101. Which of these is an example of a sustainability impact of Sylhet Tea Estates Ltd?

A) Rising consumer expectations
B) A new regulatory risk
C) Biodiversity loss
D) Climate risk to the crops

Correct: C difficult Sustainability glossary

Land use and biodiversity is listed as an impact of the business. Consumer expectations, regulatory risks and climate risks are listed as dependencies.

102. Reporting impact information alongside dependency information is consistent with which concept, defined in Chapter 3?

A) Performance materiality
B) Inherent risk
C) Tolerable error
D) Double materiality

Correct: D difficult Sustainability glossary

Reporting impacts together with dependencies is consistent with the concept of double materiality, which is dealt with in Chapter 3 when different forms of materiality are covered.

103. How do most computerised systems produce the statement of profit or loss and the statement of financial position from the final trial balance?

A) By mapping accounts to headings
B) By re-keying each balance by hand again
C) By posting each item to separate ledgers
D) By asking the auditor to classify each one

Correct: A difficult Bookkeeping recap

Most computerised systems automate the process by mapping the accounts on the trial balance to the appropriate headings of the statement of profit or loss or financial position.

104. Rupganj Ltd's trial balance shows electricity expense of CU48,000. An accrual of CU6,000 is added and a CU4,000 prepayment of next year's charge is removed. What expense appears in the final trial balance?

A) CU38,000
B) CU50,000
C) CU52,000
D) CU58,000

Correct: B complex Bookkeeping recap

Period-end adjustments are made for accruals and prepayments: 48,000 + 6,000 accrual - 4,000 prepaid = CU50,000.

105. Narayanganj Traders records a sale and leaseback as an ordinary sale though in substance it is a loan. Which element of 'true and fair' is most clearly missing?

A) That the books are correctly extracted
B) That the figures are factual
C) Reflecting commercial substance
D) That the criteria are suitable

Correct: C difficult ISA 200

Fair means the accounts should reflect the commercial substance of the company's underlying transactions. Recording a financing arrangement as a sale does not do this.

106. Moni Textiles asks a practitioner to report to its lender whether its covenant calculations follow the loan agreement. What is the subject matter?

A) The covenant calculations
B) The terms of the loan agreement
C) The management of Moni Textiles
D) The lender's own bank statements

Correct: A difficult International Framework for Assurance Engagements

The subject matter is what is evaluated or measured, here the covenant calculations. The loan agreement terms are the criteria.

107. In the Moni Textiles covenant report, which item supplies the criteria used to judge the calculations?

A) The lender's credit officer
B) The loan agreement terms
C) The practitioner's own opinion
D) The prior year audit report

Correct: B difficult International Framework for Assurance Engagements

Criteria are the benchmarks against which the subject matter is judged. The terms of the loan agreement set the covenant tests.

108. In the same Moni Textiles engagement, who is the responsible party?

A) The lender
B) The practitioner firm
C) Moni's management
D) The tax authority itself

Correct: C difficult International Framework for Assurance Engagements

The responsible party is the party responsible for the subject matter. Moni's management prepares the covenant calculations.

109. In the same engagement, who is the intended user of the practitioner's report?

A) Moni's management
B) The practitioner's own firm
C) The company's employees
D) The lender

Correct: D difficult International Framework for Assurance Engagements

The lender asked for the report to gain confidence about the covenant calculations, so the lender is the intended user.

110. At which stage of an audit are the audit procedures designed, before they are performed to obtain evidence?

A) The planning stage
B) The reporting stage
C) The review stage
D) The engagement acceptance stage

Correct: A difficult ISA 200

The workbook says audit procedures are designed at the planning stage and are then performed in order to obtain evidence.

111. Which pair of audit stages is described as largely outside the scope of the Assurance syllabus?

A) Planning and reporting
B) Review and completion
C) Obtaining the engagement and planning
D) Procedures and reporting

Correct: B difficult ISA 200

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

112. The auditor of Karim Foods decides how many receivable balances to confirm and when to confirm them. Which area of professional judgement is this?

A) Materiality and audit risk only
B) Drawing conclusions from evidence
C) Nature, timing and extent
D) Ethical requirements of the firm

Correct: C difficult ISA 200

Professional judgement is needed in the nature, timing and extent of audit procedures, which includes the size and timing of a confirmation exercise.

113. The auditor of Padma Steel considers whether management's depreciation policy is reasonable under the framework. Which area of judgement is this?

A) Materiality and audit risk levels
B) Nature of audit procedures
C) Sufficiency of audit evidence
D) Judging management's choices

Correct: D difficult ISA 200

Professional judgement is needed in evaluating management's judgements in applying the applicable financial reporting framework.

114. Which stakeholder group is most interested in sustainability dependencies, because they affect the growth of the value of its investment?

A) Investors
B) Local communities only
C) Competitors of the business
D) Suppliers of raw materials only

Correct: A difficult IFRS S1

Dependencies are particularly important to investors who want to see their investment increase in value and manage any risks to it.

115. An unmodified audit report addressed to shareholders makes a bank more willing to lend to the company. Which benefit of assurance is this?

A) A deterrent effect on errors and fraud
B) Added confidence for other parties
C) Highlighting deficiencies in the information
D) Removal of all audit risk from the work

Correct: B difficult ISA 200

Audit reports are addressed to shareholders, but an unmodified opinion can give the bank more confidence to lend, enhancing the credibility of the information.

116. How do authorities usually react to sustainability impacts that cause public demand for change?

A) By ignoring them
B) By lowering taxes
C) With legislation
D) With audit fees

Correct: C difficult IFRS S1

Impacts cause reactions from consumers, society and employees, and authorities react to these impacts and the demand for change with legislation.

117. Which engagement concludes on whether a public sector service provides value for money?

A) A circulation report
B) A website security report
C) A due diligence report
D) A value for money study

Correct: D difficult ISAE 3000

Value for money studies, for example in the public sector, are assurance engagements where the practitioner concludes on whether a service provides value for money.

118. Which body issued the International Framework for Assurance Engagements from which the definition of an assurance engagement is taken?

A) IFAC
B) The ARB
C) The company
D) ICAB's ethics panel

Correct: A difficult International Framework for Assurance Engagements

The definition is taken from the International Framework for Assurance Engagements, which is issued by IFAC, of which ICAB is a member.

119. Why must entities consider climate-related risks in the financial statements and not only in sustainability reports?

A) The tax law requires a note
B) Investors rely on it
C) Banks charge higher fees
D) Auditors prefer shorter reports

Correct: B difficult IAASB practice alert

Given the importance of climate-related risks to investors' economic decision making, entities should consider them in the financial statements rather than solely as a matter of CSR reporting.

120. Preparing for stakeholder engagement on sustainability calls for which kind of data, according to the workbook?

A) Only tax and VAT filing data from the NBR
B) Only payroll and pension data for staff
C) Social, environmental and economic data
D) Only daily share price data from the market

Correct: C difficult IFRS S1

Preparing for and responding to stakeholder engagement will often call for social, environmental and economic data, so assurance may help on governance over that data.

121. A practitioner is given access to only some of a company's records and gives a negatively worded conclusion. Which level of assurance is this?

A) Limited assurance
B) Reasonable assurance in full form
C) Absolute assurance on all records
D) No assurance, as the report is only advice

Correct: A difficult ISAE 3000

The level of assurance depends on the evidence the practitioner can obtain. With partial access, only limited assurance can be given, expressed negatively.

122. Which of these is NOT a benefit of assurance work?

A) An independent, professional opinion for users
B) Judgements on estimates become conclusive
C) Added confidence for other related parties
D) A deterrent to error and fraud in the information

Correct: B difficult ISAE 3000

Benefits include independent opinion, extra confidence for other parties and deterrence. Estimates are uncertain, so judgements on them can never be made conclusive.

123. The Companies Act requires ARBs to ensure that eligible company auditors are either qualified individuals or what?

A) Firms approved by each audit client
B) Firms owned by any shareholder group
C) Firms controlled by qualified persons
D) Firms that have never been investigated

Correct: C difficult Companies Act 1994

ARBs must have rules ensuring that those eligible for appointment are individuals holding an appropriate qualification or firms controlled by qualified persons.

124. What must an ARB do about its registered auditors, apart from setting entry rules?

A) Sign all of their audit reports each year
B) Appoint them to each company that asks
C) Set their audit fees for each client
D) Monitor them regularly

Correct: D difficult Companies Act 1994

ARBs must implement procedures for monitoring their registered auditors on a regular basis. Professional qualifications are a prerequisite of membership.

125. A firm rewards audit staff in appraisals for challenging management and following issues through. Which factor does this support?

A) Rewarding scepticism in competency reviews
B) A checklist approach to all procedures
C) Excessive trust in client explanations given
D) Timidity among the junior staff members

Correct: A difficult ISA 200

Embedding scepticism within the firm's competency frameworks, used to evaluate and reward performance, is a factor that facilitates professional scepticism.