QUESTION: 109

Rio owns an architects business which employs 12 skilled architects and four administrative staff. The Office Manager has just attended a workshop on internal controls and the way in which they can improve organisations. He intends to implement some internal controls as soon as possible. What are the limitations of an internal control system in Rio's business?

Internal controls are only suitable for large businesses.
Employees could ignore the internal controls.
If Rio does not support the internal control system then the controls may not be adhered to.
Internal controls may slow down the speed with which the architects can respond to enquiries.
Internal controls will usually mean hiring more staff.

Answer(s): B,C,D

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QUESTION: 110

Which of the following are objectives of the audit planning procedure?

To work out the time and resources required for the audit.
To perform substantive tests.
To work out how audit evidence will be obtained.
To perform analytical review to identify possible areas for investigation.
To set out how audit objectives will be achieved.

Answer(s): A,C,E

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QUESTION: 111

D plc is a public relations company. Shares in D plc have recently been listed on the UK stock exchange.
D plc has an internal audit department that reports to the Chief Executive Officer (CEO). The CEO is considering outsourcing internal audit to an audit firm, which would not be the firm that conducts D plc's external audit.
Identify THREE advantages to D plc of outsourcing internal audit in this way.

Doing so may improve independence.
Decisions relating to internal audit can be based solely on cost.
Internal audit will have a better understanding of D plc's objectives and culture.
Specialist skills may be more readily available.
Risk of staff turnover is passed to the outsource company.

Answer(s): A,D,E

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QUESTION: 112

DRAG DROP
A government department is conducting a value for money audit on a school. The school's pupils sit leaving exams. Classify each of the audit tests as either economy and efficiency or effectiveness.