ACCA Audit and Assurance (AA) 2022 past questions and answers

1. To certify that every transaction recorded during the year is correct
2. To obtain reasonable assurance that the financial statements as a whole are free from material misstatement and report accordingly
3. To guarantee that the company will remain profitable for the next year
4. To prepare the financial statements and then provide an independent opinion on them

Answer: B. To obtain reasonable assurance that the financial statements as a whole are free from material misstatement and report accordingly

An audit provides reasonable, not absolute, assurance that the financial statements as a whole are free of material misstatement. Preparing the statements and guaranteeing future performance are not the external auditor's objectives.

1. The auditor assumes responsibility for preventing fraud once an audit begins
2. The auditor is responsible for preparing controls, while management only reviews them
3. The auditor must detect every fraud, regardless of its size or concealment
4. Management and those charged with governance retain primary responsibility for preventing and detecting fraud

Answer: D. Management and those charged with governance retain primary responsibility for preventing and detecting fraud

Primary responsibility for preventing and detecting fraud rests with management and those charged with governance; the auditor obtains reasonable assurance and considers fraud risks. An audit cannot guarantee detection of every fraud.

1. Accept it because the audit opinion has not yet been drafted
2. Accept it if the partner discloses it in the audit report
3. Decline the inducement, inform the appropriate firm personnel, and assess whether any threat to the fundamental principles requires further action
4. Accept it provided another partner signs the audit report

Answer: C. Decline the inducement, inform the appropriate firm personnel, and assess whether any threat to the fundamental principles requires further action

A substantial hospitality offer can create a serious self-interest or intimidation threat and must be declined, with the matter escalated and threats evaluated. Disclosure in the audit report or a second signature does not make accepting it appropriate.

1. Establish that the preconditions for an audit exist and agree the terms of engagement with management, recording them in an engagement letter
2. Begin substantive testing and agree the audit scope after the year-end results are known
3. Ask the previous auditor to sign the engagement letter on Northstar's behalf
4. Agree only the audit fee, because the scope and responsibilities are fixed by the auditor

Answer: A. Establish that the preconditions for an audit exist and agree the terms of engagement with management, recording them in an engagement letter

Before accepting, the auditor establishes the audit preconditions and agrees the terms with management, normally documenting them in an engagement letter. The client and auditor responsibilities and scope should not be left to be settled after fieldwork begins.

1. Trade payables and expenses may be understated because subscriptions are paid in advance
2. Revenue may be understated because the cash receipt is not a credit sale
3. Inventory may be overstated because subscription access has not begun
4. Revenue may be recognised too early and deferred income understated

Answer: D. Revenue may be recognised too early and deferred income understated

Recognising the full fee before the service period begins risks overstating revenue and understating the liability for services still owed. The receipt of cash does not by itself establish that the subscription revenue has been earned.