ca_exm_au1_2010-09 - CGA-CANADA EXTERNAL AUDITING [AU1]...

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EAU1S10 ©CGA-Canada, 2010 Page 1 of 7 CGA-CANADA EXTERNAL AUDITING [AU1] EXAMINATION September 2010 Marks Time: 3 Hours 30 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each a. What audit opinion would be appropriate when the auditor has formed a positive opinion with respect to the financial statements taken as a whole, even though there is a material misstatement due to a departure from Canadian GAAP? 1) Unqualified 2) Qualified 3) Adverse 4) Denial b. What audit opinion would be appropriate when the auditor has formed an opinion that the financial statements are not fairly presented in all material respects due to a departure from Canadian GAAP? 1) Unqualified 2) Qualified 3) Adverse 4) Denial c. Which of the following examples of evidence would an auditor find to be most persuasive, assuming the client has strong internal controls? 1) An invoice from a vendor, stamped PAID by the client’s payables clerk 2) An email from the employee responsible for the bank reconciliation, sent to his supervisor, stating that all items on the bank reconciliation had been accounted for 3) A letter from the client’s board of directors, stating that there were no dividends declared in the year 4) Information verbally provided by an employee to the auditor, concerning possible illegal activities by the client’s management d. Which of the following would most likely suggest a related party transaction? 1) A transaction lacks an apparent business reason. 2) A new vendor is added to the approved vendor list. 3) A payment is made to settle a lawsuit close to the end of the year. 4) A customer’s credit limit is increased above the average credit limit of all other customers. Continued. ..
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EAU1S10 ©CGA-Canada, 2010 Page 2 of 7 e. How would an auditor use the critical cut-off percentage analysis? 1) To identify items that have exceeded materiality 2) To identify items that may not exceed materiality but for which the percentage change is so large it indicates potential problems 3) To allocate materiality to different accounts within the audit 4) To calculate the amount of adjustment needed to accept an account’s recorded balance f. An auditor developed an estimate for a contingent liability of $85,000 to $95,000. The client recorded an estimate of $60,000. The auditor noted that earlier in the year, the client had initially estimated the contingent liability to be $70,000. How should the auditor proceed in this situation? 1)
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ca_exm_au1_2010-09 - CGA-CANADA EXTERNAL AUDITING [AU1]...

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