ICAN Audit & Assurance
Past Questions
77+ verified Audit & Assurance practice questions for ICAN. Step-by-step worked answers in 5 Nigerian languages.
Audit & Assurance topics (14)
ICAN Audit & Assurance practice sets by year
Sample Audit & Assurance practice questions
1. An auditor primarily provides:
- A. Tax advice
- B. Independent opinion on financial statements
- C. Accounting services
- D. Marketing advice
Answer: B
AI Explanation
**The reasoning** An auditor's **primary role** is to act as an independent watchdog. Think of them as a referee in a football match — they don't play for either team, they just ensure the game is fair. When a company prepares financial statements (balance sheets, income statements, etc.), stakeholders (investors, banks, JAMB candidates studying Commerce 😊) need to trust those numbers. The auditor examines these statements and gives an **independent opinion** on whether they show a "true and fair view" of the company's financial position. This is called an *audit report*. The key principle here: **Independence**. The auditor must be objective, not involved in running the business. **Why the wrong options tempt you** - **A (Tax advice)** — Some auditors offer this as an *additional service*, but it's not their primary function. - **C (Accounting services)** — Accountants *prepare* the books; auditors *review* them. Different jobs! - **D (Marketing advice)** — Completely unrelated to auditing. **Quick takeaway** An auditor doesn't do the cooking (accounting) or serve the food (marketing) — they **taste-test to confirm the meal is safe** (independent verification of financial statements).
2. An auditor who owns shares in the client lacks:
- A. Skill
- B. Independence
- C. Time
- D. Software
Answer: B
3. The audit opinion that signals serious problems is:
- A. Unqualified
- B. Adverse
- C. Clean
- D. Standard
Answer: B
4. Audit evidence should be sufficient and:
- A. Cheap
- B. Appropriate
- C. Old
- D. Secret
Answer: B
5. Internal control weaknesses increase audit:
- A. Speed
- B. Risk
- C. Profit
- D. Salary
Answer: B
6. An unqualified audit opinion means the accounts are:
- A. Wrong
- B. True and fair
- C. Incomplete
- D. Fraudulent
Answer: B
7. External audit's primary objective is to:
- A. detect all fraud
- B. express an opinion on whether financial statements give a true and fair view
- C. prepare accounts
- D. set internal controls
Answer: B
AI Explanation
ISA 200 — reasonable assurance and an opinion on free from material misstatement.
8. An unqualified audit opinion means:
- A. accounts are wrong
- B. FS give true and fair view in all material respects
- C. audit not completed
- D. auditor disagrees
Answer: B
AI Explanation
Unqualified (clean) opinion is the best outcome.
9. Materiality is judged by:
- A. auditor fees
- B. amounts/issues that could affect users' economic decisions
- C. company size only
- D. auditor preference
Answer: B
AI Explanation
Materiality has quantitative (size) and qualitative (nature) dimensions affecting user decisions.
10. Audit risk model:
- A. AR = IR + CR + DR
- B. AR = IR × CR × DR
- C. AR = IR/DR
- D. AR = IR × CR
Answer: B
AI Explanation
Audit risk = inherent × control × detection risk. Auditor manages DR via amount/timing of work.
11. Test of controls assesses:
- A. account balances
- B. operating effectiveness of internal controls
- C. going concern only
- D. fraud only
Answer: B
AI Explanation
Tests of controls support reliance on the entity's controls when they operate effectively.
12. External confirmation is an example of:
- A. test of controls only
- B. substantive procedure
- C. inquiry only
- D. analytical procedure
Answer: B
AI Explanation
Confirmations (e.g. of receivables) are substantive procedures providing direct external evidence.
13. An 'engagement letter' is signed:
- A. after the audit
- B. before commencement to formalise terms
- C. by clients only
- D. at the AGM
Answer: B
AI Explanation
ISA 210: engagement letter establishes scope, responsibilities, fees and timing BEFORE fieldwork.
14. Independence threats include:
- A. nothing
- B. self-interest, familiarity, advocacy, intimidation, self-review
- C. auditing
- D. professional ethics
Answer: B
AI Explanation
IESBA identifies these five threats — addressed by safeguards (rotation, recusal, partner review).
15. Going concern under ISA 570 requires:
- A. ignoring concerns
- B. evaluating management's assessment for at least 12 months
- C. lifelong analysis
- D. no review
Answer: B
AI Explanation
Auditor evaluates management's assessment of going concern over at least 12 months from the balance-sheet date.
16. ISA 700 covers:
- A. forming the opinion and reporting
- B. engagement letters
- C. fraud
- D. going concern
Answer: A
AI Explanation
ISA 700 — Forming an opinion and reporting on financial statements.
17. A 'qualified' opinion is issued when:
- A. all material respects fair
- B. misstatements are material but not pervasive
- C. FS are completely unreliable
- D. no evidence available
Answer: B
AI Explanation
ISA 705: qualified opinion ('except for...') for material but not pervasive issues.
18. An 'adverse' opinion is issued when:
- A. all fair
- B. misstatements are both material AND pervasive
- C. no material issues
- D. fees unpaid
Answer: B
AI Explanation
Adverse opinion: FS as a whole are misleading. Material AND pervasive misstatement.
19. A 'disclaimer of opinion' is issued when:
- A. FS are perfect
- B. auditor cannot obtain sufficient evidence and the possible effects are pervasive
- C. auditor has all evidence
- D. company is profitable
Answer: B
AI Explanation
Disclaimer: insufficient evidence AND possible effects pervasive — auditor declines to express an opinion.
20. Sampling under ISA 530 applies procedures to:
- A. 100% of items
- B. less than 100% so all items have a chance of selection
- C. no items
- D. subjective choice only
Answer: B
AI Explanation
Audit sampling allows conclusions from less than 100% while every item has a chance of selection.
21. Internal control component 'Control Environment' is part of:
- A. COSO framework
- B. GAAP
- C. CAMA
- D. Tax law
Answer: A
AI Explanation
COSO 2013 framework — 5 components: Control Environment, Risk Assessment, Control Activities, Information & Communication, Monitoring.
22. A walkthrough test is performed to:
- A. confirm receivables
- B. trace transactions through the system to verify understanding of controls
- C. audit inventory
- D. test sampling
Answer: B
AI Explanation
Walkthrough verifies that the documented controls match how transactions actually flow through the system.
23. Key Audit Matters (KAMs) per ISA 701 are reported in audit reports of:
- A. all entities
- B. listed (public-interest) entities
- C. private companies only
- D. non-profits only
Answer: B
AI Explanation
ISA 701 requires KAMs in listed-entity audit reports — significant matters in the auditor's professional judgement.
24. Reasonable assurance is best described as:
- A. Absolute assurance
- B. A high but not absolute level of assurance
- C. A moderate level of assurance
- D. A negative form of assurance
Answer: B
AI Explanation
Reasonable assurance is a high level of assurance, but not absolute, because of inherent limitations such as the use of sampling, the possibility of collusion, and the judgemental nature of many accounting estimates.
ICAN 2023
25. The objective of an audit of financial statements is to enable the auditor to express an opinion on whether the financial statements are:
- A. Free from all errors
- B. Prepared, in all material respects, in accordance with the applicable financial reporting framework
- C. A guarantee of the company's future viability
- D. Certified as accurate by the directors
Answer: B
AI Explanation
ISA 200 defines the objective as obtaining reasonable assurance about whether the financial statements as a whole are free from material misstatement, enabling an opinion on whether they are prepared in accordance with the applicable framework. An audit is not a guarantee of accuracy or of future viability.
ICAN 2023
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