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Assurance ACA questions with complete solutions
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Assurance ACA questions with complete solutions
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Assurance ACAWritten confirmations are required from all client staff who have made oral representations. True or
False? - correct answer ✔✔A) True
B) False
Which one of the following controls is LEAST LIKELY to address the risk that money received is not
banked? - correct answer ✔✔A) Matching cash receipts with invoices
B) Monthly bank reconciliations
C) Prompt bank payments
D) Investigation of shortages and surpluses of cash in the business
As part of his analytical procedures on the financial statements of Nails Ltd, Peter has identified that the
current ratio has decreased from 1.7 to 1.3. All purchases of inventory are currently made for cash and
all sales are credit sales.
Which TWO of the following could be a valid explanation for this decrease? - correct answer ✔✔A) The
company has increased its credit policy to customers from 30 to 50 days.
B) The company has shifted its reliance from long-term debit to short-term debit.
C) The company has decided to adopt a just in time inventory system (whereby the supplier will deliver
direct to its stores, eliminating the need for a distribution centre).
D) The company has recently offered special discounts to customers to attract more sales.
, The following describes processes which form part of the purchases system in operation at Green Ltd.
For each process, decide whether it represents a strength or a weakness in the system. - correct answer
✔✔1. All orders are placed directly with suppliers by the production department.
2. All supplier invoices are matched against purchase orders and goods received notes prior to being
entered into the accounting system.
Two types of procedures used in gathering evidence are tests of controls and substantive procedures.
For each of the following examples, decide which type of procedure is illustrated. - correct answer ✔✔1.
Carrying out analytical procedures on the income statement
2. Reviewing board minutes for evidence of authorisation of major additions to non-current assets
3. Reperforming only the year-end bank reconciliation
For each of the following statements concerning analytical procedures, decide whether they are true or
false. - correct answer ✔✔1. Analytical procedures can be used in tests of controls
2. Analytical procedures are only helpful where the integrity of the underlying data is high
3. Analytical procedures must be carried out by senior audit personnel only
In respect of an assurance engagement which of the following is the LEAST persuasive method of
gathering evidence? - correct answer ✔✔A) Re performance of a depreciation calculation
B) Inspection of a supplier's invoice
C) Inspection of an internally-generated order for the purchase of a non-current asset
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