Q1. Last year Rajshahi Leather Ltd wrote off a large amount of obsolete inventory after the design of its main product was changed for safety. What can the auditor request this year, and how may it be corroborated? Incorrect

A) A written statement that no sales were made, checked to bank records
B) A written statement that inventory is valued at cost, checked to invoices
C) A confirmation from customers, checked to the receivables ledger
D) A statement of no similar design changes, checked to minutes

Your answer: B  |  Correct answer: D

Management can be asked for a written representation that it has no intention of making similar amendments to products this year. The representation would be corroborated by reviewing minutes of management meetings.

ISA 580

Q2. An accountant sees possible fraud by a client director. Which code area deals with this? Incorrect

A) The fees rules in the Code
B) The gifts rules in the Code
C) The marketing rules in the Code
D) NOCLAR provisions

Your answer: A  |  Correct answer: D

The Code has provisions on responding to non-compliance with laws and regulations (NOCLAR), including fraud.

IESBA Code 260

Q3. What is the main purpose of a proposal sent to Narsingdi Fertiliser Ltd during a tender? Incorrect

A) Approach, team and fee
B) The auditor's salary and bonus for the year
C) The weather forecast for the audit period
D) The final audit report for the year

Your answer: C  |  Correct answer: A

The proposal explains approach, staffing and fees so the client can choose.

ISA 210

Q4. Zaman & Co advises a client on restructuring its debt and negotiates with the bank on the client's behalf. Which threat is most directly created? Incorrect

A) Advocacy threat
B) Intimidation threat from a bank claim
C) Familiarity threat from years of service
D) Self-interest threat from an overdue fee

Your answer: B  |  Correct answer: A

An advocacy threat arises when the firm takes the client's part. The workbook's example is advice on debt restructuring and negotiating with the bank on the client's behalf.

ICAB Code

Q5. A customer sets strict quality control requirements for goods supplied by Savar Plastics. Which link to the financial statements does the workbook draw? Correct

A) Direct effect on payroll costs only
B) No link whatever to any account at all
C) A link to sales and sales returns
D) A link to share capital only

Your answer: C  |  Correct answer: C

The quality risk does not directly affect the statements, but if the process is not working well there is likely to be a correlation with sales and sales returns.

ISA 315

Q6. Partners of Barisal & Co discuss the results of a client in a taxi in front of the driver. What is the risk? Correct

A) None at all as the driver is a stranger
B) Familiarity threat from the driver
C) Accidental disclosure of information
D) Advocacy threat for the client

Your answer: C  |  Correct answer: C

Discussions in public places risk accidental disclosure of confidential information.

IESBA Code

Q7. Surma Pharma Ltd has a 30 June 2026 year end. The auditor completed all procedures, including the subsequent events review, on 9 September 2026. The board approved the financial statements on 12 September 2026. The representation letter, signed by the Managing Director and Chief Financial Officer, is dated 14 September 2026. What is the earliest date the auditor's report may carry? Incorrect

A) 14 September 2026, because the report cannot be dated before the representation letter, which is the latest of the three dates
B) 9 September 2026, because the report date is when sufficient evidence was obtained and the letter merely repeats earlier evidence
C) 12 September 2026, because board approval is the last event management controls and the letter only confirms matters already approved
D) 30 September 2026, because the report is dated when members receive the statements and the letter sets only a minimum date

Your answer: C  |  Correct answer: A

Written representations are necessary audit evidence, so the auditor's opinion cannot be expressed, and the report cannot be dated, before the date of the representation letter. The report date must also not precede board approval or the completion of sufficient appropriate evidence. The three dates are 9, 12 and 14 September, so the binding constraint is the letter dated 14 September 2026. Choosing the approval date ignores that the letter is itself evidence, and choosing the evidence date overlooks the approval and the letter.

ISA 580

Q8. When reviewing Icket's overhead allocation, which cost should be excluded from inventory? Incorrect

A) Factory rent
B) Idle time
C) Production labour
D) Machine depreciation

Your answer: C  |  Correct answer: B

Only appropriate costs are included in inventory valuation, so idle time, for example, is excluded. Rajeev compares the allocation to previous years analytically.

IAS 2

Q9. What is the external auditor's main reason to review internal audit reports? Correct

A) To avoid planning the audit
B) To copy its audit opinions
C) To set the audit fee level
D) To see control weaknesses

Your answer: D  |  Correct answer: D

Internal audit reports can help the external auditor identify risks and control weaknesses relevant to the audit.

ISA 610

Q10. The auditor tests a sample of CU40,000 from payables of CU600,000 and finds a CU800 omission. What is the projected misstatement? Incorrect

A) CU800
B) CU9,600
C) CU24,000
D) CU12,000

Your answer: A  |  Correct answer: D

The projection is 800 x (600,000 / 40,000) = 800 x 15 = CU12,000.

ISA 530

Q11. What does the auditor check when voluntary deductions are made from pay? Incorrect

A) That customers approved the deductions
B) That the board approved all of them
C) That the bank approved all of them
D) Employees signed an authority

Your answer: B  |  Correct answer: D

For voluntary deductions, the auditor should see the authority completed by the relevant employees.

ISA 330

Q12. Lack of resources for internal audit in Gazipur Garments Ltd means only 40% of the plan is delivered. What does the external auditor infer? Correct

A) Perfect coverage of every risk in the entity
B) Limited coverage
C) Higher assurance from internal audit than before
D) No risk remains in the areas not covered

Your answer: B  |  Correct answer: B

Poor coverage reduces the ability to rely on internal audit.

ISA 610

Q13. A finance officer both prepares and authorises the company's bank transfers. Which control is missing? Incorrect

A) Pre-numbering of all the order forms
B) Safeguarding blank cheques and forms only
C) Authorisers not preparing transfers
D) Monthly supplier statements of account

Your answer: B  |  Correct answer: C

For bank transfers the controls include that authorisers should not also prepare the transfer, together with limits on authority to specific amounts.

ISA 315

Q14. A trainee discusses a client's payroll with colleagues in a lift. What is the risk? Incorrect

A) Lower audit risk for the audit
B) None at all, it is only a lift
C) Others may overhear
D) Better teamwork in the audit team

Your answer: B  |  Correct answer: C

Accountants must not discuss client matters with colleagues in a public place, as others may overhear, which is accidental disclosure.

IESBA Code 114

Q15. A representation says all laws were followed, but the auditor finds a licence breach. What follows? Incorrect

A) Treat it as unreliable
B) Accept both as they are
C) Delete the finding from the file
D) Sign the report straight away

Your answer: B  |  Correct answer: A

Where evidence contradicts a representation, the auditor investigates and reconsiders the reliability of other representations.

ISA 580

Q16. Internal audit at Sylhet Mills Ltd checks adherence to laws, policies and procedures. What is this? Incorrect

A) Operational audit
B) Compliance audit
C) Forensic audit
D) Environmental audit

Your answer: C  |  Correct answer: B

Compliance audits test whether rules and procedures are followed.

IIA Standards

Q17. Which statement about the scope of testing is correct? Incorrect

A) Internal audit scope is wider
B) External audit scope is the wider one
C) The two scopes are exactly the same
D) Neither of them does any testing at all

Your answer: B  |  Correct answer: A

Internal auditors focus on all operations and all controls, not only those linked to the financial statements, so their scope of testing is far greater.

ISA 610

Q18. The auditor asks for explanations of unrecorded invoices that have been outstanding for a long time. Which risk is the test mainly aimed at? Correct

A) Overstated purchases in the year
B) Duplicated payments to suppliers
C) Understated liabilities
D) Overstated inventory at year end

Your answer: C  |  Correct answer: C

Items outstanding for a long time, such as unrecorded invoices and unmatched goods received records, may mean goods have been received but the liability has been omitted.

ISA 315

Q19. The strategy for Mirpur Sweets, a cash-based confectioner, tells the team to review profit margins and directors' salaries for reasonableness. What risk does this alert the team to? Incorrect

A) Sales may be overstated through fictitious credit sales to customers
B) Inventory may be recorded in the wrong accounting period
C) Not all takings may be reported
D) Trade receivables may be uncollectable at the year end

Your answer: A  |  Correct answer: C

In a cash business, not all earnings may be reported. The team is therefore alerted to check whether the reported earnings are consistent with other available information, such as margins, the sales mix and the owner's lifestyle.

ISA 315

Q20. Meghna Foods Ltd, an unlisted company, is audited by Rahman & Co. At planning, audit senior Nasrin discloses that her husband bought 300 shares in Meghna Foods Ltd for CU 9,000, under 0.01 percent of its equity and trivial to the couple. What is the correct position? Incorrect

A) The threat is acceptable if her husband agrees not to vote or trade the shares, so Nasrin may stay with the partner's approval
B) The interest is clearly immaterial to both sides, so Nasrin may remain if an engagement quality reviewer examines her work
C) The shares belong to her husband rather than Nasrin, so this is a close family matter needing only disclosure to the board of directors
D) A direct interest held by an immediate family member is prohibited whatever its size, so it must be sold or Nasrin leaves the team

Your answer: C  |  Correct answer: D

A direct financial interest in an audit client held by a member of the audit team or by an immediate family member (spouse or dependant) creates a self-interest threat that no safeguard can reduce, however small the holding. The only effective actions under the IESBA Code are to dispose of the interest or to remove the individual from the team. Materiality is relevant to indirect interests, not to direct ones. Review of the work or an undertaking not to trade does not remove the interest and so cannot make the threat acceptable.

IESBA Code Section 510

Q21. A system will not accept a sales invoice with the delivery date field left blank. Which input check is this? Incorrect

A) Hash total of the invoice numbers
B) Digit verification of the reference
C) Necessary information check
D) Batch reconciliation of the totals

Your answer: B  |  Correct answer: C

A necessary information check stops any transaction being passed with missing information.

ISA 315

Q22. In the audit of Karnaphuli Cement Ltd the team accumulated these misstatements (CU): revenue cut-off overstated 180,000; inventory overstated 95,000; accruals understated 60,000; depreciation understated 22,000; prepayment misclassified 14,000; returns provision understated 31,000. Management corrected only the inventory item. The clearly trivial threshold is CU 25,000. What total should the attached schedule show? Incorrect

A) CU 271,000, being the uncorrected items above the clearly trivial threshold (revenue cut-off, accruals and returns provision)
B) CU 402,000, being all misstatements identified, because management's belief that they are immaterial relates to every item found
C) CU 307,000, being every uncorrected item identified, because the attached schedule must be complete down to the smallest item
D) CU 366,000, being every item above the threshold, because the inventory item was found by the auditor rather than by management

Your answer: D  |  Correct answer: A

The schedule attached to the representation letter lists uncorrected misstatements that the auditor accumulated. Items below the clearly trivial threshold (depreciation 22,000 and prepayment 14,000) are not accumulated, and the inventory item (95,000) was corrected. That leaves 180,000 + 60,000 + 31,000 = CU 271,000. Including corrected items or trivial items overstates the schedule, and management's belief that the effect is immaterial does not replace the auditor's own evaluation against materiality.

ISA 450

Q23. What is the overall objective of the auditor under ISA 200 in relation to misstatement? Incorrect

A) To find every fraud and every error in the financial statements
B) To confirm that the internal controls are designed without any weakness
C) To obtain reasonable assurance of no material misstatement
D) To make sure that the directors have complied with the corporate governance code

Your answer: D  |  Correct answer: C

The auditor's first objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, so as to express an opinion. The second is to report in accordance with the findings.

ISA 200

Q24. How does the auditor of Comilla Tiles Ltd test purchases cut-off? Correct

A) Compare gross margin with the margin of last year
B) Check GRNs near year-end to invoices
C) Check the credit limits of all of the customers
D) Observe the cash count on the last day of the year

Your answer: B  |  Correct answer: B

Matching receipts around the year-end to invoice periods shows whether purchases are in the right year.

ISA 330

Q25. An external auditor gives internal audit the task of confirming inventory counts at depots of Jessore Plastics Ltd. What should the external auditor do? Incorrect

A) Have it signed off by management at once
B) Leave it unreviewed to save time and cost
C) Rely on it without checking any of the work
D) Review it

Your answer: B  |  Correct answer: D

The external auditor directs, supervises and reviews assistance work.

ISA 610

Q26. Pabna Online Ltd receives an annual subscription of CU 120,000 on 1 October. What revenue is recognised by 31 December? Incorrect

A) CU 90,000
B) CU 120,000
C) CU 30,000
D) CU 10,000

Your answer: B  |  Correct answer: C

The service is provided over time: 3/12 x 120,000 = CU 30,000.

IFRS 15

Q27. Which principles are most relevant to a trainee who sees client information and does new work? Incorrect

A) Objectivity and advocacy for the client
B) Confidentiality and competence
C) Independence and the audit fees
D) Marketing and tendering for audits

Your answer: C  |  Correct answer: B

Trainees may be privy to client information, so confidentiality matters, and they may do work new to them, so professional competence and due care are also relevant.

IESBA Code 110

Q28. Internal audit identifies the company's significant exposures to risk and suggests improvements to risk management. Which activity is this? Correct

A) Reviewing value for money
B) Evaluating risk exposures
C) Performing a cash count
D) Appointing the auditors

Your answer: B  |  Correct answer: B

Identifying and evaluating significant exposures to risk, and contributing to the improvement of risk management and control systems, is a usual internal audit activity.

ISA 315

Q29. Why does a company keep blank purchase order forms locked in the purchase department? Incorrect

A) To make sure the goods are obtained on the most advantageous terms available to it
B) To prevent the same supplier invoice from being paid twice from the bank account
C) To make sure invoices are recorded in the correct accounting period at the year end
D) To prevent unauthorised orders being raised, for example for goods for personal use

Your answer: C  |  Correct answer: D

Safeguarding blank order forms, together with pre-numbering and authorisation of orders, mitigates the risk that unauthorised purchases are made for personal use. It does not deal with prices, duplicate payment or cut-off.

ISA 315

Q30. The audit of Pabna Textiles Ltd is budgeted at 600 hours and the partner is planned to spend 5% of the time. How many partner hours is this? Incorrect

A) 50 hours, found by using 8.3% of the time
B) 30 hours
C) 300 hours, found by using half of the time
D) 3 hours, found by using 0.5% of the time

Your answer: C  |  Correct answer: B

5% x 600 = 30 hours.

ISA 210

Q31. The auditor has discussions with those charged with governance on a significant matter. How should it be documented? Correct

A) Only in the audit report issued
B) Not at all, as it was informal
C) Record what and with whom
D) Only orally with the partner

Your answer: C  |  Correct answer: C

Documentation should include the significant matters discussed, when and with whom, including any discussions with TCWG.

ISA 230

Q32. The audit firm of Bogura Cement Ltd promotes the client's shares in a public offering. Which threat arises? Incorrect

A) Familiarity threat
B) Self-review threat
C) Advocacy threat
D) Intimidation threat

Your answer: D  |  Correct answer: C

Promoting a client's position to the point where objectivity may be compromised is an advocacy threat.

IESBA Code

Q33. A limited assurance report concludes in which style? Incorrect

A) The subject matter is proved correct
B) The statements give a true and fair view
C) Nothing has come to our attention
D) The opinion is a positive opinion

Your answer: B  |  Correct answer: C

A limited assurance conclusion is expressed in a negative form, such as nothing has come to the practitioner's attention to indicate that the subject matter is materially misstated.

ISAE 3000

Q34. What must the auditor do once a risk is identified as a significant risk? Incorrect

A) Remove it from the audit plan
B) Ignore the related controls entirely
C) Rely on last year's test result
D) Check control design and use

Your answer: C  |  Correct answer: D

When the auditor identifies a significant risk, the auditor must evaluate the design and implementation of the entity's controls in that area.

ISA 315

Q35. A contract of Chattogram Builders Ltd for CU 40 million is 30% complete at year-end under the input method. What revenue is recognised to date? Incorrect

A) CU 28 million, the balance
B) CU 12 million
C) CU 40 million, the whole contract
D) CU 30 million, from the percentage as an amount

Your answer: C  |  Correct answer: B

30% x 40 million = CU 12 million.

IFRS 15

Q36. How does the internal audit function of Mymensingh Dairy Ltd maintain the quality of its work? Incorrect

A) By avoiding all forms of review of its work
B) By ignoring the standards of the profession
C) By changing its staff every single year
D) Periodic internal and external reviews

Your answer: B  |  Correct answer: D

Quality assurance and improvement programmes include periodic assessments.

ISA 610

Q37. A new accounting standard is applied for the first time. Which inherent risk factor? Incorrect

A) Location
B) Volume
C) Change
D) Brand

Your answer: B  |  Correct answer: C

New requirements create change, which increases the likelihood of misstatement as processes and policies adapt.

ISA 315

Q38. Besides performing procedures to obtain evidence, what does the audit scope paragraph say an audit includes? Incorrect

A) Preparing the financial statements for the directors
B) Guaranteeing that no misstatement remains undiscovered
C) Evaluating policies, estimates and presentation
D) Setting the accounting policies for the directors

Your answer: B  |  Correct answer: C

An audit also includes evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates made by management, and the overall presentation of the financial statements.

ISA 210

Q39. A payroll of CU 8,400,000 a month is paid to 70 employees. What is the average monthly pay? Correct

A) CU 120,000
B) CU 1,200,000
C) CU 12,000
D) CU 588,000,000

Your answer: A  |  Correct answer: A

8,400,000 / 70 = CU 120,000.

ISA 520

Q40. To speed up work at remote factory sites, the team leader on Meghna Foods Ltd's audit stores scanned working papers in a personal cloud account and shares them through a messaging group. The partner finds out. Which response is consistent with ISQM 1 and the duty of confidentiality? Correct

A) Move the files to firm-controlled secure systems, because the firm must keep documentation confidential, intact, accessible and retrievable
B) Allow it if the client consents in writing, because confidentiality of working papers is the client's right and not the firm's
C) Allow it if the accounts are password-protected and the personal copies are deleted once the final audit file has been assembled
D) Allow it because the duty of confidentiality applies to paper files, while electronic copies are covered by the firm's own back-ups

Your answer: A  |  Correct answer: A

ISQM 1 requires a firm to establish policies and procedures so that engagement documentation is assembled on time and its confidentiality, safe custody, integrity, accessibility and retrievability are maintained. Personal accounts and messaging groups sit outside the firm's controls over access, back-up and retention, so the data should be moved to firm systems. Passwords do not give the firm control or an audit trail, and deleting copies afterwards does not cure the exposure. Client consent does not relieve the firm of its own quality management and ethical duties.

ISQM 1

Q41. Each director must take steps to be aware of relevant audit information. What else must the director establish? Correct

A) That the auditors are independent of the board
B) That the auditors have been paid in full
C) That the auditors know of it
D) That the auditors will attend the next AGM

Your answer: C  |  Correct answer: C

Each director must take all steps they ought to take to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

ISA 210

Q42. At the planning meeting for Karnaphuli Cement Ltd, the manager notes that revenue consists of simple over-the-counter sales at list prices, that management is not under profit pressure, and that results have been stable for years. The senior proposes to rebut both the presumed fraud risk in revenue recognition and the management override risk. Which approach complies with the standard? Incorrect

A) Rebut both presumed risks, because revenue and management override both depend on circumstances and stable results remove them
B) Rebut the management override risk because controls are strong, but keep the revenue risk as significant in every audit
C) Rebut neither presumed risk, because ISA 240 prohibits rebutting any presumption of fraud in revenue and in management override
D) Rebut the revenue risk only with documented reasons, but always treat management override of controls as a significant risk

Your answer: A  |  Correct answer: D

ISA 240 presumes risks of fraud in revenue recognition, which the auditor may rebut where the circumstances justify it and the reasons are documented. Risk of management override of controls is present in all entities and cannot be rebutted, so procedures on journal entries, accounting estimates and significant unusual transactions are always required. Strong controls do not remove the risk, because management is able to override them.

ISA 240

Q43. May the audit firm of Gazipur Textiles Ltd take on decisions as part of an outsourced internal audit service? Incorrect

A) Yes, in a minor way only for the client
B) Yes, if the client agrees to it in writing
C) Yes, if another partner supervises the work
D) No, taking management decisions is barred

Your answer: B  |  Correct answer: D

A firm must not assume management responsibilities for an audit client, as this impairs independence.

IESBA Code

Q44. Who normally signs the representation letter at Rajshahi Silk Ltd? Correct

A) CEO and CFO
B) The audit junior on the engagement team
C) The tax inspector of the NBR office
D) The security guard at the factory gate

Your answer: A  |  Correct answer: A

Management with appropriate responsibility, normally the CEO and CFO, signs.

ISA 580

Q45. A fire destroyed the count sheets and stock records of Madhumati Rubber Ltd, and the auditor could not attend the count. Inventory is CU 14.6 million against overall materiality of CU 1.1 million. Management offers a letter from its senior officers confirming the year-end quantities. No alternative procedures yield evidence. Which statement is correct? Incorrect

A) The letter is not a substitute for evidence; with no other evidence on a balance over thirteen times materiality, the opinion is modified
B) The letter is acceptable for the balance, because management has primary responsibility for inventory, and an emphasis of matter suffices
C) The letter is acceptable, because the loss was outside management's control and a signed representation is the best evidence left
D) The letter is acceptable if both senior officers sign it, because dual signature raises its reliability to that of external evidence

Your answer: B  |  Correct answer: A

Written representations corroborate other evidence and cannot replace evidence that the auditor expects to exist, whatever the cause of its absence. Inventory of CU 14.6 million is about 13.3 times materiality of CU 1.1 million (14.6 / 1.1), so the missing evidence is clearly material. The auditor therefore cannot obtain sufficient appropriate evidence and modifies the opinion, with qualification or disclaimer depending on pervasiveness. Dual signature or an emphasis of matter paragraph does not cure a scope limitation.

ISA 580

Q46. A client's confidential information may be disclosed in the public interest. Which condition? Correct

A) Any request from outside
B) Serious public harm
C) The client's rival wants it
D) A dispute over the fee

Your answer: B  |  Correct answer: B

Public interest disclosure is considered where there is serious harm and after taking advice and trying other avenues.

IESBA Code 114

Q47. Why does the internal audit function normally avoid helping to design the systems of control? Incorrect

A) Internal auditors lack the ability to understand the controls
B) The Companies Act 1994 forbids it from taking part in this work
C) Systems design has to be done by the external auditors only
D) It would later have to monitor a system it helped to design

Your answer: C  |  Correct answer: D

Internal audit's key role is monitoring and giving assurance that systems designed by departments meet their objectives. To preserve objectivity, internal auditors are generally not involved in assessing risks and designing the system.

IIA Standards

Q48. A cement producer, Meghna Concrete Ltd, has a riverside plant flooded by an unusually severe monsoon, and also faces a new carbon levy on kiln emissions. How are these two climate risks classified? Incorrect

A) The flood is a transition risk and the carbon levy is a physical risk
B) The flood is a physical risk and the carbon levy is a transition risk
C) Both are physical risks as both arise from the physical effects of climate change
D) Both are transition risks as both are linked to a move to a low carbon economy

Your answer: C  |  Correct answer: B

Physical risks arise from the physical effects of climate change such as storms, extreme temperatures and flooding. Transition risks arise from the shift to a low carbon economy, such as changes in policy, regulation, technology and markets. A carbon levy is a policy change.

IFRS S2

Q49. The auditor of Sirajganj Textiles Ltd discusses a significant matter with management. How should it be documented? Correct

A) Do not record any oral discussions at all
B) Record the matter and the outcome
C) Record only the date of the discussion held
D) Record only the name of the manager spoken to

Your answer: B  |  Correct answer: B

ISA 230 requires documentation of significant matters, discussions with management and conclusions reached.

ISA 230

Q50. Under the letter, who is responsible for safeguarding the company's assets and preventing fraud? Incorrect

A) The directors
B) The auditors
C) The Registrar
D) The tax authority

Your answer: B  |  Correct answer: A

The directors are responsible for safeguarding assets, taking reasonable steps to prevent and detect fraud and irregularities, and for internal control, while the auditor plans to detect significant misstatements.

ISA 210