Auditing and Assurance

A client’s manager approaches the audit team and threatens to dismiss the auditing firm if the audit team does not accept the accounting treatment currently being in use by the client. This represents:

Select one:

a. A familiarity threat

b. An advocacy threat

c. An intimidation threat *

d. A self-review threat 

Independent auditors are referred to as ‘independent’ because:

Select one:

a. they are not employees of the entity being audited *

b. they are paid by parties outside of the audited entity

c. their offices are not at the entity’s place of business

d. they report to users outside of the audited entity

Having each partner and employee complete annually a questionnaire concerning ownership of shares and membership on boards of directors is a procedure relevant to the quality control objective of:

Select one:

a. assignment of engagement teams

b. client acceptance and continuance

c. ethical requirements *

d. engagement performance

Independence in fact is where:

Select one:

a. the auditor maintains an unbiased attitude during the audit *

b. the audit firm has an effective quality control system in place in the conduct of an audit

c. the audit firm does not provide any non-assurance services to the audit client

d. the general public considers that the auditor has acted objectively

The organisation that has the right to launch an investigation into auditing companies and individual audits is:

Select one:

a. Companies Auditors and Liquidators Disciplinary Board (CALDB)

b. Australian Securities and Investments Commission (ASIC). *

c. Australian Auditing and Assurance Standards Board (AUASB)

d. Financial Reporting Council (FRC)

An auditor’s duty of due care to a client is most likely breached when the auditor:

Select one:

a. fails to detect all of a client’s fraudulent activities

b. gives a client an oral report instead of a written report

c. fails to follow generally accepted auditing standards *

d. gives a client incorrect advice based on an honest error of judgment

Audit expectation gap occurs when:

Select one:

a. auditors perform their duties appropriately and satisfy users’ demands

b. the public is well educated about auditing

c. user beliefs do not align with what an auditor has actually done *

d. peer reviews of audits ensure that auditing standards have been applied correctly and the standards are at the level that satisfy users’ demand

The Code of Ethics for Professional Accountant (APES) 110 is:

Select one:

a. legally applicable to the audited company

b. not carrying the “force of law”.

c. legally applicable to both members in practice and members in business of professional bodies *

d. legally applicable to the partner of the auditing company only

Which of the following is NOT an ethical attribute of an external auditor?

Select one:

a. Client advocacy. *

b. Concern for the public interest

c. Objectivity.

d. Independence

The Australian Auditing and Assurance Standards Board (AUASB) is responsible for:

Select one:

a. The monitoring of auditor independence

b. The auditor’s compliance with Australian Auditing Standards

c. The issuance of Australian Auditing Standards (ASAs). *

d. The issuance of Australian Accounting Standards (AASB standards).

Which one of the following is NOT one of the five fundamental principles of professional conduct set out in the Code of Ethics for Professional Accountants?

Select one:

a. Continuing education *

b. Integrity

c. Objectivity

d. Confidentiality

In the audit of financial statements, the auditor examines and reports on the adherence of the client’s financial statements to

Select one:

a. legislative requirements

b. applicable auditing standards

c. applicable accounting standards *

d. the client’s rules and regulations

The objective of a compliance audit is to determine whether:

Select one:

a. the company has followed specific rules and regulations that govern the activities of the entity *

b. organisation is operating efficiently and effectively

c. the client’s financial reports are fairly stated in accordance with AASB standards

d. All of the above

Part B of the Code of Ethics identifies threats to independence from the following sources:

Select one:

a. familiarity and intimidation

b. self-interest, self-review and advocacy

c. both A and B *

d. the work environment

An audit establishes the conformity of assertions with specified criteria. In an audit of a financial report, the criteria by which financial report assertions are judged are:

Select one:

a. applicable accounting standards *

b. listing rules of the Australian Securities and Investments Commission

c. Australian Auditing Standards

d. the ethical rules of conduct