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ICAN Audit, Assurance and Forensics 2022 past questions and answers

This 2022 ICAN Audit, Assurance and Forensics set has 20 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2022 set with instant marking.

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Sample ICAN Audit, Assurance and Forensics 2022 questions

1. At the planning meeting for Koru Manufacturing, the finance director says the auditor should guarantee that no fraud or error remains in the financial statements. Which response best reflects the objective of an audit under the ISAs?
  1. The auditor must identify every fraud, including immaterial fraud, before issuing any report.
  2. The auditor seeks reasonable assurance that the financial statements as a whole are free from material misstatement due to fraud or error, then reports accordingly.
  3. The auditor certifies that every transaction complies with all laws and internal policies.
  4. The auditor's primary objective is to prepare the financial statements on management's behalf.

Answer: B. The auditor seeks reasonable assurance that the financial statements as a whole are free from material misstatement due to fraud or error, then reports accordingly.

An audit provides reasonable, not absolute, assurance and is directed at material misstatement in the financial statements as a whole. Inherent limitations mean it cannot guarantee detection of every fraud or error; management remains responsible for preparing the statements.

2. A retailer's new online sales platform processes a large volume of refunds, and staff can approve refunds without independent review. When planning the audit, what is the most appropriate first response to this information?
  1. Treat the issue only as a detection risk and reduce substantive testing.
  2. Assume a material misstatement has occurred and issue a qualified opinion immediately.
  3. Understand the process and assess the risks of material misstatement at the financial-statement and relevant assertion levels.
  4. Ignore the process because refund controls are solely a matter for management.

Answer: C. Understand the process and assess the risks of material misstatement at the financial-statement and relevant assertion levels.

ISA 315 requires the auditor to obtain an understanding of the entity and its controls and assess risks of material misstatement at the financial-statement and assertion levels. A control weakness informs risk assessment; it does not by itself prove a misstatement or justify reducing audit work.

3. A lender's audit team calculates overall materiality using profit before tax. The entity is close to breaching a loan covenant based on current assets, and users are particularly sensitive to inventory valuation. What is the best planning response?
  1. Consider a lower materiality for inventory or relevant disclosures and set performance materiality to reduce aggregation risk.
  2. Keep the original threshold because one benchmark must govern every balance and disclosure.
  3. Set performance materiality equal to overall materiality so that all detected errors can be ignored individually.
  4. Raise materiality because the lender is already aware of the covenant position.

Answer: A. Consider a lower materiality for inventory or relevant disclosures and set performance materiality to reduce aggregation risk.

Materiality is based on users' needs and may be lower for particular classes, balances or disclosures where smaller misstatements could influence decisions. Performance materiality is set below overall materiality to reduce the risk that uncorrected and undetected misstatements aggregate beyond materiality.

4. At Nuru Services, one clerk creates new suppliers, enters their invoices and prepares the electronic payment file. The finance manager approves only the total payment amount. Which control improvement most directly addresses the weakness?
  1. Require the clerk to sign a declaration that all suppliers are genuine.
  2. Increase the frequency of the year-end external audit.
  3. Have the same clerk review the payment file before submission.
  4. Separate supplier-master maintenance, invoice processing and payment authorisation, with independent review of changes and payment details.

Answer: D. Separate supplier-master maintenance, invoice processing and payment authorisation, with independent review of changes and payment details.

Separating incompatible duties and independently reviewing supplier changes and payment details reduces the opportunity to create fictitious suppliers and pay their invoices. A self-review or a signature alone does not provide an effective independent control.

5. A hospital's policy requires a second authorised officer to approve every purchase above ₦2 million. The auditor plans to rely on this control for the year. Which procedure provides the clearest test of its operating effectiveness?
  1. Ask the procurement manager whether approvals were always obtained.
  2. Select purchases above the threshold and inspect dated evidence that an appropriately authorised second officer approved them before commitment.
  3. Recalculate the total value of purchases for the year.
  4. Compare the hospital's policy document with a competitor's policy.

Answer: B. Select purchases above the threshold and inspect dated evidence that an appropriately authorised second officer approved them before commitment.

Inspection of a sample of transactions for evidence of timely approval directly tests whether the control operated during the period. Inquiry alone is weaker evidence and does not establish consistent operation.

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