Norman & Co is the external auditor of Diamond plc, a listed company. The directors of Diamond plc have requested that Norman & Co carry out a review engagement assessing the effectiveness of its corporate governance policies against the UK Corporate Governance Code.
Which of the following understanding is LEAST necessary for Norman & Co to understand Diamond plc and its environment?

• A. Diamond plc's marketing plan for next one year
• B. The nature of Diamond plc, including its operations, ownership, governance structures and the types of investments
• C. Diamond plc's selection and application of accounting policies
• D. Relevant industry, regulatory, and other external factors related with Diamond plc

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

Mike Robin, ACA is identifying risk in the statement of Mohin Co as a part of his audit work.
Which of the following defines control risk for Mohin Co?

• A. The risk that the financial statements of Mohin Co are materially misstated prior to audit.
• B. The susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls of Mohin Co.
• C. The risk that a misstatement that could occur in an assertion about a class of transaction, account balance or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by Mohin Co's internal control.
• D. The risk that the procedures performed by Mike to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements.

The management of Tory Bank Ltd suspects that a bank loan officer frequently made loans to fictitious companies, disbursed loan proceed to his wife's accounts, and then the loan has been written-off as irrecoverable. Some significant facts about the loan officer include
A high standard of living, explained as the result of sound investments and not taking vacations
An expensive personal car obtained through business contacts
Gasoline and repair bills submitted for an assigned company car that is higher than company average (mileage logs were submitted on a quarterly basis)
Marked annoyance with questions from auditors
The most appropriate trend analysis to indicate this potential fraud is

• A. Automobile operating expenses by loan officer.
• B. Loan default rates by loan officer.
• C. Total dollar volume of loans by loan officer.
• D. Accumulation of unpaid vacation days.

Indicate the most objective and relevant evidence in a computer environment involving fraud.

• A. Physical observation.
• B. Physical examination.
• C. Inquiries of people.
• D. Computer logs.