CGA-CANADA ADVANCED EXTERNAL AUDITING [AU2] EXAMINATION December 2010 Marks
30

Time: 4 Hours
Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note:
11/2 marks each

a.

Which of the following opinions is an auditor most likely to issue when he or she found a material misstatement in a client’s opening balances during an initial audit engagement, but has determined that the balance sheet accounts at the end of the fiscal year are not materially misstated? 1) 2) 3) 4) An unqualified opinion modified by an explanatory paragraph A qualified (GAAP) opinion A qualified (scope) opinion An adverse opinion

b. Which of the following situations is most likely to represent an attitude risk factor, in the context of the fraud triangle model of material financial reporting fraud? 1) 2) 3) 4) c. Significant managerial judgment needed to determine an estimated account balance Major unusual transactions recorded by management Aggressive managers who unduly emphasize meeting quantitative earnings targets Inadequate profitability

Which of the following elements is not an example of an organization and management control in an information technology (IT) environment? 1) 2) 3) 4) Separation of systems analysis from computer operations Separation of physical access to assets from access to related accounting records Separation of initiation of a transaction from authorization of the transaction Separation of storage of systems documentation from the area housing computer hardware

d. Which of the