[AA/F8: Tài liệu ôn thi] Part D: Audit Evidence

Part D sẽ ôn lại 8 dạng bài tập quan trọng môn Audit & Assurance (F8) với chủ đề Audit Evidence.

1. Tổng quan:

Topic	Question types	Question index
		MCQ	Case
Audit Evidence	1. The assertions explained	1,2,4,5	3
	2. Audit evidence	6,7	8
	3. Audit procedures for obtaining audit evidence/ confirm audit assertions	9,10,11,12,13, 14
	4. Analytical procedures	15,16,17
	5.  Audit sampling	18,19,20
	6. Using work of others	21, 22
	7. Audit software	23, 25	24
	8. Control vs substantive test	26, 27	28
Reference: BPP ACCA F8 - Audit & Aussurance StudyText

2. Dạng bài tập chi tiết

Mức độ: Quan trọng

2.1. Dạng 1: The assertions explained

Assertion about classes of transaction and events

Assertion	Explanation
Occurrence	Transactions and events that have been recorded or disclosed have occurred, and such transactions and events pertain to the entity.
Completeness	Record completely all transactions, events, and related disclosures.
Accuracy	Record appropriate amounts and other data of transactions and events, measured and described appropriately related disclosures.
Cut-off	Transactions and events have been recorded in the correct reporting period.
Classification	Transactions and events have been recorded in the proper accounts.
Presentation	Transactions and events are appropriately aggregated or disaggregated and are clearly described, and related disclosures are relevant and understandable.

Assertion about account balances

Assertion	Explanation
Existence	Assets, liabilities, and equity interests exist.
Rights and obligations	The entity holds or controls the rights to assets, and liabilities are the obligations of the entity.
Completeness	Recorded completely all assets, liabilities, equity interests, and related disclosures.
Accuracy, valuation, and allocation	Record amounts of assets, liabilities, and equity interests in the financial statements, any resulting valuation or allocation adjustments, and measure, describe related disclosures appropriately.
Classification	Record assets, liabilities, and equity interests in the proper accounts.
Presentation	Assets, liabilities, and equity interests are appropriately aggregated or disaggregated and clearly described, and related disclosures are relevant and understandable.

References: F8 BPP Chapter 8: Introduction to audit evidence phần 2 Financial statement assertions

Câu 1: (3.6m) (Dễ)

Question: 

Indicate whether the following assertions are relevant to the audit of tangible non-current assets.

Assertion	Yes	No
Existence
Occurrence
Classification
Presentation

Answer:

Assertion	Yes	No
Existence	X
Occurrence		X
Classification	X
Presentation	X

Existence, classification, and presentation are all assertions related to tangible non-current assets (account balance)

Occurrence relate to classes of transactions and events recorded in profit or loss

Reference: F8 BPP Chapter 8: Introduction to audit evidence phần 2 Financial statement assertions

Câu 2: (3.6m) (TB)

Question:

Which of the following supplier balances would indicate a high risk in relation to the COMPLETENESS of the liability recorded at the year-end?

A.  A supplier with a high balance at the year-end and with a low volume of transactions during the year
B.  A supplier with a low balance at the year-end and with a high volume of transactions during the year
C.  A supplier with a low balance at the year-end and with a low volume of transactions during the year
D.  A supplier with a high balance at the year-end and with a high volume of the transaction during the year

Answer: B

Options C and D demonstrate normal supplier => not a high risk of liability => C and D are false

A supplier with a high balance at the year-end and with a low volume of transactions during the year => risk that liability does not exist => relation to the EXISTENCE of the liability => A is false

A supplier with a low balance at the year-end but with a high volume of transactions during the year may indicate that not all liabilities have been recorded at the year‐end date. => relation to the COMPLETENESS of the liability => B is true

Reference: F8 BPP Chapter 8: Introduction to audit evidence phần 2 Financial statement assertions

Câu 3: (14.4m) (TB)

Question: 

1. Identify and explain FOUR financial statement assertions relevant to classes of transactions and events for the year under audit; and
2. For each identified assertion, describe a substantive procedure relevant to the audit of REVENUE.

Guidance: 

Step 1: Choose assertions of 6 assertions relevant to classes of transactions and events, include:

Assertion	Explanation
Occurrence	Transactions and events that have been recorded or disclosed have occurred, and such transactions and events pertain to the entity.
Completeness	Record completely all transactions, events and related disclosures.
Accuracy	Record appropriately amounts and other data of transactions and events, measured and described appropriately related disclosures.
Cut-off	Transactions and events have been recorded in the correct reporting period.
Classification	Transactions and events have been recorded in the proper accounts.
Presentation	Transactions and events are appropriately aggregated or disaggregated and are clearly described, and related disclosures are relevant and understandable.

Step 2: Identify the risk that will cause a material misstatement in the financial statements related to the assertion in step 1.

Step 3: Describe audit procedures that should be performed in order to avoid the risk mentioned in step 2

Normally the answer is a simple sentence that explains the substantive procedure. You don’t need to explain the risk of material misstatement (step 2) in your answer.

Example: Audit of REVENUE

In relation to occurrence assertion, the risk that transactions and events that have been recorded or disclosed have not occurred

• Audit procedures: Select a sample of sales transactions recorded in the sales day book; agree with the details back to goods despatched note (GDN) and customer order.

Answer: Assertions for classes of transactions and events

Assertion (Step 1)	Relevant risk relates to revenue (Step 2)	Substantive procedures relate to revenue (Step 3)
Occurrence The transactions and events that have been recorded have actually occurred and pertain to the entity.	Sales transactions that have been recorded or disclosed have not occurred or pertained to the entity.	Select a sample of sales transactions recorded in the sales day book; agree with the details back to goods despatched note (GDN) and customer order. Review the monthly breakdown of sales per key product, compare to the prior year and budget and investigate any significant differences.
Completeness All transactions and events that should have been recorded.	Transactions or events aren’t recorded	Select a sample of GDNs raised during the year; agree to the sales invoice and that they are recorded in the sales day book. Review the total amount of sales, compared to the prior year and budget, and investigate any significant differences.
Accuracy The amounts and other data relating to recorded transactions and events have been recorded appropriately.	The amounts sales have been recorded inaccurately.	Select a sample of sales invoices and recalculate that the totals and calculation of sales tax are correct. For a sample of sales invoices, confirm the sales price stated agrees to the authorised price list.
Cut-off Transactions and events have been recorded in the correct accounting period.	Transactions and events have been recorded in the incorrect accounting period.	Select a sample of pre and post-year-end GDNs and agree that the sale is recorded in the correct period’s sales day books. Review the post-year-end sales returns and agree if they relate to pre-year-end sales that the revenue has been correctly removed from the sales day book.
Classification Transactions and events have been recorded in the proper accounts.	Transactions and events have been recorded in the wrong accounts.	Agree for a sample of sales invoices that have been correctly recorded within revenue nominal account codes and included within revenue in the financial statements.

Câu 4: (3.6m) (TB)

Question

Which of the following statements explains the CUT‐OFF assertion for wages and salaries?

A.  Wages and salaries have been fairly allocated within the statement of profit or loss
B.  Wages and salaries have been appropriately calculated taking into account all relevant taxation costs and adjustments
C.  Wages and salaries which have been incurred during the period have been accounted for in respect of all personnel employed by Walker Co
D.  Wages and salaries accounted for relating to the current year ended 31 October 20X6

Answer: D

The cut‐off assertion relates to transactions being recorded in the correct accounting period.

In this case, payroll costs reflect payroll transactions for the period to 31 October 20X6. => D is true

Options A, B, C relate to the assertions of classification, accuracy and completeness

Câu 5: (3.6m) (TB)

Question:

In respect of the revenue procedures included in the audit plan, select the assertion being tested.

1.  Select a sample of goods despatched notes and agree to invoices in the sales day book	Accuracy	Completeness	Occurrence
2.  Select a sample of invoices from the sales day book and agree to goods despatched notes	Accuracy	Completeness	Occurrence
3.  Select a sample of invoices and recalculate the invoiced amount agreeing to price list	Accuracy	Completeness	Occurrence

Answer:

1.  Select a sample of goods despatched notes and agree to invoices in the sales day book	Accuracy	Completeness	Occurrence
2.  Select a sample of invoices from the sales day book and agree to goods despatched notes	Accuracy	Completeness	Occurrence
3.  Select a sample of invoices and recalculate the invoiced amount agreeing to price list	Accuracy	Completeness	Occurrence

Statement 1: Select a sample of goods despatched notes and agree to invoices in the sales day book => Avoid risk that goods didn’t record in FS => relate to COMPLETENESS assertion

Statement 2: Select a sample of invoices from the sales day book and agree to goods despatched notes => Avoid risk that sales transaction didn’t occur in reality => relate to OCCURRENCE assertion.

Statement 3: Select a sample of invoices and recalculate the invoiced amount agreeing to the price list enables the auditor to test accuracy => Avoid the risk of inaccuracy => relate to ACCURACY assertion.

2.2. Dạng 2: Audit evidence:

Quality of evidence: (References: BPP Chapter 8: Introduction to audit evidence phần 1.2 Sufficient appropriate audit evidence)

• external sources > entity’s records
• obtained directly by auditors > obtained indirectly or by inference
• obtained from entity’s record when the related control system operates effectively > ineffectively
• form of documents or form of documents > oral representations
• original documents > photocopies or facsimiles

Câu 6: (3.6m) (TB)

Question:

The following audit evidence has been gathered relating to the accuracy of wages and salaries for Walker Co:

1. Proof in total calculation performed by an audit team member
2. Written representation from the directors of Walker Co confirming the accuracy of wages and salaries
3. Verbal confirmation from the finance director of Walker Co confirming the accuracy of wages and salaries
4. Recalculation of the gross and net pay for a sample of employees by an internal audit team member of Walker Co

What is the order of reliability of the audit evidence starting with the MOST RELIABLE first?

A.  1, 2, 3, 4
B.  1, 4, 2, 3
C.  2, 1, 4, 3
D.  3, 1, 4, 2

Answer: B

The most reliable evidence will be the work performed by the audit team member as auditor-generated evidence is the most reliable. 

Verbal confirmation is the least reliable form of evidence as it can be disputed or retracted. Written confirmation is the next least reliable form of evidence as it is client generated.

Câu 7: (3.6m) (TB)

Question:

An audit junior has been assigned to the audit of bank and cash balances of Howard Co. He has obtained the following audit evidence:

1. Bank reconciliation carried out by the cashier
2. Bank confirmation report from Howard’s bankers
3. Verbal confirmation from the directors that the overdraft limit is to be increased
4. Cash count carried out by the audit junior

What is the order of reliability of the audit evidence starting with the most reliable first?

A.  4, 2, 1 and 3
B.  2, 1, 4 and 3
C.  4, 3, 2 and 1
D.  2, 4, 1 and 3

Answer: D

Confirmation from external sources is the most reliable evidence because it is from an independent source => statement 2

Work performed by the audit team member is more reliable than work performed by the client => Statement 4 > 1

Verbal confirmation is the least reliable form of evidence as it can be disputed or retracted => Statement 3 

Câu 8: (5.4m) (Dễ) (Đọc thêm)

Question:

Identify and explain THREE factors that influence the reliability of audit evidence.

Answer:

Reliability of audit evidence

The following factors or generalizations can be made when assessing the reliability of audit evidence:

• The reliability of audit evidence is increased when it is obtained from independent sources outside the entity.
• The reliability of audit evidence which is generated internally is increased when the related controls, including those over its preparation and maintenance, imposed by the entity are effective.
• Audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly or by inference.
• Audit evidence in documentary form, whether paper, electronic or other media, is more reliable than evidence obtained orally.
• Audit evidence provided by original documents is more reliable than audit evidence provided by photocopies or facsimiles, the reliability of which may depend on the controls over their preparation and maintenance.

2.3. Dạng 3: Audit procedures for obtaining audit evidence/ confirm audit assertions 

You are an audit senior of Viola & Co and are currently conducting the audit of Poppy Co for the year ended 30 June 20X6.

Materiality has been set at $50,000, and you are carrying out the detailed substantive testing on the year‐end payables balance. The audit manager has emphasised that understatement of the trade payables balance is a significant audit risk.

Below is an extract from the list of supplier statements as of 30 June 20X6 held by the company and corresponding payables ledger balances at the same date along with some commentary on the noted differences:

Supplier	Statement balance	Payables ledger balance
	$000	$000
Carnation Co	70	50
Lily Co	175	105

Carnation Co

The difference in the balance is due to an invoice that is under dispute due to faulty goods which were returned on 29 June 20X6.

Lily Co

The difference in the balance is due to the supplier statement showing an invoice dated 28 June 20X6 for $70,000 which was not recorded in the financial statements until after the year‐end. The payables clerk has advised the audit team that the invoice was not received until 2 July 20X6.

Câu 9: (3.6m) (Dễ)

Question:

The audit manager has asked you to review the full list of trade payables and select balances for which supplier statement reconciliations will be performed.

Which THREE of the following items should you select for testing?

A.  Suppliers with material balances at the year‐end
B.  Suppliers which have a high volume of business with Poppy Co
C.  Major suppliers of Poppy Co with nil balances at the year‐end
D.  Major suppliers of Poppy Co where the statement agrees to the ledger

Answer: A + B + C

Suppliers with material balances, suppliers with a high volume of business with Poppy Co and major suppliers with no outstanding balance at the year‐end should be selected to testing to confirm completeness assertion. 

Major suppliers of Poppy Co where the statement agrees to the ledger don’t need to reconcile balances.

Câu 10:

Question:

Which of the following audit procedures should be performed in relation to the balance with Lily Co to determine if the payables balance is understated?

A.  Inspect the goods received a note to determine when the goods were received
B.  Inspect the purchase order to confirm it is dated before the year‐end
C.  Review the post-year-end cashbook for evidence of payment of the invoice
D.  Send a confirmation request to Lily Co to confirm the outstanding balance

Guidance: 

Step 1: Identify assertion that needs to be tested

Step 2: Identify the risk that will cause a material misstatement in the financial statements related to the assertion in step 1 and the scenario.

Step 3: Think of the audit procedures that should be performed in order to avoid the risk mention in step 2

Answer: A

Step 1: Assertion: Completeness

Step 2: Risk: Goods received before the year-end but have not recorded in the payables balance.

In order to determine if the goods should be included in payables at the year‐end so inspecting, the goods received note should be performed => A is true

Inspect the purchase order to confirm it is dated before the year‐end but it does not confirm goods are received before the year-end or not => B is false

Review the post-year-end cashbook for evidence of payment of the invoice to ensure right and obligation assertion => C is false

There is no need to send a confirmation request to Lily Co as a supplier statement has been obtained => D is false

Câu 11:

Question

Which of the following audit procedures should be carried out to confirm the balance owing to Carnation Co?

1. Review post year‐end credit notes for evidence of acceptance of return
2. Inspect pre-year-end goods returned note in respect of the items sent back to the supplier
3. Inspect post-year-end cash book for evidence that the amount has been settled
   A.  1, 2 and 3
   B.  1 and 3 only
   C.  1 and 2 only
   D.  2 and 3 only

Answer: C

Assertion: Right & Obligation

Risk: Goods weren’t returned and order didn’t cancel but the company recorded this event 

Reviewing pre-year-end goods returned notes and post-year-end credit notes help the auditor to determine if the liability related to exists for the disputed items at the year-end => avoid the risk that goods weren’t returned and order didn’t cancel but the company recorded this event => 1 and 2 are true.

Inspect the post-year-end cash book for evidence that the amount has been settled helps the auditor determine companies received cash or not but didn’t help the auditor confirm the liability for the disputed items at the year‐end => 3 is false.

Câu 12-14:

It is 1 July 20X5. You are an audit supervisor in Seagull & Co and you are currently performing the audit of an existing client, Eagle Heating Co (Eagle), for the year ended 31 May 20X5. Eagle manufactures and sells heating and plumbing equipment to a number of home improvement stores across the country.

The following information has been obtained during discussions with the finance director.

Unpaid receivable

One of Eagle’s key customers has been experiencing financial difficulties. Eagle has agreed that the customer can take a six‐month payment break, after which payments will resume. The finance director does not believe that any allowance is required against this receivable. Your review of industry journals has identified several articles that suggest the key customer may soon cease trading.

Lawsuit

A customer has filed a claim against the company regarding a heating system that Eagle installed two months before the year-end. The customer claims the installation was not done properly resulting in an explosion that caused damage to his home. The customer is claiming compensation of $50,000 which is material to the financial statements. The finance director believes that the claim is not probable to succeed so has not referred to it in the financial statements.

Câu 12:

Question:

Which of the following substantive procedures will provide the MOST reliable evidence as to the recoverability of the outstanding balance from Eagle’s key customer?

A.  Obtain a direct confirmation letter from the key customer
B.  Compare the current outstanding balance from the customer to the prior year
C.  Review the industry journal articles referring to the customer’s financial difficulties
D.  Review post-year-end cash receipts from the key customer

Answer: D

To obtain evidence about the recoverability of the outstanding balance from Eagle’s key customer, the auditor should determine the intention and ability of the customer to pay the amount. 

A direct confirmation will confirm the amount outstanding but not the intention of the customer to pay this amount. => A is false

Compare the current outstanding balance from the customer to the prior year didn’t help the auditor determine the intention or ability of the customer to pay the amount => B is false

The industry journal articles are unlikely to provide specific detail regarding a company’s ability to pay specific debts. => C is false

Reviewing post-year-end receipts will confirm the actual recoverability of the outstanding balance, therefore, provides the most reliable evidence => D is true

Câu 13:

Question

Which TWO of the following substantive procedures will provide evidence over the EXISTENCE of Eagle’s other trade receivables?

A.  Calculate the receivables collection period and compare it with the prior year
B.  Perform a receivables circularisation
C.  Review post year‐end cash receipts from customers
D.  Recalculate the allowance for irrecoverable receivables

Answer: B + C

Risk: Eagle’s other trade receivables balance didn’t exist 

Perform a receivables circularization helps the auditor to obtain evidence from independent external sources about the existence, right & obligation, and valuation of Eagle’s other trade receivables => B is true

Review post year‐end cash receipts from customers to identify if customers pay debt => Eagle’s other trade receivables related to these customers are exist at the year-end => C is true

Options A and D help auditors to confirm recorded amounts are calculated accurately => A and D are false.

Câu 14:

Question:

Which of the following are appropriate audit responses to the lawsuit?

1. Ask the finance director to include a provision in the financial statements
2. Inspect correspondence between the client and their legal advisers
3. Review board minutes to understand management’s view about the claim
4. Contact the customer to understand the details of the claim
   A.  2 and 3 only
   B.  2, 3 and 4
   C.  1, 3 and 4
   D.  1 and 4 only

Answer: A

The auditor needs to establish whether the claim is probable to succeed before they can ask the client to recognise a provision (=> statement (1) is false). If the claim is not probable to succeed it should not be recognised. If it is possible to succeed it should be disclosed as a contingent liability. 

This evidence should be obtained from the legal adviser as they are an independent expert => statement 2 is true 

The auditor would review board minutes to ascertain the view of the board as a whole in respect of the claim =>statement 3 is true

It would not be appropriate for the auditor to contact the customer making the claim against the client => statement 4 is true

2.4. Dạng 4: Analytical procedures

Câu 15: Applying analytical procedures

Learning outcome: Nắm được các bước trong quy trình kiểm toán cần sử dụng analytical procedures

Question: 

According to ISAs 315 and 520 which TWO of the following statements are correct?

A.  Analytical procedures must be used as risk assessment procedures
B.  Analytical procedures must be used as substantive procedures
C.  Analytical procedures must be used during the overall review stage of an audit
D.  Analytical procedures must be carried out by senior-level assurance staff

Guidance (Tips/ Steps/ Cách tư duy)

At substantive procedures: Audit can use test of details instead of analytical

According to ISA 520, it may be advisable for analytical procedures to be carried out
by senior-level assurance staff but not requirements

Answer: A-C

Câu 16: Reliability of analytical procedures

Learning outcome

Question: Which TWO of the following circumstances would REDUCE the reliability of the results of analytical procedures?

A.  Detailed information is available analysed by the department
B.  Budgeted figures in the past have proved to be highly optimistic
C.  Reliable industry data is available
D.  Significant deficiencies in the internal control system have been identified in the past

Guidance (Tips/ Steps/ Cách tư duy)

If budgets are not realistic they will not provide a reasonable basis for comparison with actual. Deficiencies in internal controls reduce the reliability of the basic accounting information which will be used in the analytical procedures.

Answer: B-D

Câu 17: Analytical substantive procedures

Learning outcome: Nắm được ứng dụng của analytical procedure trong substantive procedure

Question: Which of the following is an analytical procedure that can be used to test revenue?

1. Comparison of revenue in the current year to revenue in the prior year
2. Review of credit notes issued post year-end
3. Inspection of a sample of goods despatch notes and sales invoices
4. Recalculation of the sales day book

Guidance (Tips/ Steps/ Cách tư duy)

B, C, and D are all substantive tests of detail as they focus attention on individual sales transactions. 

Comparison of sales in the current year to the prior year is an analytical procedure as it is focused on identifying unusual trends or fluctuations which may indicate misstatement

Answer: A. Comparison of revenue in the current year to revenue in the prior year

2.5. Dạng 5: Audit sampling 

Câu 18: Sample size for the test of details

Learning outcome: Nắm được các yếu tố ảnh hưởng đến việc lấy mẫu

Question: 

Which TWO of the following are factors that an assurance provider should take into account when determining the sample size for a test of details?

A.  The time available to complete the test
B.  The skill of the team member assigned to carry out the test
C.  A decrease in the assurance provider’s assessment of the risk of material misstatement
D.  An increase in the level of expected misstatement

Guidance (Tips/ Steps/ Cách tư duy)

Sample size depends on the level of confidence sought and expected and acceptable misstatement/deviation rate.

Answer: C-D 

Câu 19: Factors influence a sample size

Learning outcome: Hiểu được sự ảnh hưởng của các yếu tố đối với việc chọn mẫu

Question: 

When determining sample size for tests of controls, there are a number of factors which an auditor should take into account. For each of the following factors select whether it would cause the sample size to increase, decrease, or have a negligible effect.

Factor	Effect
	Increase	Decrease	Negligible
An increase in a tolerable misstatement
An increase in the number of invoices in the population
A decrease in the auditor’s required confidence level

Guidance (Tips/ Steps/ Cách tư duy)

Step 1: Identify the consequence of each event. 

Step 2: Assess these consequence to audit sampling whether they have an effect on a sample size

Note: Sample size depends on the level of confidence sought and expected and acceptable misstatement/deviation rate.

Answer: 

Factor	Effect
	Increase	Decrease	Negligible
An increase in a tolerable misstatement		X
An increase in the number of invoices in the population			X
A decrease in the auditor’s required confidence level		X

Increase in tolerable misstatement 🡪 Increase in the amount of 'acceptable misstatements' (or audit risk acceptable) 🡪 Decrease sample size.

Increase in the number of invoices in the population 🡪 Negligible effect 

The decrease in the auditor’s required confidence level 🡪 Decrease sample size.

Câu 20: Type of sampling

Learning outcome: Nắm được các đặc điểm về các loại sampling

Question: Which of the following statements is true? 

A.  Random sampling is a method where the auditor picks the sample with no particular pattern 
B.  Deviations must be extrapolated to determine the effect on the population 
C.  Block sampling is where the auditor tests all items in a population 
D.  Monetary unit selection is a non-statistical method of sampling 

Guidance (Tips/ Steps/ Cách tư duy)

Deviations are not extrapolated as the deviation rate will be the same across the population. Misstatements are extrapolated across the population 🡪 B false

Block sampling is sampling test 🡪 NOT test all items in a population 🡪 C false

Monetary unit selection is a statistical method of sampling NOT non-statistical🡪 D false

Answer: A. Random sampling is a method where the auditor picks the sample with no particular pattern

2.6. Dạng 6: Using work of others

Câu 21: Auditor’s expert

Learning outcome: Nắm được các đặc điểm khi sử dụng expert của auditor 

Question: 

What must be agreed with the auditor's expert in writing before the work is performed? 

(i) Responsibilities of each party. 

(ii) Inherent limitations of the audit. 

(iii) Deadline for the work. 

(iv) Scope and objectives. 

A.  (i), (ii), (iii) and (iv) 
B.  (i), (iii) and (iv) only 
C.  (iii) and (ii) only 
D.  (i), (ii) and (iv) only

Guidance (Tips/ Steps/ Cách tư duy)

Inherent limitations of an audit would not be communicated to the expert. This would be included in an audit engagement letter 

Answer: B. (i), (iii), and (ii) only

Câu 22: Management’s expert

Learning outcome: Nắm được các đặc điểm khi sử dụng expert của management 

Question: 

Which of the following statements best describes a management's expert?

A.  A management's expert is an employee of the company
B.  A management's expert is someone appointed by the company to provide evidence for the auditor
C.  A management's expert is someone recommended by the auditor which management appoints to provide evidence for the audit
D.  A management's expert is someone appointed by the company to provide evidence for management which may be relied upon by the auditor 

Guidance (Tips/ Steps/ Cách tư duy)

A management expert is appointed by management to produce evidence to be used by management. If the evidence is reliable and relevant to the external audit, the auditor may choose to rely on that work. 

Answer: D. A management's expert is someone appointed by the company to provide evidence for management which may be relied upon by the auditor

2.7. Dạng 7: Audit software 

Câu 23: Application of audit software

Learning outcome: Nắm được những thủ tục kiểm toán có thể sử dụng audit software

Question: Which one of the following could NOT be carried out by audit software?

A.  Reperforming calculations.
B.  Testing the operation of application controls.
C.  Identifying unusual transactions.
D.  Selecting samples for investigation.

Guidance (Tips/ Steps/ Cách tư duy)

Audit software use to process data of audit significance from the entity's accounting system and testing the operation of application controls is NOT relevant.

Answer: B. 

Câu 24: Audit software procedures

Learning outcome: Nắm được cách sử dụng audit software

Question: Which one of the following could NOT be carried out by audit software?

Airsoft Co is a listed company which manufactures stationery products. The company’s profit before tax for the year ended 31 December 20X6 is $16·3m and total assets as of that date are $66·8m. You are an audit supervisor of Biathlon & Co and you are currently finalising the audit programmes for the year-end audit of your existing client Airsoft Co. You attended a meeting with your audit manager where the following matters were discussed: 

Trade payables and accruals 

Airsoft Co purchases its raw materials from a large number of suppliers. The company’s policy is to close the purchase ledger just after the year-end and the financial controller is responsible for identifying goods which were received pre year-end but for which no invoice has yet been received. An accrual is calculated for goods received but not yet invoiced (GRNI) and is included within trade payables and accruals. The audit strategy has identified risk over the completeness of trade payables and accruals. The audit team will utilise computer-assisted audit techniques (CAATs), in the form of audit software while auditing trade payables and accruals. 

Required: Describe audit software procedures which could be carried out during the audit of Airsoft Co’s trade payables and accruals

Guidance (Tips/ Steps/ Cách tư duy)

Audit software can be used 

• To test Sampling programs 
• Compare data elements in different files.

Step 1: Identify the data that can be compared or sampling programs that need to be tested

Example: Audit can use it to calculate payables days for this year against the prior year to determine payables are understated or overstated.

Step 2: Identify sampling programs that need to be tested

Example: Audit software can be used to cast the payables and accruals listings to confirm the completeness and accuracy of trade payables and accruals.

Answer

• The audit team can use audit software to calculate payables days for the year-to-date to compare against the prior year to identify whether payables days have changed in line with trading levels and expectations. If payables days have decreased, this may be an indication that payables are understated.
• Audit software can be used to cast the payables and accruals listings to confirm the completeness and accuracy of trade payables and accruals. 
• Audit software can be used to select a representative sample of items for further testing of payables balances.
• Audit software can be utilized to recalculate the accruals for goods received not invoiced at the year-end. – CAATs can be used to undertake cut-off testing by assessing whether the dates of the last GRNs recorded relate to pre year end; and that any with a date of 1 January 20X6 onwards were excluded from trade payables.

Câu 25:

Question:

To help improve audit efficiency, X Co is considering introducing the use of automated tools and techniques for some audits. You have been asked to consider how to audit software and test data that could be used during the audit of Poppy Co.

Select whether the following are examples of using test data or audit software for trade payables testing. 

Selecting a sample of supplier balances for testing using monetary unit sampling	Test data	Audit software
Recalculating the aging of trade payables to identify balances which may be in dispute	Test data	Audit software
Calculation of trade payables payment period to use in analytical procedures	Test data	Audit software
Inputting dummy purchase invoices into the client system to see if processed correctly	Test data	Audit software

Answer:

Selecting a sample of supplier balances for testing using monetary unit sampling		Audit software
Recalculating the aging of trade payables to identify balances which may be in dispute		Audit software
Calculation of trade payables payment period to use in analytical procedures		Audit software
Inputting dummy purchase invoices into the client system to see if processed correctly	Test data

Test data	Audit software
This is data designed by the auditor and which is operated on by clients’ programs to see what the results are. For example, try to process a transaction that would put a customer over their credit limit and see if the client’s system rejects it.	This software belongs to the auditor and is used to read clients’ files. It can be used to identify noteworthy transactions, select samples, and for reperforming calculations (such as adding up the file).

2.8. Dạng 8: Control vs substantive test

Câu 26:  

Question:

The payroll section of the audit plan of Coastal Co includes the following procedures. For each procedure select whether it is a test of control or a substantive procedure.

Recalculate the total of the bank transfer list	Test of control	Substantive procedure
Inspect the bank transfer list for evidence of the finance director’s signature	Test of control	Substantive procedure
For a sample of employees, agree the salary details in the standing data files to the calculation of the employee’s monthly salary as per the payslip	Test of control	Substantive procedure
Review the procedures to ensure payroll files and documents are kept secure and confidential	Test of control	Substantive procedure

Guidance:

Test of control is audit procedures performed to test the operating effectiveness of the internal control system.

Substantive procedure are audit procedures performed to detect material misstatements at the assertion level

Answer:

Recalculate the total of the bank transfer list	Test of control	Substantive procedure
Inspect the bank transfer list for evidence of the finance director’s signature	Test of control	Substantive procedure
For a sample of employees, agree the salary details in the standing data files to the calculation of the employee’s monthly salary as per the payslip	Test of control	Substantive procedure
Review the procedures to ensure payroll files and documents are kept secure and confidential	Test of control	Substantive procedure

Statement 1: help to detect risk about accuracy assertion of payroll => Substantive procedures

Statement 2: Check the authorization of bank transfer list => provide the auditor with evidence that the controls over the payroll system are operating effectively => Test of controls

Statement 3: To ensure employee’s monthly salary recorded => help to detect risk about completeness assertion of payroll => Substantive procedures

Statement 4: Check the physical controls of payroll files and documents => provide the auditor with evidence that the controls over the payroll system are operating effectively => Test of controls

Câu 27:

Question:

Select whether the following are tests of control or substantive procedures in relation to Eagle’s inventory balance.

Observe the client’s staff to ensure they are following the inventory count instructions	Test of control	Substantive procedure
Inspect the inventory for evidence of damage or obsolescence	Test of control	Substantive procedure
Re‐perform the reconciliation from the inventory count date to the year‐end date for inventory to assess the accuracy of the inventory quantities.	Test of control	Substantive procedure

Answer:

Observe the client’s staff to ensure they are following the inventory count instructions	Test of control	Substantive procedure
Inspect the inventory for evidence of damage or obsolescence	Test of control	Substantive procedure
Re‐perform the reconciliation from the inventory count date to the year‐end date for inventory to assess the accuracy of the inventory quantities.	Test of control	Substantive procedure

Statement 1: Observing the count ensure the count instructions are followed will provide the auditor with evidence that the controls over the inventory count are operating effectively => Test of control

Statement 2+3 provide evidence over the accuracy, valuation, and allocation assertion => Substantive procedures

Câu 28: (Đọc thêm)

Question:

Define and differentiate between the terms ‘Test of Control’ and ‘Substantive Tests’

Answer:

	Test of controls	Substantive testing
Definition	Audit procedures performed to test the operating effectiveness of controls in preventing, detecting, or correcting material misstatements.	Audit procedures performed to detect material misstatements at the assertion level.
	Supports control risk assessment	Support the overall audit opinion of a company and accompanying transactions.
	Only performed when the auditor believes that the control risk is low, enabling them to verify this assessment	Always required to obtain sufficient audit evidence.
Categories	Inquiry, Observation, Reperformance, Inspection	Test of detail, substantive analytical procedure

Author: Hong Quan