Advanced Audit & Assurance (AAA) MCQ Practice — MDCAT

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All topics in Advanced Audit & Assurance (AAA)

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Legal and Regulatory Frameworks
Money Laundering and CDD
Code of Ethics and Threats
Quality Management Systems
Audit Planning and Materiality
Group Audit Considerations
Going Concern Assessment
Audit Report Modifications
Sustainability Assurance
Professional Scepticism
Due Diligence Engagements
Review of Interim Financial Information
Prospective Financial Information
Forensic Audits
Audit of Performance Information in Public Sector
Reporting on Other Assignments
Emerging Ethical Issues
Developments in Sustainability Assurance
Auditing Standards Developments
Technology in Auditing
Transnational Audits
Initial Audit Engagement Procedures
Audit of Accounting Estimates
Use of Internal Auditor’s Work
Component Auditor Evaluation
Joint Audit Arrangements
Audit of Foreign Subsidiaries
Audit of Business Combinations
Audit of Subsequent Events
Engagement Quality Review
Audit of Accounting Estimates Using Models
Auditing Leases under IFRS 16
Audit of Deferred Tax
Audit of Business Combinations – Goodwill Impairment
Audit of Related Party Disclosures
Audit of Financial Instruments at Fair Value
Audit of Revenue Recognition under IFRS 15
Audit of Provisions and Contingent Liabilities
Audit of Foreign Currency Transactions
Audit of Segmental Reporting
Audit of Government Grants
Audit of Borrowing Costs
Audit of Share-Based Payment Transactions
Audit of Earnings Per Share
Audit of Changes in Accounting Policy
Audit of Events After the Reporting Period
Audit of Financial Statement Notes
Audit of Payroll and Other Expenses
Audit of Biological Assets
Audit of Assets Held for Sale
Audit of Intangible Assets
Audit of Employee Benefits
Audit of Taxation (Current and Deferred)
Audit of Financial Instruments at Amortised Cost
Audit of Leases under IFRS 16 – Lessee Accounting
Audit of Inventory Valuation
Audit of Property, Plant and Equipment
Audit of Segmental Reporting
Audit of Government Grants
Audit of Borrowing Costs

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Forensic Audits

Question 1

Which of the following best describes the primary objective of a forensic audit?

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A To express an opinion on the fairness of financial statements in accordance with IFRS.

B To detect all instances of fraud during the financial statement audit.

C To investigate specific allegations of fraud and gather admissible evidence. ✓

D To assess the overall effectiveness of internal controls over financial reporting.

10:20 ✓✓

✅ Correct!
Forensic audits focus on specific fraud allegations and produce legally admissible evidence (ISA 200, ISA 240). They are not general audits or control evaluations. Detection of all fraud is not guaranteed even in forensic work.

10:20 ✓✓

Audit Planning and Materiality

Question 2

Company X is undergoing its first audit. The auditor identifies complex revenue recognition policies. How should this affect planning?

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A Use the same materiality percentage as for recurring audits to maintain consistency.

B Increase detection risk to compensate for higher inherent and control risks.

C Allocate more experienced staff and perform earlier risk assessment procedures. ✓

D Postpone planning until after interim testing is complete.

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✅ Correct!
Initial audits and complex areas require greater planning rigor and skilled resources (ISA 315). Detection risk should be lowered, not increased, when risks are high. Materiality may differ, and planning must precede testing, not follow it.

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Audit of Foreign Subsidiaries

Question 3

Company X, a UK-based parent, has a subsidiary in Argentina where hyperinflation exists. The component auditor applied local GAAP without adjusting for inflation. What should the group auditor do?

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A Accept the financial statements since local GAAP is always acceptable for foreign subsidiaries.

B Ensure the financial statements are restated under IAS 29 and translated correctly into the presentation currency. ✓

C Rely on the component auditor’s conclusion that inflation effects are immaterial.

D Recommend that the subsidiary be excluded from consolidation due to complexity.

10:20 ✓✓

✅ Correct!
IAS 29 requires financial statements of entities in hyperinflationary economies to be restated before consolidation. Local GAAP compliance does not override IFRS requirements. The group auditor must ensure restatement and proper translation. Excluding the subsidiary would violate consolidation principles under IFRS 10.

10:20 ✓✓

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🔎 Advanced Audit & Assurance (AAA)
MCQ Practice

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