAS 20.

Question

IAS 20 deals with Accounting for Government Grants and Disclosure of Government Assistance. In the Standard, a grant in the form of a non-monetary asset may be valued at …………… or …………… value.

Answer

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Tags: Financial Reporting, Government Grants, IAS 20, Non-Monetary Assets, Valuation
Level: Level 3

Topic: Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q8 – Public Sector Audits

Identifies the type of monthly accounts submitted to the Accountant-General by a Self-Accounting Unit.

Question

The monthly accounts submitted to the Accountant-General of the Federation by a Self-Accounting Unit are referred to as ……………………

Answer

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Tags: Accountant General, Financial Reporting, Government Accounts, Public Sector, Self-Accounting Unit
Level: Level 3

Topic: Public sector audit
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q7 – Regulatory Framework and Professional Standards

Defines the role of a chartered accountant reporting under CAMA and NSE listing requirements.

Question

A chartered accountant in public practice, who is engaged to report under the relevant provisions of the Companies and Allied Matters Act, CAP. C20, LFN 2004, and the listing requirements of the Nigerian Stock Exchange is known as …………….

Answer

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Tags: CAMA, Chartered Accountant, Nigerian Stock Exchange, Public Practice, Reporting Requirements
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q6 – Ethical Issues in Auditing

Identifies when certain professional activities should commence according to ICAN guidelines on obtaining professional work.

Question

In view of the guidelines in Statement No. 8 of ICAN’s Professional Conduct for Members covering “obtaining professional work” referred to under Advertising and Publicity, ………………. should commence only when a firm has been approached by a prospective client.

Answer

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Level: Level 3

Topic: Ethical Issues in Auditing
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing

Identifies two general approaches to negotiation for auditors when discussing fees.

Question

Auditors need negotiation skills to be able to agree fees with prospective clients or agree to increase fees with existing clients. TWO recommended general approaches to negotiation are …………… and …………… bargaining.

Answer

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Tags: Audit Fees, Client Relations, Ethical Standards, Negotiation, Professional Skills
Level: Level 3

Topic: Ethical Issues in Auditing
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q4 – Regulatory Framework and Professional Standards

Identifies the regulatory authority with which companies must file audited financial statements.

Question

The audited financial statements of every company must be filed with the ……………………

Answer

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Tags: Audit Standards, Corporate Governance, Filing Requirements, Financial Statements, Regulatory Compliance
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2012

Series: NOV 2012

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AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries

This question tests knowledge of reserves that may or may not be reviewed during the audit of a non-life insurance company.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries"

AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance

This question identifies assignments that qualify as continuous audit functions.

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AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting

This question assesses knowledge of the main users of financial reports that auditors focus on.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting"

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability"

AAA – Nov 2013 – L3 – A – Q16 – Group Audits

This question assesses the appropriate audit procedure for verifying a subsidiary’s accounts before consolidation.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q16 – Group Audits"

AAA – Nov 2013 – L3 – A – Q15 – Audit Reporting

This question assesses the primary purpose of sending a letter of enquiry to a legal firm regarding client litigation.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q15 – Audit Reporting"

AAA – Nov 2013 – L3 – A – Q14 – Regulatory Framework and Professional Standards

This question assesses knowledge of factors that weaken local auditing standards and identifies an unrelated factor.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q14 – Regulatory Framework and Professional Standards"

AAA – Nov 2013 – L3 – A – Q13 – Environmental and Sustainability Audits

This question assesses the scope of social audit and identifies an area it does not cover.

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AAA – Nov 2013 – L3 – A – Q12 – Advanced Audit Planning and Strategy

This question assesses the primary purpose of understanding a client’s internal control system.

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AAA – Nov 2013 – L3 – A – Q11 – Advanced Audit Planning and Strategy

This question tests knowledge of analytical procedures used to produce audit evidence.

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AAA – Nov 2012 – L3 – AII – Q13 – Use of Experts in Audits

Defines the use of external specialist teams or consultants to perform tasks that could otherwise be done internally.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q13 – Use of Experts in Audits"

AAA – Nov 2012 – L3 – AII – Q12 – Auditor’s Legal Liability

Identifies the type of creditors given priority in payment during a liquidation process.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q12 – Auditor’s Legal Liability"

AAA – Nov 2012 – L3 – AII – Q11 – Ethical Issues in Auditing

Identifies the nature of ethical standards in the ICAN Code of Professional Conduct.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q11 – Ethical Issues in Auditing"

AAA – Nov 2012 – L3 – AII – Q10 – Risk Management in Audits

Defines money laundering as an attempt to legitimize the origin of illicit funds.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q10 – Risk Management in Audits"

AAA – Nov 2012 – L3 – AII – Q9 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)

Identifies the valuation methods for non-monetary government grants under IAS 20.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q9 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)"

AAA – Nov 2012 – L3 – AII – Q8 – Public Sector Audits

Identifies the type of monthly accounts submitted to the Accountant-General by a Self-Accounting Unit.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q8 – Public Sector Audits"

AAA – Nov 2012 – L3 – AII – Q7 – Regulatory Framework and Professional Standards

Defines the role of a chartered accountant reporting under CAMA and NSE listing requirements.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q7 – Regulatory Framework and Professional Standards"

AAA – Nov 2012 – L3 – AII – Q6 – Ethical Issues in Auditing

Identifies when certain professional activities should commence according to ICAN guidelines on obtaining professional work.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q6 – Ethical Issues in Auditing"

AAA – Nov 2012 – L3 – AII – Q5 – Ethical Issues in Auditing

Identifies two general approaches to negotiation for auditors when discussing fees.

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AAA – Nov 2012 – L3 – AII – Q4 – Regulatory Framework and Professional Standards

Identifies the regulatory authority with which companies must file audited financial statements.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q4 – Regulatory Framework and Professional Standards"

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