76. Dhaka Trading Co, a company incorporated overseas, trades in Bangladesh through a branch and needs an audit of that branch. Which assurance engagement is this?

A) A branch audit
B) A local authority audit
C) A value for money study
D) A circulation report

Correct: A difficult ISAE 3000

A branch audit is one of the specialised audits listed in the workbook. It applies where an overseas company trades in the country through a branch and requires an audit of that branch.

77. A surveyor reports on a house but could not lift the fitted carpets to inspect the floor beneath. What should the report contain about this?

A) Nothing, because the limitation is too minor to mention
B) The limitation to the surveyor's work
C) A guarantee that the floor beneath is sound
D) A reduced fee for the buyer to pay

Correct: B difficult ISAE 3000

The report outlines the surveyor's opinion and also contains any limitations to the work done, for example parts of the property that could not be accessed or inspected.

78. Where problems exist within the information, what does an assurance report do?

A) It removes the problems from the information
B) It makes the practitioner responsible for the problems
C) It draws attention to the deficiencies
D) It guarantees that no further problems will arise

Correct: C difficult ISAE 3000

Where problems exist within information, the assurance report draws attention to the deficiencies so that users know what they are. It does not remove them or guarantee against others.

79. How does a strong culture of assurance help a country, according to the workbook?

A) It removes the need for companies to be audited
B) It lowers the tax paid by every investor
C) It guarantees that no company will fail
D) Investors are happy to invest there

Correct: D difficult ISAE 3000

Assurance helps ensure high quality, reliable information, which leads to effective markets that investors trust. It adds to the reputation of organisations and of countries, so investors are happy to invest where a strong culture of assurance exists.

80. Karnaphuli Garments publishes a pledge not to employ children in its sustainability report. How does assurance on that report help?

A) It shows stakeholders the information is reliable
B) It prevents the company from changing the pledge
C) It proves the pledge is legally binding on suppliers
D) It removes the need for a sustainability report

Correct: A difficult ISAE 3000

Corporate responsibility or sustainability reports give stakeholders assurance about published information such as emissions targets or pledges. Assurance on those reports adds credibility so stakeholders can rely on them.

81. Why does the use of testing limit the assurance an auditor can give?

A) Auditors prefer to rely on the directors' word
B) Auditors do not watch the statements being built
C) Testing is used only by internal auditors
D) Testing removes the need for professional judgement

Correct: B difficult ISA 200

Because testing is used, auditors do not oversee the process of building the financial statements from start to finish. This is one of the inherent limitations that stop assurance being absolute.

82. Why can the auditor never conclude absolutely that judgemental estimates are correct?

A) Estimates are always prepared by the auditor
B) Estimates are never included in financial statements
C) Estimates are uncertain by nature
D) Estimates cannot be tested using any procedure

Correct: C difficult ISA 200

Some items in the subject matter are estimates and are therefore uncertain. It is impossible to conclude absolutely that judgemental estimates are correct, so judgements on estimates cannot be conclusive.

83. Hasan is an employee of Padma Foods Ltd and is ineligible to be its auditor. For which other companies is he also ineligible?

A) Only companies in the same industry as Padma Foods
B) Only companies in which Padma Foods holds all the shares
C) None, since the rule applies to one company only
D) Directly connected companies

Correct: D difficult Companies Act 1994

The Companies Act 1994 makes a person ineligible if they are an officer or employee of the company, and also ineligible for appointment as auditor of any directly connected companies.

84. Which risk does maintaining professional scepticism help to reduce?

A) Over-generalising when drawing conclusions
B) Spending too long on planning the engagement
C) Paying for specialist help on every engagement
D) Sampling more items than the ISAs require

Correct: A difficult ISA 200

Professional scepticism, maintained throughout the audit, reduces the risks of overlooking unusual transactions, over-generalising when drawing conclusions, and using inappropriate assumptions in setting the nature, timing and extent of procedures.

85. Why do most companies that have an audit have one?

A) Because investors demand it before buying shares
B) Because the law requires it
C) Because the audit is free of cost to the company
D) Because the directors cannot prepare accounts alone

Correct: B difficult Companies Act 1994

The reason most companies have audits is that they are legally required to. Audits can also be valuable because they may enhance the credibility of the financial statements.

86. When is the final trial balance extracted from the ledgers?

A) Before any entries are made in the nominal ledger
B) At the end of each month, before ledgers are closed
C) After adjusting for accruals and prepayments
D) Only after the financial statements are issued

Correct: C difficult ISA 315

At the period end the ledger accounts are balanced and a trial balance extracted. Adjustments are made for accruals, prepayments and other items, and a final trial balance is then extracted to prepare the statements.

87. Which global initiative did the workbook place in 2015?

A) Global Reporting Initiative
B) United Nations Global Compact
C) Sustainable Development Goals
D) TCFD

Correct: D difficult IFRS S1

The workbook's timeline lists the United Nations Global Compact (2000), the Global Reporting Initiative (2000), the Task Force on Climate-related Financial Disclosures (2015) and the Sustainable Development Goals (2016).

88. Under ESG, executive pay is classified as which type of issue?

A) A governance issue
B) An environmental issue
C) A social issue
D) A climate dependency

Correct: A difficult IFRS S1

Governance issues relate to the governance of companies and include board structure, executive pay, shareholder rights, disclosure, business ethics, bribery and corruption, and internal controls.

89. Which stakeholder group benefits from ESG assurance 'to strengthen the supply chain'?

A) Employees
B) Business partners
C) Communities
D) Credit rating agencies

Correct: B difficult ISAE 3000

Assurance on sustainability information helps business partners to strengthen the supply chain. Employees gain confidence in systems and targets, and communities gain credibility with neighbours.

90. Which body published a practice alert on considering climate-related risks in an audit of financial statements?

A) The ISSB
B) IFAC's ethics board
C) The IAASB
D) The TCFD

Correct: C difficult IAASB practice alert

The IAASB published the practice alert 'The Consideration of Climate-Related Risks in an Audit of Financial Statements', which focuses on the implications for audits conducted under ISA Standards.

91. Hasan, a trainee, assumes that the review and completion stages of an audit are fully examined in the Assurance syllabus. What does the workbook say about these stages?

A) Largely outside this syllabus
B) They are covered fully in Chapter 4
C) They are covered in Chapters 14 to 16
D) They are covered only for limited assurance

Correct: A difficult ISA 200

Audit reporting is covered in Chapter 4, but review and completion are largely outside the scope of the Assurance syllabus and are covered later in the studies.

92. Dr Rahim is an employee of Meghna Cement Ltd. The company's directly connected company, Meghna Packaging Ltd, wants to appoint him as its auditor. What is the position under the Companies Act 1994?

A) He is eligible if he steps down from the board
B) He is ineligible there as well
C) He is eligible because he holds a recognised qualification
D) He is eligible if ICAB gives its consent first

Correct: B difficult Companies Act 1994

A person who is an officer or employee of a company is ineligible, and that ineligibility extends to appointment as auditor of any directly connected companies.

93. Farzana is a partner in a firm. Her partner Imran is an employee of Kushtia Dairy Ltd. May Farzana's firm be appointed auditor of Kushtia Dairy Ltd?

A) Yes, because Farzana personally has no link
B) Yes, if Imran resigns before the year end
C) No, because of her partner's link
D) Yes, if the shareholders approve the choice

Correct: C difficult Companies Act 1994

A partner in a partnership in which an employee of the company is also a partner is ineligible for appointment as the company's auditor.

94. Tania's team uses a new automated inventory valuation report. The report differs from a manual count sheet, but Tania accepts the automated figure and ignores the count sheet. Which concept applies?

A) Information asymmetry
B) The expectations gap
C) Limited assurance
D) Automation bias

Correct: D difficult ISA 200

Automation bias is the propensity to favour suggestions from automated systems and to ignore contradictory information produced without automation, even if it is correct.

95. Junior auditor Nasrin is given complex work beyond her audit experience and simply follows a checklist without asking questions. Which factor is hindering professional scepticism?

A) Inexperience for the work given
B) Review of work within the audit team
C) Training relevant to the client's sector
D) Partners who are readily accessible to staff

Correct: A difficult ISA 200

A lack of sufficient audit experience for the tasks allocated, and a checklist approach in place of real understanding, are factors that hinder professional scepticism.

96. Partner Karim is on site daily, leads the team actively and answers staff questions. Which feature of scepticism does this illustrate?

A) A factor that hinders scepticism
B) A facilitating factor
C) A breach of the independence rules
D) A limitation of the audit report

Correct: B difficult ISA 200

Partners and managers who actively lead the audit team and are accessible to other staff during the audit are listed as factors that facilitate professional scepticism.

97. Which of these is NOT something the auditor must do to meet the overall objectives in ISA 200?

A) Comply with relevant ethical requirements
B) Plan and perform with professional scepticism
C) Guarantee that no fraud or error exists
D) Exercise professional judgement

Correct: C difficult ISA 200

The auditor obtains reasonable, not absolute, assurance. The duties include ethics, scepticism, judgement and sufficient appropriate evidence, but there is no duty to guarantee the absence of fraud or error.

98. A speaker at a Dhaka seminar quotes the 1987 definition of sustainability as meeting present needs without compromising future generations. Which body gave that definition?

A) The International Federation of Accountants
B) The Sustainability Standards Board
C) The Financial Reporting Council
D) UN Brundtland Commission

Correct: D difficult Sustainability glossary

In 1987 the United Nations Brundtland Commission defined sustainability as meeting the needs of the present without compromising the ability of future generations to meet their own needs.

99. A Gazipur garment exporter reduces plastic packaging only after a ban is announced. What does the workbook say organisations should do instead?

A) Identify and manage them proactively
B) Wait for legislation before any change is made
C) Leave all ESG matters to its investors
D) Report the matter only to the regulators

Correct: A difficult Sustainability glossary

Organisations should not just react to legislation. They should proactively identify and manage ESG impacts and dependencies that affect their ability to create and maintain value.

100. Chattogram Steel's furnaces need a stable gas supply, and a shortage threatens output. How is this ESG issue classified?

A) A sustainability impact
B) A dependency
C) A governance impact
D) A reporting limitation

Correct: B difficult Sustainability glossary

Resource availability is an example of a dependency: an ESG issue that can affect the organisation's ability to create and maintain value, rather than an effect of the business on others.