An employee of an insurance company processed a fraudulent policy loan application for an amount less than the established level requiring supervisory review. The employee then obtained the cheque and cashed it by forging the endorsement. To prevent the loan's appearance on a subsequent policyholder statement, the loan amount was transferred to a "suspense" account. Which of the following should expose this situation at the earliest date?

• A. The use of pre-numbered checks which are periodically accounted for.
• B. A computer report identifying unusual entries to the suspense account.
• C. Regular reconciliation of the "suspense" account performed by an independent employee.
• D. An annual internal audit.

Assurance providers obtain evidence using procedures set out in ISA 500.
Identify which type of audit procedures is / are correctly paired with each tests carried out by an auditor.
TestsAudit procedures (i)The assurance provider writes to a sample of customers asking them to inform him of the balance they owe theInspection company at the year end (ii)The assurance provider looks at a share certificate to confirm that the company has an investment in Company AObservation (iii)The assurance provider attends the inventory count and ensures that it is being carried out in accordance withConfirmation the issued instructions

• A. All are incorrect
• B. (i) and (ii) only
• C. All are correct
• D. (ii) and (iii) only

When performing risk assessment procedures and related activities to obtain an understanding of the entity and its environment, including the entity's internal control, required by ISA 315, the auditor shall perform certain procedures to obtain information for use in identifying the risks of material misstatement due to fraud.
Which of the following is not a part of an entity's risk assessment process?

• A. Identify relevant business risks
• B. Report the process to the auditors
• C. Decide upon actions to manage the risks
• D. Assess the likelihood of occurrence

A subsidiary president terminated a controller and hired a replacement without the required corporate approvals. Sales, cash flow, and profit statistics were then manipulated by the newcontroller and president via accelerated depreciation and sale of capital assets to obtain larger performance bonuses for the controller and the subsidiary president.
Which of the following approaches might detect this fraudulent activity?

• A. Regular analytical review of operating divisions.
• B. Periodic changes of outside public accountants.
• C. Exit interview for all terminated employees.
• D. Analysis of overall management control for segregation of duties.

Audit documentation provides evidence that the audit complies with the ISAs. However, it is neither necessary nor practicable for the auditor to document every matter considered, or professional judgment made, in an audit. Further, it is unnecessary for the auditor to document separately (as in a checklist, for example) compliance with matters for which compliance isdemonstrated by documents included within the audit file. For example the existence of an adequately documented audit plan demonstrates that the auditor has planned the audit.
Which one of the following is not an objective of audit planning?

• A. To determine the scope of the engagement
• B. To ensure appropriate attention is devoted to the important areas of the audit
• C. To identify potential problems and resolve them on a timely basis
• D. To assign work to members of the audit team