35 Multiple Choice Questions worth 1 mark each
(all questions to be answers)
1. ABC firm are the auditors of XYZ Company. The partner responsible for the audit has recently spent a week working with XYZ as a paid consultant on their internal control systems. The ethical principle that has been breached is: a. auditor independence.
b. auditor appointment.
c. auditor rotation.
d. auditor competence.
2. The term audit expectation gap refers primarily to differences in expectations between: a. auditors and users of audited financial reports.
b. auditors and their clients.
c. CPA Australia/ICAA and the ASIC.
d. auditors and the ASIC.
3. The oversight structure of financial reporting in Australia had many levels. CALDB is part of which level? a. regulation by the profession
b. regulation by the firm.
c. self or peer regulation.
d. government regulation.
4. Investors shift financial responsibility for audited financial information to the auditor in order to lower the expected loss from litigation or related settlements. This describes which theory of auditing? a. explanatory.
c. information hypothesis.
d. insurance hypothesis.
5. Which of these actions is most likely to remove the audit expectation gap? a. improving auditing standards
b. educating of audit users about what are reasonable expectations c. improving auditor’s performance
d. it will require a comprehensive approach combining all three of the above
6. Which body has a mission ‘to develop, in the public interest, high-quality auditing and assurance standards and related guidance to enhance the relevance, reliability and timeliness of information provided to users of audit and assurance services’? a. the IAASB.
b. the AASB.
c. the AUASB.
d. the FRC
7. The audit trinity concept refers to:
a. external audit, internal audit, audit committee
b. conformance, performance, assurance
c. past, current and future approaches
d. none of the above
8. The approach that has been suggested for operational audits is: a. the risk based audit approach
b. the value-for-money audit approach
c. the process audit approach
d. all three of the above approaches have been suggested for operational audits
9. The statement that best describes internal auditing is: a. an activity located within an entity, primarily to detect fraud. b. an independent and objective assurance activity within an entity. c. an accounting function located within an entity.
d. an activity to reduce risk.
10. Accepting a gift with the possibility of the acceptance subsequently being made public is a form of what type of threat? a. self-interest.
11. Which of these is not identified as a type of threat to compliance with the fundamental principles in the IFAC Code applicable to professional accountants in public practice? a. self-interest.
d. all are identified as a threat to compliance
12. The statement about auditor independence that is true is: a. statutory law does not recognise the need for audit independence. b. statutory law recognises the need for audit independence. c. all auditor appointments must be made by the shareholders in the AGM. d. the auditor has no right to be heard at the AGM.
13. Under the provisions in the Code of Ethics the statement that is not true in relation to the technical competence of auditors is: a. members have a duty to maintain their level of competence throughout their...
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