ACCA Audit and Assurance (AA) 2025 past questions and answers

1. To obtain reasonable assurance that the financial statements as a whole are free from material misstatement, whether due to fraud or error
2. To certify that every transaction recorded by the company is accurate
3. To detect every instance of fraud, regardless of its financial effect
4. To prepare the financial statements and confirm that they comply with accounting standards

Answer: A. To obtain reasonable assurance that the financial statements as a whole are free from material misstatement, whether due to fraud or error

An audit provides reasonable, not absolute, assurance that the financial statements as a whole are free from material misstatement. Management prepares the statements, and an audit is not designed to identify every immaterial error or fraud.

1. Agree, provided a different audit team member reviews the statements
2. Explain that management is responsible for preparing the financial statements and for the underlying records and controls
3. Agree only if the audit committee approves the arrangement
4. Prepare the statements but disclaim responsibility in the auditor's report

Answer: B. Explain that management is responsible for preparing the financial statements and for the underlying records and controls

Management retains responsibility for the financial statements and the systems and controls used to prepare them. Taking responsibility for accounting decisions or preparation would create a self-review threat and cannot be cured simply by assigning another auditor to review the work.

1. Require internal audit to obtain the chief operating officer's approval before each audit
2. Limit internal audit to testing transactions selected by divisional managers
3. Give the audit committee oversight of the internal audit plan, results and appointment of the head of internal audit
4. Transfer responsibility for internal audit findings to the external auditor

Answer: C. Give the audit committee oversight of the internal audit plan, results and appointment of the head of internal audit

Audit committee oversight and direct access for the head of internal audit support organizational independence from the operations being reviewed. Management approval of individual audits or transferring the function to the external auditor would not provide the same appropriate governance structure.

1. Ignore the payments because their total is below overall materiality
2. Reduce performance materiality to zero for every financial statement balance
3. Conclude that the financial statements are materially misstated without further work
4. Assess the nature and circumstances of the payments, including whether they indicate fraud, related-party transactions or a control deficiency

Answer: D. Assess the nature and circumstances of the payments, including whether they indicate fraud, related-party transactions or a control deficiency

Materiality is affected by both amount and nature; a small transaction may be significant because it involves a director's relative or suggests fraud or a control weakness. It should be investigated and evaluated rather than automatically ignored or treated as a proven material misstatement.

1. Observe the count and inspect a sample of goods for condition, then reconcile the auditor's test counts to the final inventory records
2. Compare this year's gross margin with last year's gross margin
3. Read the cold-store manager's representation that all goods are saleable
4. Inspect invoices for purchases made after the reporting date only

Answer: A. Observe the count and inspect a sample of goods for condition, then reconcile the auditor's test counts to the final inventory records

Attendance and observation, supported by test counts and inspection, provide direct evidence of inventory existence and condition at the count. Analytical review or a representation alone is less direct, and later purchase invoices do not establish the year-end condition of the sampled goods.