ACCA F8 flashcards – set 2

See also ACCA F8 Flashcards: Set 1 | Set 3 | Set 4 |


What are the two general classes of control found in computer systems?

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General controls – development, prevention of unauthorised changes etc., backup. Can be classified as development and administrative controls.

Application controls – initiation, recording, processing and recording transactions.

What are the five components of internal control?

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* The control environment
* Risk assessment process
* Control activities
* Information system
* Monitoring controls

Under what conditions would substantive tests be carried out instead of tests of control?

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Substantive tests would be carried out in preference to tests of control if:
controls did not exist or were not operating effectively, or
there were relatively few transactions so that substantive tests were more efficient.

What aspects of a third party expert’s audit work should an auditor examine?

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The auditor must examine the expert’s work with respect to: consistency with other evidence, assumptions made, use and accuracy of source data.

What qualities should the auditor look for in third parties who are carrying out some audit work?

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The third parties should be: qualified, experienced, independent and professional

What matters should the auditor agree with third parties who are carrying out some audit work?

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The auditor should agree the following in writing:
* Nature, scope and objectives of work
* Respective responsibilities
* Nature, scope and timing of communications
* That the expert observes confidentiality

What aspects of a client’s undertaking is computer test data used to test?

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The operation of the client’s computer programs.

What aspects of a client’s undertaking do computer audit programs examine?

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Computer audit programmes examine client data.

Does non-sampling risk increase or decrease as the sample size increases?

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Non-sampling risk does not depend on sample size. This risk is affected by the experience and ability of the auditor, supervision and planning.

Does sampling risk increase or decrease as the sample size increases?

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As more items are examined in the sample, sampling risk decreases.

List six types of sampling:

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* Random selection,
* Systematic selection,
* Haphazard selection,
* Sequence/block selection,
* Monetary unit sampling,
* Stratified sampling.

What are the sources or procedures for obtaining of audit evidence?

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Analytical procedures, enquiry, confirmation, inspection, observation, recalculation and reperformance

ISA500 states that auditors must obtain xxxxxxxxxxxxx xxxxxxxxxxxxx audit evidence to be able to draw reasonable conclusions on which to base an audit opinion.
What words are represented by xxxxxxxxxxxxx xxxxxxxxxxxxx ?

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Sufficient appropriate

What are the audit assertions as represented by ‘ACCA COVER’?

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Accuracy
Completeness
Cut off
Allocation
Classification and understandability
Occurrence 
Valuation
Existence
Rights & obligations (ownership)

What are the two types of audit file?

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Current audit file (detail’s this year’s work) and permanent audit file (holds more permanent information such as organisation charts, letters of engagement etc).

What are auditors’ duties with respect to fraud?

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Managers, not auditors, are responsible for the prevention or detection of fraud. However, auditors should be aware of material misstatement due to fraud. Once discovered, fraud should be reported to appropriate management.

What is performance materiality?

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Materiality relates to financial statements as a whole. Additionally, a lesser amount is set when designing audit procedures to reduce the risk that misstatements in aggregate exceed FS materiality. This is performance materiality.

Define ‘materiality’

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A matter is material if it omission or misstatement would reasonably influence the economic decisions users.

At which stage of an audit (interim or final) will the documentation of systems and procedural tests usually be carried out?

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These processes are usually carried out at the interim audit stage

What are the six objectives of audit planning?

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The six objective of audit planning are to
* Ensure that appropriate attention to important areas
* Identify potential problems
* Ensure that work is completed expeditiously
* Help with the proper staffing and work assignment
* Coordinate with other parties
* Facilitate review

A common element of analytical procedures is ratio analysis.

Name three sources of comparison for any ratios calculated.

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* Previous years’ ratios,

* Budget ratios,

* Industry standard ratios

Are analytical procedures part of tests of control or substantive tests?

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Substantive tests

What is sampling risk?

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The risk, that because the auditor is relying on a sample, conclusions drawn about the population are wrong.

What is another name for a reasonable assurance engagement?

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A positive assurance

What are RQBs and RSBs?

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To be an auditor, the person must:

Pass an approved set of professional examinations, set by a Recognised Qualifying Body (RQB) eg the ACCA

Become a member (and stay a member!) of a Recognised Supervisory Body (RSB) eg the ACCA


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