ACCA Audit and Assurance (AA) 2023 past questions and answers

1. The auditor guarantees that the financial statements contain no fraud or error.
2. The auditor obtains reasonable assurance that the financial statements as a whole are free from material misstatement and expresses an opinion.
3. The auditor prepares the financial statements and then reports whether they comply with the framework.
4. The auditor provides absolute assurance that every transaction has been recorded correctly.

Answer: B. The auditor obtains reasonable assurance that the financial statements as a whole are free from material misstatement and expresses an opinion.

An audit provides reasonable, not absolute, assurance and culminates in an opinion on the financial statements. Preparation of the statements remains management's responsibility, and an audit cannot guarantee detection of every fraud or error.

1. Accept the request because the auditor is responsible for preventing all fraud.
2. Take over the bookkeeping until the suspected fraud has been resolved.
3. Ignore the matter unless the suspected amount exceeds materiality.
4. Maintain professional scepticism, assess the implications for the audit, communicate as required, and avoid assuming management responsibilities.

Answer: D. Maintain professional scepticism, assess the implications for the audit, communicate as required, and avoid assuming management responsibilities.

The auditor considers suspected fraud and its effect on risk, evidence and communications, but management retains responsibility for controls and records. The auditor is not responsible for preventing all fraud or for performing management's investigation.

1. The head of internal audit reports functionally to the audit committee and administratively to the chief executive.
2. The head of internal audit reports only to the financial controller whose work is regularly reviewed.
3. The head of internal audit reports to the external audit manager, who approves the internal audit plan.
4. The head of internal audit reports to the operations director and is responsible for operating the controls tested.

Answer: A. The head of internal audit reports functionally to the audit committee and administratively to the chief executive.

Functional reporting to the audit committee helps protect internal audit's objectivity and access to those charged with governance. Reporting solely to an executive whose area may be audited, or operating the controls under review, creates threats to objectivity.

1. Increase substantive testing of all revenue balances without further assessment.
2. Rely on last year's risk assessment because the accounting policies are unchanged.
3. Obtain an understanding of the new system and how the change affects relevant controls and risks of material misstatement.
4. Conclude that the new platform is a significant deficiency before testing it.

Answer: C. Obtain an understanding of the new system and how the change affects relevant controls and risks of material misstatement.

The auditor must understand the entity and its system of internal control to identify and assess risks of material misstatement. The system change requires current-year assessment; it does not automatically prove a deficiency or dictate a particular substantive response.

1. The increase proves revenue is materially misstated and should be reported immediately.
2. The unexpected fluctuation indicates a potential risk that should be investigated and may require more focused audit procedures.
3. Analytical procedures cannot be used until the final audit is complete.
4. The auditor can accept the balance because management provided the revenue figure.

Answer: B. The unexpected fluctuation indicates a potential risk that should be investigated and may require more focused audit procedures.

A significant unexpected fluctuation is an indicator requiring investigation and may affect risk assessment and the planned response. It is not by itself proof of a misstatement; the auditor should obtain explanations and corroborating evidence.