When questions arise on the appropriateness of the going concern assumption made by management and the existence of material misstatements which was not adequately disclosed in the financial statements would lead to auditor's-

• A. Qualified opinion
• B. Unmodified opinion (but have to include an emphasis of matter paragraph in the auditor's report)
• C. Unmodified opinion
• D. Disclaimer of opinion

Internal auditors and management have become increasingly concerned about computer fraud. Which of the following control procedures would be least important in preventing computer fraud?

• A. Segregation of duties between the applications programmer and the programme librarian function.
• B. Segregation of duties between the programmer and systems analyst.
• C. Programme change control that requires a distinction between production programmes and test programmes.
• D. Testing of new applications by users during the systems development process.

The internal auditing department has been assigned to perform an audit of a division. Based on background review, the auditor knows the following about management policies:
Company policy is to rapidly promote divisional managers who show significant success. Thus, successful managers rarely stay at a division for more than three years.
A significant portion of division management's compensation comes in the form of bonuses based on the division's profitability.
The division was identified by senior management as a turnaround opportunity. The division is growing, but is not scheduled for a full audit by the external auditors this year. The division has been growing about 7% per year for the past three years and uses a standard cost system.
During the preliminary review, the auditor notes the following changes in financial data compared to the prior year:
Sales have increased by 10%.
Cost of goods sold has increased by 2%.
Inventory has increased by 15%.
Divisional net income has increased by 8%.
If the auditor decides that there are significant problems with the standard cost system, the next audit step to perform would be to

• A. Use generalised audit software to prepare a listing of gross margin by product by comparing standard cost with sales price. Select all high-gross-margin items for further investigation.
• B. Schedule all variances and determine their source and their disposition, that is, whether they are allocated to inventory or cost of goods sold.
• C. Select a random sample of products and review the standard cost build-up by tracing purchases to the standard cost record.
• D. Interview divisional management to determine why the standard cost system has not been updated on a timely basis.

A personnel department is responsible for processing placement agency fees for new hires. A recruiter established some bogus placement agencies and, when interviewing walk-in applicants, the recruiter would list one of the bogus agencies as referring the candidate.
A possible means of detection or deterrence is to

• A. Verify new vendors to firms listed in a professional association catalog and/or verify the vendor name and address through the telephone book.
• B. Require all employees to sign an annual conflict of interest statement.
• C. Monitor the closeness of the relationships of recruiters with specific vendors.
• D. Process all personnel agency invoices via a purchase order through the purchasing department.

Frederich Gastona has been invited by ECA Co to perform the audit of financial statements of 2012-13. When deciding whether to accept an auditing engagement, Frederich must judge his independence and objectivity. If Frederich's audit firm lacks independence or objectivity, Frederich can't accept the engagement.
What does "Independence" mean in the context of the above case?

• A. Being an advocate for ECA Co in the law suit.
• B. Not being financially dependent on client ECA Co.
• C. Taking an unbiased viewpoint while conducting audit of ECA Co.
• D. Remaining aloof from client ECA Co.