Acca audit & assurance chapter 5 the auditor's report mcqs

🎓 ACCA Audit & Assurance

📋 Exam Instructions

This practice test contains 50 multiple choice questions

Each question has 4 options (A, B, C, D)

Choose the best answer for each question

All questions focus on Chapter 5: The Auditor's Report

Answers and explanations are provided at the end

📚 Chapter 5 Topics

Structure and elements of auditor's reports

Types of audit opinions (Unmodified, Qualified, Adverse, Disclaimer)

Key Audit Matters (KAMs)

Emphasis of Matter and Other Matter paragraphs

Going Concern reporting

📝 PART 1: QUESTIONS (50 Questions)

Question 1: Which of the following statements regarding the auditor's report and audit opinion is true?

A The audit opinion is part of the auditor's report

Chapter 5: The Auditor's Report - Practice Quiz (50 Questions)

B The auditor's report is the same as the audit opinion

C The auditor's report is part of the audit opinion

D The auditor's report is part of the financial statements

Question 2: Which of the following is NOT part of the financial statements on which an auditor reports?

A Notes to the financial statements

B Statement of financial position

C Cash flow statement

D Directors' report

Question 3: Which of the following statements regarding

materiality is true, in accordance with ISA 320 'Materiality in Planning and Performing an Audit'?

A Materiality levels are the same for all amounts in the financial

D Performance materiality is set at a higher level than materiality forthe financial statements

Question 4: Which of the following is NOT implied by an unmodified audit opinion in an auditor's report?

A No frauds occurred in the financial period

B All transactions have been recorded and are reflected in the

financial statements

C Management provided the auditor with all relevant information

D The financial statements have been prepared in accordance withthe applicable financial reporting framework

Question 5: On which TWO of the following does the

determination of materiality depend?

A The size of errors (quantitative factors) AND The nature of errors(qualitative factors)

B The economic decisions of users AND Management's

consideration of financial information needs

C The size of errors (quantitative factors) AND The economic

decisions of users

D The nature of errors (qualitative factors) AND Management'sconsideration of financial information needs

Question 6: Which of the following would NOT be found in an auditor's report with an unmodified audit opinion?

A Details about materiality levels

B An explanation of management's responsibilities with respect tothe financial statements

C A statement that the audit provides only reasonable assurance

D A statement that the audit has been conducted in accordance withInternational Standards on Auditing

Question 7: A matter is material if it satisfies which of the following criteria?

A It is more than 5% of profit

B A shareholder or provider of loan finance believes it to be material

C It would reasonably be expected to influence the economic

decisions of users taken on the basis of the financial statements

D A member of the audit team believes it to be material

Question 8: Which of the following statements about the presentation of sections in the auditor's report is correct?

A An 'Emphasis of matter' section is presented before the 'Basis ofopinion' section

B A section headed 'Qualified opinion' is presented before a 'Basis

for qualified opinion' section

C A section headed 'Basis of opinion' is presented after the

'Qualified opinion' section

D A section headed 'Basis of opinion' is presented before the'Opinion' section

Question 9: Which of the following types of audit opinion indicates that the financial statements are materially

A There is no difference - they are the same

B Material and pervasive misstatements are more significant andwidespread

C Material misstatements only affect one financial statement

D Material and pervasive misstatements are less significant

Question 11: When should an auditor issue a disclaimer of opinion?

A When misstatements are material but not pervasive

B When misstatements are material and pervasive

C When unable to obtain sufficient appropriate audit evidence andthe effects are material and pervasive

D When the financial statements are fairly presented

Question 12: Which section of the auditor's report explains the basis for a modified opinion?

A Opinion section

B Basis for Opinion section

C Basis for Qualified Opinion section (or similar)

D Key Audit Matters section

Question 13: What is an 'Emphasis of Matter' paragraph?

A A paragraph that modifies the auditor's opinion

B A paragraph that draws attention to a matter appropriately

presented in the financial statements

C A paragraph that describes audit procedures performed

D A paragraph that explains management responsibilities

Question 14: Which of the following would typically result in a qualified opinion?

A Inability to attend inventory count representing 80% of total

inventory

B Disagreement with management over a material accounting policy

C Discovery of fraud by senior management

D Late receipt of management representation letter

Question 15: What is meant by 'Key Audit Matters' (KAMs)?

A Matters that modify the audit opinion

B Matters of most significance in the audit of listed entities

C Matters that prevent the auditor from forming an opinion

D Matters related to auditor independence

Question 16: Which of the following is NOT a required

element of the auditor's report?

A Auditor's opinion

B Management's responsibilities

C Detailed audit procedures performed

D Auditor's responsibilities

Question 17: When is a qualified opinion appropriate?

A When misstatements are immaterial

B When misstatements are material but not pervasive

C When misstatements are material and pervasive

D When no misstatements are identified

Question 18: What does 'true and fair view' mean in the context of financial statements?

A The financial statements are completely accurate

B The financial statements are free from all errors

C The financial statements give a faithful representation inaccordance with the financial reporting framework

D The financial statements guarantee future performance

Question 19: Which of the following best describes

'reasonable assurance'?

A Absolute certainty that no misstatements exist

B A high, but not absolute, level of assurance

C A moderate level of assurance

D Limited assurance about the financial statements

Question 20: What is the purpose of the 'Other Information' section in the auditor's report?

A To provide additional audit procedures

B To address information other than the financial statements andauditor's report

C To modify the audit opinion

D To explain Key Audit Matters

Question 21: Which of the following would be included in the 'Auditor's Responsibilities' section?

A Preparation of financial statements

B Design and implementation of internal controls

C Obtaining reasonable assurance and expressing an opinion

D Selection of accounting policies

Question 22: What is meant by 'going concern' in auditing?

A The entity's ability to continue operations for the foreseeable

future

B The entity's profitability

C The entity's compliance with laws and regulations

D The entity's internal control effectiveness

Question 23: When should an auditor include a 'Material

Uncertainty Related to Going Concern' section?

A When the entity is profitable

B When adequate disclosure is made about material uncertainty but

no modification to opinion is necessary

C When the auditor disagrees with management

D When Key Audit Matters are identified

Question 24: Which of the following is a limitation of an audit?

A Auditors are not qualified to detect misstatements

B The inherent limitations of internal control and the use of testing

C Auditors do not have access to accounting records

D Management always conceals information from auditors

Question 25: What is the significance of the auditor's signature

on the audit report?

A It has no legal significance

B It indicates personal responsibility for the audit opinion

C It is only required for listed companies

D It can be signed by any member of the audit team

Question 26: Which of the following statements about audit evidence is correct?

A All audit evidence provides the same level of assurance

B Audit evidence is conclusive proof of financial statement accuracy

C Audit evidence is often persuasive rather than conclusive

D External evidence is always more reliable than internal evidence

Question 27: What is the difference between an unmodified opinion and a clean opinion?

A They are exactly the same thing

B An unmodified opinion may include emphasis of matter

paragraphs

C A clean opinion is only for listed companies

D An unmodified opinion is less favorable than a clean opinion

Question 28: Which of the following would typically be

communicated in a management letter?

A The audit opinion

B Key Audit Matters

C Internal control deficiencies and recommendations

D Going concern uncertainties

Question 29: What is the purpose of obtaining a management representation letter?

A To replace audit procedures

B To obtain written confirmation of management's responsibilitiesand representations

C To modify the audit opinion

D To document Key Audit Matters

Question 30: Which of the following best describes the concept of 'audit risk'?

A The risk that the auditor will be sued

B The risk that the auditor expresses an inappropriate opinion whenfinancial statements are materially misstated

C The risk that the client will not pay audit fees

D The risk that the audit will take longer than expected

Question 31: What is meant by 'sufficient appropriate audit evidence'?

A Evidence that is both adequate in quantity and suitable in quality

B Evidence that is only adequate in quantity

C Evidence that is only suitable in quality

D Evidence that is easily obtainable

Question 32: Which of the following is an example of a pervasive misstatement?

A An error in recording a single transaction

B Misstatement of inventory that affects multiple financial statementareas

C A small computational error

D An isolated disclosure omission

Question 33: What is the auditor's responsibility regarding subsequent events?

A No responsibility after the balance sheet date

B To identify and evaluate events between the balance sheet dateand the date of the auditor's report

C Only to consider events that occurred before the balance sheetdate

D To predict future events

Question 34: Which of the following best describes the

auditor's responsibility for detecting fraud?

A To detect all fraud regardless of materiality

B To obtain reasonable assurance that the financial statements arefree from material misstatement due to fraud

C No responsibility for fraud detection

D Only to detect fraud committed by management

Question 35: What is the significance of the date on the

auditor's report?

A It has no significance

B It indicates when the audit was planned

C It indicates when the auditor has obtained sufficient appropriateaudit evidence

D It must be the same as the balance sheet date

Question 36: Which of the following would result in an 'Other Matter' paragraph?

A A material misstatement in the financial statements

B A matter relevant to users' understanding that is not presented inthe financial statements

C A Key Audit Matter

D A going concern uncertainty

Question 37: Which of the following is NOT a type of

subsequent event?

A Events that provide evidence of conditions existing at the balancesheet date

B Events that provide evidence of conditions arising after the

balance sheet date

C Events that occurred before the balance sheet date

D Non-adjusting events that require disclosure

Question 38: What is the auditor's responsibility regarding laws and regulations?

A To ensure compliance with all laws and regulations

B To obtain reasonable assurance that the financial statements arefree from material misstatement due to non-compliance with lawsand regulations having a direct effect on financial statements

C No responsibility regarding laws and regulations

D Only to consider tax laws

Question 39: Which of the following best describes

'professional skepticism'?

A Assuming management is dishonest

B An attitude that includes a questioning mind and critical

assessment of audit evidence

C Accepting all management representations without question

D Focusing only on areas of high risk

Question 40: What is the difference between an error and fraud?

A There is no difference

B Errors are always material, fraud is not

C Fraud is intentional, errors are unintentional

D Errors only affect the income statement

Question 41: Which of the following is required when reporting on comparative financial statements?

A A separate opinion on each year

B The opinion covers both current and comparative figures

C Only the current year requires an opinion

D Comparative figures are not the auditor's responsibility

Question 42: What is meant by 'audit sampling'?

A Testing all transactions in a population

B The application of audit procedures to less than 100% of itemswithin a population

C Only testing high-value items

D Random selection without any methodology

Question 43: Which of the following factors would increase audit risk?

A Strong internal controls

B Experienced management team

C Complex transactions and accounting estimates

D Stable business environment

Question 44: What is the purpose of tests of controls?

A To detect misstatements in account balances

B To evaluate the operating effectiveness of controls

C To determine materiality levels

D To prepare the financial statements

Question 45: Which of the following best describes

substantive procedures?

A Procedures to test the effectiveness of internal controls

B Procedures designed to detect material misstatements at the

assertion level

C Procedures to assess audit risk

D Procedures to determine materiality

Question 46: What is meant by 'audit assertions'?

A Statements made by the auditor

B Representations embodied in the financial statements used by theauditor to consider different types of potential misstatements

C Legal requirements for audits

D Audit procedures performed

Question 47: Which of the following is an example of a review threat in auditing?

self-A Having a close family member employed by the audit client

B Preparing and auditing the same financial statements

C Being pressured to reduce audit work due to fee constraints

D Becoming too trusting of client representations

Question 48: What is the primary purpose of analytical

procedures in an audit?

A To replace detailed testing

B To identify areas requiring further investigation

C To prepare the financial statements

D To determine materiality levels

Question 49: Which of the following would most likely result

in an adverse opinion?

A Inability to obtain sufficient evidence about inventory

B Disagreement with management about a single material item

C Widespread use of inappropriate accounting policies

D Late receipt of legal confirmations

Question 50: What is the standard wording for an unmodified audit opinion?

A The financial statements are accurate and complete

B The financial statements give a true and fair view (or present fairly)

C The financial statements are free from all errors

D The financial statements are prepared correctly