F8 (AA) – Chapter 1 to 5 – PART A – CBE MCQs

These are ACCA F8 (AA) Audit and Assurance MCQs for Part-A of the Syllabus Audit framework and regulation.

These multiple-choice questions (MCQs) are designed to help ACCA F8 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

  • Students should not attempt these MCQs until they have finished the entire chapter.
  • All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F8 (AA) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:ACCA – Associations of Chartered Certified Accountants
Fundamental Level:Applied Skills
Subject:Audit and Assurance
Paper:F8 – AA
Chapter:01 – Audit and other assurance engagements
02 – Statutory audit and regulation
03 – Corporate governance
04 – Professional ethics and quality control procedures
05 – Internal audit
Questions:01 – BJM Co
02 – Conoy
03 – Stark
04 – Tangerine Tech Co
05 – LV Fones
06 – Orange
07 – SGCC
Syllabus Area:A – “Audit framework and regulation”
Questions Type:CBE MCQs
Exam Section:Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part A of the Syllabus; “Audit framework and regulation” of ACCA F8 (AA) Audit and Assurance Module.

Time

These MCQs are not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate

Result

Students will get their F8 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “( select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

 

Question – BJM Co – (01/07)

0 votes, 0 avg
16

F8 (AA) - Part A - MCQs - BJM Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F8 (AA) - Audit and Assurance
Syllabus Area: A - Audit framework and regulation
Question Name: BJM Co
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit senior of YHT & Co and have worked on the external audit of BJM Co (BJM), an unlisted company, since your firm was appointed external auditor two years ago.

BJM owns a chain of nine restaurants and is a successful company. BJM has always been subject to national hygiene regulations, especially in relation to the food preparation process. Non-compliance can result in a large fine or closure of the restaurant concerned.

The board of BJM has recently notified you that the national hygiene regulations have been updated and are now much more stringent and onerous than before.

With this in mind, the board has asked your firm to conduct a review of BJM's compliance with hygiene regulations, in order to allow the board to assess whether the appropriate processes have been implemented at each of the nine restaurants. The review is not expected to include the provision of accounting advice or the preparation of figures in the financial statements.

The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement.

QUESTION

The audit engagement partner has told you that the independence threats arising from YHT & Co performing the review engagement should be monitored carefully.

Which of the following is likely to cause the audit engagement partner most concern?

2 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit senior of YHT & Co and have worked on the external audit of BJM Co (BJM), an unlisted company, since your firm was appointed external auditor two years ago.

BJM owns a chain of nine restaurants and is a successful company. BJM has always been subject to national hygiene regulations, especially in relation to the food preparation process. Non-compliance can result in a large fine or closure of the restaurant concerned.

The board of BJM has recently notified you that the national hygiene regulations have been updated and are now much more stringent and onerous than before.

With this in mind, the board has asked your firm to conduct a review of BJM's compliance with hygiene regulations, in order to allow the board to assess whether the appropriate processes have been implemented at each of the nine restaurants. The review is not expected to include the provision of accounting advice or the preparation of figures in the financial statements.

The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement.

QUESTION

The partner responsible for the review engagement has asked you to tell him what level of assurance you believe YHT & Co should provide, and also what type of opinion the firm should give.

What is the level of assurance and type of opinion that can be provided on this review engagement?

3 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit senior of YHT & Co and have worked on the external audit of BJM Co (BJM), an unlisted company, since your firm was appointed external auditor two years ago.

BJM owns a chain of nine restaurants and is a successful company. BJM has always been subject to national hygiene regulations, especially in relation to the food preparation process. Non-compliance can result in a large fine or closure of the restaurant concerned.

The board of BJM has recently notified you that the national hygiene regulations have been updated and are now much more stringent and onerous than before.

With this in mind, the board has asked your firm to conduct a review of BJM's compliance with hygiene regulations, in order to allow the board to assess whether the appropriate processes have been implemented at each of the nine restaurants. The review is not expected to include the provision of accounting advice or the preparation of figures in the financial statements.

The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement.

QUESTION

The partner responsible for the review of hygiene compliance has informed you that the engagement is an assurance engagement.

Which of the following would NOT have been relevant to the partner in forming this opinion?

4 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit senior of YHT & Co and have worked on the external audit of BJM Co (BJM), an unlisted company, since your firm was appointed external auditor two years ago.

BJM owns a chain of nine restaurants and is a successful company. BJM has always been subject to national hygiene regulations, especially in relation to the food preparation process. Non-compliance can result in a large fine or closure of the restaurant concerned.

The board of BJM has recently notified you that the national hygiene regulations have been updated and are now much more stringent and onerous than before.

With this in mind, the board has asked your firm to conduct a review of BJM's compliance with hygiene regulations, in order to allow the board to assess whether the appropriate processes have been implemented at each of the nine restaurants. The review is not expected to include the provision of accounting advice or the preparation of figures in the financial statements.

The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement.

QUESTION

The board has also struggled to differentiate between its responsibilities and those of the external auditor in circumstances such as the prevention and detection of fraud and error, and compliance with regulations.

Which of the following statements best describes YHT & Co's responsibility regarding BJM's compliance with hygiene regulations, in line with ISA 250 (Revised) Consideration of Laws and Regulations in an Audit of Financial Statements?

5 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit senior of YHT & Co and have worked on the external audit of BJM Co (BJM), an unlisted company, since your firm was appointed external auditor two years ago.

BJM owns a chain of nine restaurants and is a successful company. BJM has always been subject to national hygiene regulations, especially in relation to the food preparation process. Non-compliance can result in a large fine or closure of the restaurant concerned.

The board of BJM has recently notified you that the national hygiene regulations have been updated and are now much more stringent and onerous than before.

With this in mind, the board has asked your firm to conduct a review of BJM's compliance with hygiene regulations, in order to allow the board to assess whether the appropriate processes have been implemented at each of the nine restaurants. The review is not expected to include the provision of accounting advice or the preparation of figures in the financial statements.

The work is likely to be very lucrative. Your firm has sufficient experience to undertake the above review engagement.

QUESTION

Despite running a successful company, BJM's board has often needed to be reminded of some fundamental principles and you often have to explain key concepts.

Which of the following statements best defines the external audit?

Your score is

Question – Conoy – (02/07)

0 votes, 0 avg
11

F8 (AA) - Part A - MCQs - Conoy

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F8 (AA) - Audit and Assurance
Syllabus Area: A - Audit framework and regulation
Question Name: Conoy
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 6

The following scenario relates to questions 1–6.

Scenario

Conoy designs and manufactures luxury motor vehicles. It is not a listed company, but its board has recently decided that it would like to improve its corporate governance in order to apply best practice. Conoy's shares are held equally by six shareholders, four of whom are also executive directors. The remaining two shareholders are not involved with Conoy, other than as shareholders.

Conoy has an internal audit department which is managed by Adrian Muse, the chief internal auditor. Adrian frequently comments that Conoy's board does not understand his reports, and does not provide sufficient support for his department and for the company's internal control systems. RWG & Co, Conoy's external auditors, have also expressed concern in this area.

Adrian has submitted a proposal to the board to establish an audit committee, and this is currently under consideration. The proposed membership of the audit committee is:

  • Adrian Muse (chief internal auditor)
  • Penny Dinty (existing executive director with some financial expertise)
  • Sharon Header (proposed new non-executive director)
  • Fredrick Rowe (proposed new non-executive director)

The board is also considering a significant expansion of the company. However, the company's bank is concerned by the standard of financial reporting as Conoy's finance director recently left the company. The board is delaying providing the bank with financial information until a new finance director has been appointed.

As part of its commitment to the effectiveness of the external audit process, the chair of Conoy's audit committee, Leslie Schiff, is keen to ensure that the external audit makes use of the latest auditing techniques. She has heard about data analytics routines, but is unsure exactly what they entail.

QUESTION

The following statements concern the auditor’s use of data analytics routines is true.

Indicate which statements are FALSE?
(hint: two statements are false)

2 / 6

The following scenario relates to questions 1–6.

Scenario

Conoy designs and manufactures luxury motor vehicles. It is not a listed company, but its board has recently decided that it would like to improve its corporate governance in order to apply best practice. Conoy's shares are held equally by six shareholders, four of whom are also executive directors. The remaining two shareholders are not involved with Conoy, other than as shareholders.

Conoy has an internal audit department which is managed by Adrian Muse, the chief internal auditor. Adrian frequently comments that Conoy's board does not understand his reports, and does not provide sufficient support for his department and for the company's internal control systems. RWG & Co, Conoy's external auditors, have also expressed concern in this area.

Adrian has submitted a proposal to the board to establish an audit committee, and this is currently under consideration. The proposed membership of the audit committee is:

  • Adrian Muse (chief internal auditor)
  • Penny Dinty (existing executive director with some financial expertise)
  • Sharon Header (proposed new non-executive director)
  • Fredrick Rowe (proposed new non-executive director)

The board is also considering a significant expansion of the company. However, the company's bank is concerned by the standard of financial reporting as Conoy's finance director recently left the company. The board is delaying providing the bank with financial information until a new finance director has been appointed.

As part of its commitment to the effectiveness of the external audit process, the chair of Conoy's audit committee, Leslie Schiff, is keen to ensure that the external audit makes use of the latest auditing techniques. She has heard about data analytics routines, but is unsure exactly what they entail.

QUESTION

Which of the following statements best describes why having an audit committee could help Conoy raise additional finance by addressing the concerns of the bank?

3 / 6

The following scenario relates to questions 1–6.

Scenario

Conoy designs and manufactures luxury motor vehicles. It is not a listed company, but its board has recently decided that it would like to improve its corporate governance in order to apply best practice. Conoy's shares are held equally by six shareholders, four of whom are also executive directors. The remaining two shareholders are not involved with Conoy, other than as shareholders.

Conoy has an internal audit department which is managed by Adrian Muse, the chief internal auditor. Adrian frequently comments that Conoy's board does not understand his reports, and does not provide sufficient support for his department and for the company's internal control systems. RWG & Co, Conoy's external auditors, have also expressed concern in this area.

Adrian has submitted a proposal to the board to establish an audit committee, and this is currently under consideration. The proposed membership of the audit committee is:

  • Adrian Muse (chief internal auditor)
  • Penny Dinty (existing executive director with some financial expertise)
  • Sharon Header (proposed new non-executive director)
  • Fredrick Rowe (proposed new non-executive director)

The board is also considering a significant expansion of the company. However, the company's bank is concerned by the standard of financial reporting as Conoy's finance director recently left the company. The board is delaying providing the bank with financial information until a new finance director has been appointed.

As part of its commitment to the effectiveness of the external audit process, the chair of Conoy's audit committee, Leslie Schiff, is keen to ensure that the external audit makes use of the latest auditing techniques. She has heard about data analytics routines, but is unsure exactly what they entail.

QUESTION

In relation to the proposed membership of the audit committee, state each proposed member which should NOT be included.
(hint: two members will be included)

4 / 6

The following scenario relates to questions 1–6.

Scenario

Conoy designs and manufactures luxury motor vehicles. It is not a listed company, but its board has recently decided that it would like to improve its corporate governance in order to apply best practice. Conoy's shares are held equally by six shareholders, four of whom are also executive directors. The remaining two shareholders are not involved with Conoy, other than as shareholders.

Conoy has an internal audit department which is managed by Adrian Muse, the chief internal auditor. Adrian frequently comments that Conoy's board does not understand his reports, and does not provide sufficient support for his department and for the company's internal control systems. RWG & Co, Conoy's external auditors, have also expressed concern in this area.

Adrian has submitted a proposal to the board to establish an audit committee, and this is currently under consideration. The proposed membership of the audit committee is:

  • Adrian Muse (chief internal auditor)
  • Penny Dinty (existing executive director with some financial expertise)
  • Sharon Header (proposed new non-executive director)
  • Fredrick Rowe (proposed new non-executive director)

The board is also considering a significant expansion of the company. However, the company's bank is concerned by the standard of financial reporting as Conoy's finance director recently left the company. The board is delaying providing the bank with financial information until a new finance director has been appointed.

As part of its commitment to the effectiveness of the external audit process, the chair of Conoy's audit committee, Leslie Schiff, is keen to ensure that the external audit makes use of the latest auditing techniques. She has heard about data analytics routines, but is unsure exactly what they entail.

QUESTION

In relation to the proposed membership of the audit committee, state each proposed member that should be included.
(hint: two members will be included)

5 / 6

The following scenario relates to questions 1–6.

Scenario

Conoy designs and manufactures luxury motor vehicles. It is not a listed company, but its board has recently decided that it would like to improve its corporate governance in order to apply best practice. Conoy's shares are held equally by six shareholders, four of whom are also executive directors. The remaining two shareholders are not involved with Conoy, other than as shareholders.

Conoy has an internal audit department which is managed by Adrian Muse, the chief internal auditor. Adrian frequently comments that Conoy's board does not understand his reports, and does not provide sufficient support for his department and for the company's internal control systems. RWG & Co, Conoy's external auditors, have also expressed concern in this area.

Adrian has submitted a proposal to the board to establish an audit committee, and this is currently under consideration. The proposed membership of the audit committee is:

  • Adrian Muse (chief internal auditor)
  • Penny Dinty (existing executive director with some financial expertise)
  • Sharon Header (proposed new non-executive director)
  • Fredrick Rowe (proposed new non-executive director)

The board is also considering a significant expansion of the company. However, the company's bank is concerned by the standard of financial reporting as Conoy's finance director recently left the company. The board is delaying providing the bank with financial information until a new finance director has been appointed.

As part of its commitment to the effectiveness of the external audit process, the chair of Conoy's audit committee, Leslie Schiff, is keen to ensure that the external audit makes use of the latest auditing techniques. She has heard about data analytics routines, but is unsure exactly what they entail.

QUESTION

Once established, the audit committee will have many objectives.

Which of the following does NOT form part of the audit committee's objectives?

6 / 6

The following scenario relates to questions 1–6.

Scenario

Conoy designs and manufactures luxury motor vehicles. It is not a listed company, but its board has recently decided that it would like to improve its corporate governance in order to apply best practice. Conoy's shares are held equally by six shareholders, four of whom are also executive directors. The remaining two shareholders are not involved with Conoy, other than as shareholders.

Conoy has an internal audit department which is managed by Adrian Muse, the chief internal auditor. Adrian frequently comments that Conoy's board does not understand his reports, and does not provide sufficient support for his department and for the company's internal control systems. RWG & Co, Conoy's external auditors, have also expressed concern in this area.

Adrian has submitted a proposal to the board to establish an audit committee, and this is currently under consideration. The proposed membership of the audit committee is:

  • Adrian Muse (chief internal auditor)
  • Penny Dinty (existing executive director with some financial expertise)
  • Sharon Header (proposed new non-executive director)
  • Fredrick Rowe (proposed new non-executive director)

The board is also considering a significant expansion of the company. However, the company's bank is concerned by the standard of financial reporting as Conoy's finance director recently left the company. The board is delaying providing the bank with financial information until a new finance director has been appointed.

As part of its commitment to the effectiveness of the external audit process, the chair of Conoy's audit committee, Leslie Schiff, is keen to ensure that the external audit makes use of the latest auditing techniques. She has heard about data analytics routines, but is unsure exactly what they entail.

QUESTION

Conoy's internal audit department is currently not well understood or supported by the board.

Which TWO of the following statements describe the main advantages of establishing an audit committee?

Question – Stark – (03/07)

0 votes, 0 avg
8

F8 (AA) - Part A - MCQs - Stark

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F8 (AA) - Audit and Assurance
Syllabus Area: A - Audit framework and regulation
Question Name: Stark
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 7

The following scenario relates to questions 1–7.

Scenario

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr. Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of exams for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year; instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

QUESTION

Zoe is also concerned that Ali & Co might breach confidentiality were the audit firm to represent Stark in its dispute with the tax authorities.

Which of the following statements best reflects the auditor's duty of confidentiality?

2 / 7

The following scenario relates to questions 1–7.

Scenario

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr. Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of exams for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year; instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

QUESTION

Mr Day's daughter, Zoe, is currently learning about International Standards on Auditing (ISAs) in her studies. She has asked you for clarification of the following.

Which is the correct order of the following stages involved in the development of an ISA?

    1. Distribution of exposure draft for public comment
    2. Consideration of comments received from the public
    3. Approval by IAASB members
    4. Establishment of task force to develop draft standard
    5. Discussion of proposed standard at a public meeting

3 / 7

The following scenario relates to questions 1–7.

Scenario

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr. Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of exams for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year; instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

QUESTION

In relation to the audit engagement partner holding the role for nine years:

Which of the following safeguards should be implemented in order to comply with ACCA's Code of Ethics and Conduct?

4 / 7

The following scenario relates to questions 1–7.

Scenario

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr. Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of exams for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year; instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

QUESTION

In relation to the audit team being offered a balloon ride:

Which of the following actions should be taken to ensure the firm complies with ACCA's Code of Ethics and Conduct?

5 / 7

The following scenario relates to questions 1–7.

Scenario

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr. Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of exams for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year; instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

QUESTION

From a review of the information above, your audit assistant has highlighted some of the potential risks to independence in respect of the audit of Stark.

Which of the following options best identifies the Self-Interest threat?

6 / 7

The following scenario relates to questions 1–7.

Scenario

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr. Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of exams for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year; instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

QUESTION

From a review of the information above, your audit assistant has highlighted some of the potential risks to independence in respect of the audit of Stark.

Which of the following options best identifies the Intimidation threat?

7 / 7

The following scenario relates to questions 1–7.

Scenario

You are an audit manager of Ali & Co and have just been assigned the audit of Stark Co (Stark). Stark, a listed company, provides investment advice to individuals, and is regulated by the relevant financial conduct authority.

Mr. Day, a partner in Ali & Co, has been the audit engagement partner for Stark for the previous nine years and has excellent knowledge of the client. Mr Day has informed you that he would like his daughter Zoe to be part of the audit team this year; Zoe is currently studying for her first set of exams for her ACCA qualification.

In an initial meeting with the finance director of Stark, you learn that the audit team will not be entertained on Stark's yacht this year; instead, he has arranged a balloon flight costing less than one-tenth of the expense of using the yacht and hopes this will be acceptable.

Ali & Co has always carried out tax advisory work for Stark. The tax advisory services do not have an impact on the figures reported in the financial statements. The finance director has stated that he feels strongly that the firm that offers taxation services this year should charge a fee which is based on a percentage of tax saved. He also trusts that your firm will accept a fixed fee for representing Stark in a dispute regarding the amount of sales tax payable to the taxation authorities.

QUESTION

From a review of the information above, your audit assistant has highlighted some of the potential risks to independence in respect of the audit of Stark.

Which of the following options best identifies the Advocacy threat?

Your score is

Question – Tangerine Tech Co – (04/07)

0 votes, 0 avg
9

F8 (AA) - Part A - MCQs - Tangerine Tech Co

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F8 (AA) - Audit and Assurance
Syllabus Area: A - Audit framework and regulation
Question Name: Tangerine Tech Co
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co (Tangerine), a company which is planning to list on a stock exchange within six months. The listing rules of the stock exchange require compliance with corporate governance principles, and the directors are unsure whether they are following best practice in relation to this. They have asked the audit engagement partner for their view on this matter.

Tangerine's board is comprised of six executive directors, a non-executive chairman and three other non-executive directors (NEDs). The chairman and one of the NEDs are former directors of Tangerine and on reaching retirement age were asked to take on non-executive roles. The company has established an audit committee, and all NEDs are members including the chairman who chairs the committee. All four members of the audit committee were previously involved in sales or production related roles.

All of the directors have been members of the board for at least four years. As the chairman does not have an executive role, he has sole responsibility for liaising with the shareholders and answering their questions. The company has not established an internal audit function to monitor internal controls.

QUESTION

The board of Tangerine is considering establishing an internal audit function.

Which of the following factors would be relevant in making this decision?

  1. It would help the audit committee to discharge its responsibilities for monitoring internal control.
  2. The board would no longer need to take responsibility for the prevention and detection of fraud and error.
  3. The costs of establishing an internal audit function should be considered against the benefits gained.

2 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co (Tangerine), a company which is planning to list on a stock exchange within six months. The listing rules of the stock exchange require compliance with corporate governance principles, and the directors are unsure whether they are following best practice in relation to this. They have asked the audit engagement partner for their view on this matter.

Tangerine's board is comprised of six executive directors, a non-executive chairman and three other non-executive directors (NEDs). The chairman and one of the NEDs are former directors of Tangerine and on reaching retirement age were asked to take on non-executive roles. The company has established an audit committee, and all NEDs are members including the chairman who chairs the committee. All four members of the audit committee were previously involved in sales or production related roles.

All of the directors have been members of the board for at least four years. As the chairman does not have an executive role, he has sole responsibility for liaising with the shareholders and answering their questions. The company has not established an internal audit function to monitor internal controls.

QUESTION

The directors are aware that in accordance with corporate governance provisions they have responsibilities for internal control but are unclear as to the extent of these responsibilities.

Which of these two correctly describes their responsibilities?

  • To review internal controls annually
  • To report on internal controls to shareholders

3 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co (Tangerine), a company which is planning to list on a stock exchange within six months. The listing rules of the stock exchange require compliance with corporate governance principles, and the directors are unsure whether they are following best practice in relation to this. They have asked the audit engagement partner for their view on this matter.

Tangerine's board is comprised of six executive directors, a non-executive chairman and three other non-executive directors (NEDs). The chairman and one of the NEDs are former directors of Tangerine and on reaching retirement age were asked to take on non-executive roles. The company has established an audit committee, and all NEDs are members including the chairman who chairs the committee. All four members of the audit committee were previously involved in sales or production related roles.

All of the directors have been members of the board for at least four years. As the chairman does not have an executive role, he has sole responsibility for liaising with the shareholders and answering their questions. The company has not established an internal audit function to monitor internal controls.

QUESTION

The audit engagement partner has assessed the make-up of the audit committee.
Which of the following would be valid conclusions from this assessment?

(1) It is acceptable for the chairman to chair the audit committee.
(2) A new member of the audit committee with relevant financial experience must be recruited.

4 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co (Tangerine), a company which is planning to list on a stock exchange within six months. The listing rules of the stock exchange require compliance with corporate governance principles, and the directors are unsure whether they are following best practice in relation to this. They have asked the audit engagement partner for their view on this matter.

Tangerine's board is comprised of six executive directors, a non-executive chairman and three other non-executive directors (NEDs). The chairman and one of the NEDs are former directors of Tangerine and on reaching retirement age were asked to take on non-executive roles. The company has established an audit committee, and all NEDs are members including the chairman who chairs the committee. All four members of the audit committee were previously involved in sales or production related roles.

All of the directors have been members of the board for at least four years. As the chairman does not have an executive role, he has sole responsibility for liaising with the shareholders and answering their questions. The company has not established an internal audit function to monitor internal controls.

QUESTION

The audit engagement partner's review has identified the following additional corporate governance weaknesses:
(1) All the directors have been members of the board for at least four years.
(2) The board is comprised of six executive and four non-executive directors.

Which of the following would the audit engagement partner recommend to address these weaknesses to ensure compliance with corporate governance principles?

5 / 5

The following scenario relates to questions 1–5.

Scenario

You are an audit manager of Satsuma & Co and have been assigned to the audit of Tangerine Tech Co (Tangerine), a company which is planning to list on a stock exchange within six months. The listing rules of the stock exchange require compliance with corporate governance principles, and the directors are unsure whether they are following best practice in relation to this. They have asked the audit engagement partner for their view on this matter.

Tangerine's board is comprised of six executive directors, a non-executive chairman and three other non-executive directors (NEDs). The chairman and one of the NEDs are former directors of Tangerine and on reaching retirement age were asked to take on non-executive roles. The company has established an audit committee, and all NEDs are members including the chairman who chairs the committee. All four members of the audit committee were previously involved in sales or production related roles.

All of the directors have been members of the board for at least four years. As the chairman does not have an executive role, he has sole responsibility for liaising with the shareholders and answering their questions. The company has not established an internal audit function to monitor internal controls.

QUESTION

Which of the following features are corporate governance weaknesses which Tangerine Co would need to address prior to their listing?

  1. The chairman has sole responsibility for liaising with shareholders.
  2. The company has not established an internal audit function.
  3. The chairman and one of the NEDs are former executive directors of Tangerine Co.

Your score is

Question – LV Fones – (05/07)

0 votes, 0 avg
8

F8 (AA) - Part A - MCQs - LV Fones

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F8 (AA) - Audit and Assurance
Syllabus Area: A - Audit framework and regulation
Question Name: LV Fones
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 7

The following scenario relates to questions 1–7.

Scenario

You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a qualified audit senior of Jones & Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from LV Fones was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).

From a review of the correspondence files you note 20% of last year's audit fee is still outstanding.

QUESTION

The finance director of LV has made some enquiries about the other services that Jones & Co may be able to assist with.

What Other Service CAN NOT be provided by Jones & Co?

2 / 7

The following scenario relates to questions 1–7.

Scenario

You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a qualified audit senior of Jones & Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from LV Fones was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).

From a review of the correspondence files you note 20% of last year's audit fee is still outstanding.

QUESTION

The finance director of LV has made some enquiries about the other services that Jones & Co may be able to assist with.

What Other Service can be provided by Jones & Co?

3 / 7

The following scenario relates to questions 1–7.

Scenario

You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a qualified audit senior of Jones & Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from LV Fones was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).

From a review of the correspondence files you note 20% of last year's audit fee is still outstanding.

QUESTION

Which of the following steps must Jones & Co take, as the fees from LV have exceeded 15% for the last two years?

  1. Resign from the audit
  2. Disclose the matter to those charged with governance
  3. Arrange for a pre- or post-issuance review

4 / 7

The following scenario relates to questions 1–7.

Scenario

You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a qualified audit senior of Jones & Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from LV Fones was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).

From a review of the correspondence files you note 20% of last year's audit fee is still outstanding.

QUESTION

In relation to the audit team being offered a 10% discount on mobile phones:

Which of the following statements are FALSE, in accordance with ACCA's Code of Ethics and Conduct.

5 / 7

The following scenario relates to questions 1–7.

Scenario

You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a qualified audit senior of Jones & Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from LV Fones was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).

From a review of the correspondence files you note 20% of last year's audit fee is still outstanding.

QUESTION

You have also discovered that the audit engagement partner and the finance director have known each other socially for many years, and in fact went on holiday together last summer with their families to the finance director's villa.

Which TWO threats to independence are raised by this relationship and what safeguards should be applied?

6 / 7

The following scenario relates to questions 1–7.

Scenario

You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a qualified audit senior of Jones & Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from LV Fones was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).

From a review of the correspondence files you note 20% of last year's audit fee is still outstanding.

QUESTION

Based on the information above you have summarised some of the potential risks to independence in the audit of LV Fones as follows.

  1. The audit team has been offered a discount on luxury phones.
  2. The audit senior was seconded to LV to cover for the financial controller.
  3. Total fees from LV is over 15% of the total fees of the firm for the second consecutive year.
  4. Fees are overdue in respect of last year's audit.

Which of the following options best identifies the valid potential threats to independence in the audit of LV Fones and Self-review threat?

7 / 7

The following scenario relates to questions 1–7.

Scenario

You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, a listed company, which has been an audit client for four years and specialises in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information. The employees of LV Fones Co are entitled to purchase smartphones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

During the year the financial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfil the role and hence a qualified audit senior of Jones & Co was seconded to the client for three months to cover the work of the financial controller. The audit engagement partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from LV Fones was boosted by this engagement and, along with the audit and tax fee, now accounts for 16% of the firm's total fees (15.7% last year).

From a review of the correspondence files you note 20% of last year's audit fee is still outstanding.

QUESTION

Based on the information above you have summarised some of the potential risks to independence in the audit of LV Fones as follows.

  1. The audit team has been offered a discount on luxury phones.
  2. The audit senior was seconded to LV to cover for the financial controller.
  3. Total fees from LV is over 15% of the total fees of the firm for the second consecutive year.
  4. Fees are overdue in respect of last year's audit.

Which of the following options best identifies the valid potential threats to independence in the audit of LV Fones and Self-interest threat?

Question – Orange – (06/07)

0 votes, 0 avg
7

F8 (AA) - Part A - MCQs - Orange

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F8 (AA) - Audit and Assurance
Syllabus Area: A - Audit framework and regulation
Question Name: Orange
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 5

The following scenario relates to questions 1–5.

Scenario

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), which specializes in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the audit engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken; for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

QUESTION

The board has noted down a number of statements relating to the audit committee and has asked you to confirm whether their understanding is correct.

Which of the following statements are TRUE.

2 / 5

The following scenario relates to questions 1–5.

Scenario

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), which specializes in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the audit engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken; for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

QUESTION

In accordance with ACCA's Code of Ethics and Conduct you have concluded that if you win the additional work you will need to disclose the proportion of fees obtained from Orange Financials to those charged with governance and conduct a post-issuance review.

Which of the following explains the basis for your conclusion?

3 / 5

The following scenario relates to questions 1–5.

Scenario

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), which specializes in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the audit engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken; for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

QUESTION

The finance director has made two offers to members of the audit team:
(1) Weekend away
(2) Loan at reduced rates

Which of the following correctly summarises which of the offers, if any, can be accepted?

4 / 5

The following scenario relates to questions 1–5.

Scenario

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), which specializes in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the audit engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken; for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

QUESTION

Currant & Co has been offered work by Orange Financials. This is dependent on the audit being completed with minimal issues.

Which TWO of the following threats does this situation create?

5 / 5

The following scenario relates to questions 1–5.

Scenario

You are the audit manager of Currant & Co and you are planning the audit of Orange Financials Co (Orange), which specializes in the provision of loans and financial advice to individuals and companies. Currant & Co has audited Orange for many years.

The directors are planning to list Orange on a stock exchange within the next few months and have asked if the audit engagement partner can attend the meetings with potential investors. In addition, as the finance director of Orange is likely to be quite busy with the listing, he has asked if Currant & Co can produce the financial statements for the current year.

During the year, the assistant finance director of Orange left and joined Currant & Co as a partner. It has been suggested that due to his familiarity with Orange, he should be appointed to provide an independent partner review for the audit.

Once Orange obtains its stock exchange listing it will require several assignments to be undertaken; for example, obtaining advice about corporate governance best practice. Currant & Co is very keen to be appointed to these engagements, however, Orange has implied that in order to gain this work Currant & Co needs to complete the external audit quickly and with minimal questions/issues.

The finance director has informed you that once the stock exchange listing has been completed, he would like the engagement team to attend a weekend away at a luxury hotel with his team, as a thank you for all their hard work. In addition, he has offered a senior member of the engagement team a short-term loan at a significantly reduced interest rate.

Orange is aware that subsequent to the stock exchange listing it will need to establish an audit committee, and has asked for some advice in relation to this.

QUESTION

As part of your planning work you have identified a number of potential risks to independence.

Which of the following potential risks could give rise to an advocacy threat?

Question – SGCC – (07/07)

0 votes, 0 avg
7

F8 (AA) - Part A - MCQs - SGCC

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F8 (AA) - Audit and Assurance
Syllabus Area: A - Audit framework and regulation
Question Name: SGCC
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 6

The following scenario relates to questions 1–6.

Scenario

You are an audit manager in HTQ & Co. One of your clients, SGCC, has recently become a listed company and has asked for your advice regarding the changes they should make to achieve appropriate compliance with corporate governance codes.

The board

Mr. Sheppard is the Chief Executive Officer and Chairman of the board of SGCC. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets are set for each director and no review of board policies is carried out. Board salaries are therefore set and paid by Mr. Sheppard based on his assessment of all the board members, including himself, and not their actual performance.

Internal controls

Internal controls in SGCC are monitored by the senior accountant, although the company assumes that, as external auditors, your firm will carry out a detailed review of internal controls. SGCC does not have an internal audit department or an audit committee.

Annual financial statements are produced, providing detailed information on past performance.

QUESTION

If SGCC's board decides to establish an internal audit department then it will also need to decide whether it will employ members of staff directly, or will outsource the department to an external firm. You have found a list in your study notes of the advantages of outsourcing as compared to the advantages of employing staff directly. The list includes the following points:

  1. Greater availability of specialist industry skills as required
  2. Flexibility regarding staff numbers in response to changing circumstances
  3. Elimination of direct training costs
  4. Development of skills increasing the human resource strength of the entity

Which of the following consideration relates to the Employment of internal auditors by SGCC.

2 / 6

The following scenario relates to questions 1–6.

Scenario

You are an audit manager in HTQ & Co. One of your clients, SGCC, has recently become a listed company and has asked for your advice regarding the changes they should make to achieve appropriate compliance with corporate governance codes.

The board

Mr. Sheppard is the Chief Executive Officer and Chairman of the board of SGCC. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets are set for each director and no review of board policies is carried out. Board salaries are therefore set and paid by Mr. Sheppard based on his assessment of all the board members, including himself, and not their actual performance.

Internal controls

Internal controls in SGCC are monitored by the senior accountant, although the company assumes that, as external auditors, your firm will carry out a detailed review of internal controls. SGCC does not have an internal audit department or an audit committee.

Annual financial statements are produced, providing detailed information on past performance.

QUESTION

If SGCC's board decides to establish an internal audit department then it will also need to decide whether it will employ members of staff directly, or will outsource the department to an external firm. You have found a list in your study notes of the advantages of outsourcing as compared to the advantages of employing staff directly. The list includes the following points:

  1. Greater availability of specialist industry skills as required
  2. Flexibility regarding staff numbers in response to changing circumstances
  3. Elimination of direct training costs
  4. Development of skills increasing the human resource strength of the entity

Which of the following consideration relates to the Outsourcing of the department.

3 / 6

The following scenario relates to questions 1–6.

Scenario

You are an audit manager in HTQ & Co. One of your clients, SGCC, has recently become a listed company and has asked for your advice regarding the changes they should make to achieve appropriate compliance with corporate governance codes.

The board

Mr. Sheppard is the Chief Executive Officer and Chairman of the board of SGCC. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets are set for each director and no review of board policies is carried out. Board salaries are therefore set and paid by Mr. Sheppard based on his assessment of all the board members, including himself, and not their actual performance.

Internal controls

Internal controls in SGCC are monitored by the senior accountant, although the company assumes that, as external auditors, your firm will carry out a detailed review of internal controls. SGCC does not have an internal audit department or an audit committee.

Annual financial statements are produced, providing detailed information on past performance.

QUESTION

You are aware that SGCC is considering establishing an internal audit department.

With which of the following activities should the internal audit function NOT be involved?

4 / 6

The following scenario relates to questions 1–6.

Scenario

You are an audit manager in HTQ & Co. One of your clients, SGCC, has recently become a listed company and has asked for your advice regarding the changes they should make to achieve appropriate compliance with corporate governance codes.

The board

Mr. Sheppard is the Chief Executive Officer and Chairman of the board of SGCC. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets are set for each director and no review of board policies is carried out. Board salaries are therefore set and paid by Mr. Sheppard based on his assessment of all the board members, including himself, and not their actual performance.

Internal controls

Internal controls in SGCC are monitored by the senior accountant, although the company assumes that, as external auditors, your firm will carry out a detailed review of internal controls. SGCC does not have an internal audit department or an audit committee.

Annual financial statements are produced, providing detailed information on past performance.

QUESTION

Your audit assistant does not feel that SGCC's approach to internal controls is sufficiently robust to comply with corporate governance principles and has drawn up a list of recommendations.

Which TWO of the following recommendations are valid?

5 / 6

The following scenario relates to questions 1–6.

Scenario

You are an audit manager in HTQ & Co. One of your clients, SGCC, has recently become a listed company and has asked for your advice regarding the changes they should make to achieve appropriate compliance with corporate governance codes.

The board

Mr. Sheppard is the Chief Executive Officer and Chairman of the board of SGCC. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets are set for each director and no review of board policies is carried out. Board salaries are therefore set and paid by Mr. Sheppard based on his assessment of all the board members, including himself, and not their actual performance.

Internal controls

Internal controls in SGCC are monitored by the senior accountant, although the company assumes that, as external auditors, your firm will carry out a detailed review of internal controls. SGCC does not have an internal audit department or an audit committee.

Annual financial statements are produced, providing detailed information on past performance.

QUESTION

Which of the following statements is correct with regards to the composition of the board at SGCC?

6 / 6

The following scenario relates to questions 1–6.

Scenario

You are an audit manager in HTQ & Co. One of your clients, SGCC, has recently become a listed company and has asked for your advice regarding the changes they should make to achieve appropriate compliance with corporate governance codes.

The board

Mr. Sheppard is the Chief Executive Officer and Chairman of the board of SGCC. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets are set for each director and no review of board policies is carried out. Board salaries are therefore set and paid by Mr. Sheppard based on his assessment of all the board members, including himself, and not their actual performance.

Internal controls

Internal controls in SGCC are monitored by the senior accountant, although the company assumes that, as external auditors, your firm will carry out a detailed review of internal controls. SGCC does not have an internal audit department or an audit committee.

Annual financial statements are produced, providing detailed information on past performance.

QUESTION

From a review of the information above, your audit assistant has highlighted some weaknesses in SGCC's corporate governance arrangements, especially in relation to the composition of the board.

Which of the following actions would be appropriate to improve SGCC's corporate governance compliance?

Your score is

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