ICAN Audit, Assurance and Forensics 2026 past questions and answers

1. The auditor is responsible for preparing the financial statements, so an audit cannot ensure that they are accurate.
2. Audits use sampling and professional judgement, and evidence has inherent limitations, so some material misstatements may remain undetected.
3. Reasonable assurance means the auditor checks every transaction but cannot guarantee that management will cooperate.
4. The auditor only considers fraud and does not assess errors in the financial statements.

Answer: B. Audits use sampling and professional judgement, and evidence has inherent limitations, so some material misstatements may remain undetected.

Sampling, judgement, and the nature of audit evidence create unavoidable detection limits, so reasonable assurance is high but not absolute. Option C is wrong because auditors do not ordinarily examine every transaction.

1. Reduce assessed risk because the new platform creates an electronic audit trail.
2. Keep the prior-year risk assessment unchanged because the accounting policy has not changed.
3. Assess higher risk of material misstatement for inventory and design responsive procedures, considering the system transition and quantity controls.
4. Treat the issue only as an audit sampling risk and increase sample size without revisiting the risk assessment.

Answer: C. Assess higher risk of material misstatement for inventory and design responsive procedures, considering the system transition and quantity controls.

A complex system transition with known errors affecting a material balance increases the risk of material misstatement and requires a tailored response. Option D is wrong because the issue affects assessed risk, not merely sample size.

1. Separate supplier creation and payment approval between authorized employees, with an independent review of new suppliers.
2. Require the clerk to print a monthly list of payments and retain it in the office.
3. Ask suppliers to confirm their balances once a year.
4. Increase the number of invoices processed by the clerk each day.

Answer: A. Separate supplier creation and payment approval between authorized employees, with an independent review of new suppliers.

Segregating incompatible duties and independently reviewing new supplier records reduce the opportunity to create and pay a fictitious supplier. Option C may provide audit evidence later but does not prevent the control risk.

1. Let the finance director select the bank contact and receive the reply before forwarding it.
2. Use a photocopy of the bank statement supplied by the client instead of contacting the bank.
3. Ask the bank to send its reply to the finance director, who can certify that it is genuine.
4. Control the confirmation request and require the bank to return its response directly to the auditor.

Answer: D. Control the confirmation request and require the bank to return its response directly to the auditor.

The auditor's control over the request and direct receipt of the response helps preserve the independence and reliability of external confirmation evidence. Option A weakens that control because the client selects the contact and handles the reply.

1. Trace recorded year-end payables to supplier statements to test whether the recorded amounts were authorized.
2. Inspect post-year-end payments and supporting invoices, then determine whether the goods or services were received before year end and accrued.
3. Recalculate depreciation on plant and equipment acquired during the year.
4. Confirm a sample of year-end receivable balances with customers.

Answer: B. Inspect post-year-end payments and supporting invoices, then determine whether the goods or services were received before year end and accrued.

Searching subsequent disbursements and checking the period in which the underlying goods or services were received targets completeness of liabilities. Option A starts with recorded payables and is less likely to identify omitted obligations.