ICAN Audit, Assurance and Forensics 2023 past questions and answers

1. To guarantee that the financial statements contain no error or fraud of any size.
2. To obtain reasonable assurance that the financial statements as a whole are free from material misstatement and report accordingly.
3. To prepare the financial statements and certify that management's estimates are correct.
4. To detect every instance of non-compliance, whether or not it affects the financial statements.

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

ISA 200 requires reasonable, not absolute, assurance that the financial statements as a whole are free from material misstatement due to fraud or error. The auditor does not prepare the statements or guarantee detection of every immaterial matter.

1. Accept, provided the engagement letter says the directors remain responsible.
2. Accept and delegate those tasks to the audit junior team.
3. Accept if the directors promise to review the completed statements.
4. Do not accept unless management acknowledges its responsibilities, including preparing the statements, relevant internal control and providing information and access.

Answer: D. Do not accept unless management acknowledges its responsibilities, including preparing the statements, relevant internal control and providing information and access.

ISA 210 requires agreement on the preconditions for an audit, including management's acknowledgement of its responsibilities. An engagement letter cannot transfer management's responsibilities to the auditor.

1. Reduce acceptable detection risk by obtaining more persuasive substantive evidence, such as expanded testing of inventory ageing and subsequent sales.
2. Increase detection risk by reducing substantive procedures because the risk is already documented.
3. Treat the assessed risks as low because the inventory is physically present.
4. Rely on management representation alone to confirm that the goods are saleable.

Answer: A. Reduce acceptable detection risk by obtaining more persuasive substantive evidence, such as expanded testing of inventory ageing and subsequent sales.

With higher assessed risk, the auditor needs a lower risk of failing to detect a material misstatement, which generally requires more persuasive or extensive substantive procedures. Physical existence does not establish that inventory is saleable or correctly valued.

1. Ignore it because it is below the audit team's performance materiality.
2. Issue an adverse opinion immediately without asking management to reconsider it.
3. Ask management to correct it and evaluate the uncorrected misstatement, individually and with others, when forming the opinion.
4. Treat it as a scope limitation because the auditor discovered it after fieldwork.

Answer: C. Ask management to correct it and evaluate the uncorrected misstatement, individually and with others, when forming the opinion.

The known misstatement exceeds overall materiality, so it should be communicated and management asked to correct it; any remaining uncorrected misstatement must be evaluated for its effect on the opinion. A single non-pervasive misstatement does not automatically require an adverse opinion.

1. Allow sales staff to delete unused invoice numbers without recording a reason.
2. Have an independent employee review the sequence regularly and investigate every missing number.
3. Reconcile the bank account only at year end.
4. Require customers to approve the invoice-number sequence.

Answer: B. Have an independent employee review the sequence regularly and investigate every missing number.

An independent sequence check with documented follow-up helps identify unrecorded or improperly voided invoices and directly addresses completeness. A bank reconciliation does not test whether all sales invoices were recorded.