auditing quizzes chapterwise -QUESTIONS WITH VERIFIED ANSWERS-A COMPLETE GUIDE FOR EXAM PREPARATION

Chapter 1: An overview of auditing Multiple-choice questions 1. The three major professional accounting bodies in Australia are: a. ICAA, CPA and ASIC. b. CPA Australia, IPA and AARF. c. ATO, AUASB and ASIC. d. ICAA, CPA Australia and IPA. The correct option is d. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 2. Which of these is not an objective of the ASIC? a. To maintain, facilitate and improve the performance of companies. b. To establish new institutional arrangements for standard setting. c. To receive, process and store information given to the Commission under the laws. d. All of the above are objectives of the ASIC. The correct option is b. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 3. Which of the following is true regarding auditors and fraud? a. Auditors are required to detect all fraud during an audit. b. Auditors should actively investigate the possibility of fraud if suspicious circumstances exist. c. In the Kingston Cotton Mill case it was said that the audit role was not primarily to detect fraud. d. b. and c. are true. The correct option is d. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded.4. Which of these was not an Australian corporate collapse? a. Harris Scarfe. b. HIH Insurance Ltd. c. One.Tel. d. All were Australian corporate collapses. The correct option is d. Section 1.1 Auditing fundamentals 5. 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 competence. b. auditor rotation. c. auditor independence. d. auditor appointment. The correct option is c. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 6. Which of these is not a reform introduced by CLERP 9 in relation to Auditors and annual general meetings (AGMs)? a. Shareholders can submit written questions to the auditor before the AGM relating to the auditor’s report and the conduct of the audit. b. The auditor must attend the AGM. c. The auditor must address the AGM. d. A reasonable opportunity must be allowed for members as a whole to ask questions of the auditor and for the auditor to respond. The correct option is c. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded.7. The statutory body that is responsible for hearing applications in Australia as to whether auditors and liquidators have breached the Corporations Act is: a. ASIC. b. CALDB. c. FRC. d. AUASB. The correct option is b. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 8. The auditing and accounting body with the highest number of members is: a. The Institute of Public Accountants. b. CPA Australia. c. The Institute of Chartered Accountants in Australia. d. The International Federation of Accountants. The correct option is b. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 9. In relation to auditing the information hypothesis relates: a. to ‘does the audit meet the demands of users’. b. to why there is a demand for audits. c. to what auditing is. d. to which auditing standards are produced. The correct option is b. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 10.Under ASA 200/ IAS 200 the primary objective of a financial report audit is to: a. ensure that the company is free from all fraud. b. provide assurance about the future viability of the entity.c. to express an opinion as to whether the financial report is prepared in all material aspects, in accordance with a financial reporting framework. d. ensure the company complies with all aspects of Corporations Law. The correct option is c. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 11.It is not a requirement to be registered as an auditor in Australia to: a. be a fit and proper person. b. be a member of CPA Australia, the ICAA or other approved body. c. have a degree or diploma from a course in accounting (including auditing) of not less than 3 years duration and in commercial law(including company law) of not less than 2 years duration or have other equivalent qualifications acceptable to ASIC. d. all are requirements to be registered as an audtor in Australia. The correct option is d. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 12.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. Agency. b. Explanatory. c. Insurance hypothesis. d. Information hypothesis. The correct option is c. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 13.In Australia the auditors opinion in the audit report must state: a. whether the financial report is presented fairly, in all material respects, in accordance with the applicable financial reporting framework.b. whether the financial report presents a true and fair view, in all material respects, in accordance with the applicable financial reporting framework. c. whether the financial report provides a reasonable level of assurance, in all material respects, in accordance with the applicable financial reporting framework. d. a. or b.. The correct option is d. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 14.In Australia, all of the following are required to have an annual audit, except: a. not-for-profit organisations. b. statutory authorities. c. small proprietary companies. d. all of the above are required to have an annual audit with no exceptions. The correct option is c. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 15.Which theory of auditing focuses more towards the decision usefulness role of accounting? a. Insurance hypothesis. b. Agency theory. c. Information hypothesis. d. None of the above. The correct option is c. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 16.In relation to changes to auditing regulation it is true that:a. the CLERP reforms and the Sarbanes-Oxley reforms are very similar in approach. b. the CLERP reforms in Australia are more rules-based than the SarbanesOxley reforms. c. the Sarbanes-Oxley reforms in the USA are principles-based. d. the Sarbanes-Oxley reforms are more rules-based and the CLERP reforms are more principles-based. The correct option is d. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 17.The separation of ownership and control in large organisations has resulted in: a. an agency problem. b. the insurance hypothesis. c. CLERP. d. an audit expectation gap. The correct option is a. Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is demanded. 18.Any situation where information is prepared by one party and then attested as to its accuracy by another party is known as: a. agency theory. b. an audit engagement. c. an assertion engagement. d. an assurance engagement. The correct option is d. Learning objective 1.2 ~ describe how assurance relates to auditing. 19.Auditing bears what relationship to assurance? a. Auditing is a sub-category of assurance. b. Assurance is a sub-category of auditing. c. They are different names for the same thing.d. Public accounting firms perform auditing engagements but not assurance engagements. The correct option is a. Learning objective 1.2 ~ describe how assurance relates to auditing.