Multiple choice question PDF

Preview

Summary

Download Multiple choice question PDF

Description

Multiple choice question 3.1 Which of the following characteristics does not distinguish a profession from other occupations? (a) Ability to command high fees in return for services (b) Mastery of particular intellectual skills through education and training (c) A common code of conduct to be practised and monitored by an association (d) Acceptance of a duty to society as a whole 3.4 Threats to auditor independence can come from various sources. Which of these is referred to in the Code of Ethics as a self-review threat? (a) The possibility of potential employment with the audit client (b) Preparation of original data used to generate a financial statement that is the subject matter of the audit engagement (c) Concern on the part of the auditor about the possibility of losing the engagement (d) Pressure to reduce inappropriately the extent of work performed in order to reduce fees 3.5 Self-interest or self-review threats may result from the following, except: (a) executing authority on behalf of the client on transactions. (b) preparing source documents for the client to evidence the occurrence of transactions. (c) reporting to the CEO on a system which you helped implement. (d) writing a letter to the management to inform them of the discrepancies in the system. 3.6 Using the same senior personnel on an assurance engagement over a long period of time may create what type of threat to audit independence? (a) Self-interest (b) Advocacy (c) Familiarity (d) Intimidation 3.7 Conner is a staff auditor of Norfolk Associates, a medium-sized partnership accounting firm. Conner was found to have been negligent in the performance of his audits of several clients. Under these circumstances, which of the following statements is true? (a) Norfolk is not liable for Conner’s work as Conner is an employee only. (b) Norfolk is not liable as long as Conner does not continue auditing the same clients. (c) Conner is personally liable for any loss suffered as a consequence of the negligence. (d) None of the above. 3.8 What is the term used when a failure on the part of a plaintiff to meet certain required standards of care is a factor leading to a loss by the plaintiff? (a) Negligence (b) Reasonable foreseeability (c) Contributory negligence (d) Damages 3.9 The term ‘privity of contract’ refers to: (a) the contractual relationship that exists between two or more contracting parties. (b) the fact that an audit is to be performed in accordance with professional standards. (c) the fact that an auditor appointed to conduct a statutory audit cannot reduce their liability by contract (s. 241). (d) the mandatory requirement that there must be an engagement letter setting out the terms of the audit contract.

3.10 Which of the following may not be effective in avoiding litigation? (a) Use detailed engagement letters for all professional services with clients (b) Regularly discuss the risks of the business with the client to be aware of the circumstances leading to major decisions made by the client (c) Helping the client in the preparation of the required audit evidence so that the audit appears flawless (d) Ensuring that the audit working papers are complete and are in accordance with auditing standards 2.1 Professional competence and due care means that members of professional bodies must: LO1 (a) act diligently. (b) maintain their knowledge and skill at the required level. (c) keep up to date with changes in regulations and standards. (d) all of the above. 2.2 Professional behaviour means that members of professional bodies must: LO1 (a) claim to possess all qualifications. (b) comply with rules and regulations. (c) provide all services clients request. (d) question the reputation of accountants who are not members of professional bodies. 2.3 Professional independence for auditors: LO2 (a) is only relevant to audits for new clients, not continuing clients. (b) is the ability to act with integrity, objectivity and professional scepticism. (c) detracts from the ability of users to rely on the financial report to make their decisions. (d) is important when the auditor acts independently, and it does not matter what people believe about the auditor’s independence. 2.4 A self-interest threat arises when: LO2 (a) the client threatens to use a different auditor next year. (b) the auditor encourages others to buy shares in the client. (c) an assurance team member has recently been a director of the client. (d) the auditor owns shares in a business that is a major supplier to the client. 2.5 A self-review threat arises when: LO2 (a) the auditor has a loan from the client. (b) the auditor represents the client in negotiations with a third party. (c) there is a long association between the assurance firm and its client. (d) the auditor performs services for the client that are then subject of the assurance engagement. 2.6 Safeguards to independence: LO2 (a) deal with a threat when one becomes apparent. (b) minimise the risk that a threat to independence will surface. (c) are developed by the accounting profession, legislators, regulators, clients and accounting firms. (d) all of the above. 2.7 Safeguards to independence: LO2 (a) include audit committees. (b) are not the responsibility of the client. (c) are too difficult to implement by audit firms; they must be contained in legislation.

(d) apply only to business relationships between auditors and clients, not social relationships. 2.8 Audit committees for companies in the top 300 on the ASX: LO3 (a) can be any size. (b) should have a formal charter. (c) must have the same chair as the board of directors. (d) must include the chief financial officer (CFO) if the CFO is on the board of directors. 2.9 Generally, the auditor could be legally liable under: LO4 (a) contract law to third parties and to the client. (b) the tort of negligence but not contract law to the client. (c) contract law and under the tort of negligence to the client. (d) contract law but not under the tort of negligence to third parties. 2.10 If a prospective new audit client does not allow the auditor to contact its existing auditor: LO5 (a) the auditor should refuse to take on the prospective new client. (b) the auditor should respect the prospective client’s right to privacy. (c) the auditor should contact the existing auditor anyway because it is their duty. (d) the existing auditor should contact the new auditor to tell them all about the client....