Question 1

List and describe the six- step process for resolving ethical dilemmas.

Accepted Answer

1. Obtain the relevant facts
2. Identify

Question 2

Which one of the following situations is most likely to impair independence?

Accepted Answer

A)  Legal action taken by a third party against both the auditee and the audit firm 
B)  Legal action taken by the auditee against the audit firm in relation to taxation services provided 
C)  Legal action taken by the auditee against the audit firm in relation to management consulting advice 
D)  Legal action taken by the auditee against the audit firm claiming deficiencies in the prior year's audit 
A)  Legal action taken by a third party against both the auditee and the audit firm 
B)  Legal action taken by the auditee against the audit firm in relation to taxation services provided 
C)  Legal action taken by the auditee against the audit firm in relation to management consulting advice 
D)  Legal action taken by the auditee against the audit firm claiming deficiencies in the prior year's audit

Question 3

If the outgoing auditor refuses to communicate with the successor auditor:

Accepted Answer

A)  this is a breach of the ethical rules. 
B)  ASIC should be informed so that action can be instigated against the outgoing auditor. 
C)  the client should withhold payment of the audit fee. 
D)  all of the above 
A)  this is a breach of the ethical rules. 
B)  ASIC should be informed so that action can be instigated against the outgoing auditor. 
C)  the client should withhold payment of the audit fee. 
D)  all of the above

Question 4

The annual audit is the cornerstone of corporate governance.

Accepted Answer

A) True 
 B)False

Question 5

Section 324CH lists 19 relationships that establish a conflict of interest. Which relationship that the auditor may have with the client is NOT included?

Accepted Answer

A)  Owes an amount of more than $5000 to the audited body 
B)  Has an asset that is an immaterial investment in an entity that has a controlling interest in the audited body 
C)  Has an asset that is a material investment in an entity that has a controlling interest in the audited body 
D)  Has an asset that is an investment in the audited body 
A)  Owes an amount of more than $5000 to the audited body 
B)  Has an asset that is an immaterial investment in an entity that has a controlling interest in the audited body 
C)  Has an asset that is a material investment in an entity that has a controlling interest in the audited body 
D)  Has an asset that is an investment in the audited body

Question 6

The professional bodies' ethical rules have the force of law applicable to auditing standards.

Accepted Answer

A) True 
 B)False

Question 7

Audit quality means:

Accepted Answer

A)  how competent the auditor is. 
B)  how well an audit detects and reports material misstatements and fraud in financial statements. 
C)  how well an audit detects and reports material misstatements in financial statements. 
D)  how independent the auditor is. 
A)  how competent the auditor is. 
B)  how well an audit detects and reports material misstatements and fraud in financial statements. 
C)  how well an audit detects and reports material misstatements in financial statements. 
D)  how independent the auditor is.

Question 8

The auditor's relationship with financial statement users is different from the relationship that most professionals have with the users of their services because:

Accepted Answer

A)  higher standards of professionalism apply. 
B)  the users directly remunerate the auditor. 
C)  the primary beneficiaries of the audit do not engage the auditor. 
D)  of the confidentiality aspects involved. 
A)  higher standards of professionalism apply. 
B)  the users directly remunerate the auditor. 
C)  the primary beneficiaries of the audit do not engage the auditor. 
D)  of the confidentiality aspects involved.

Question 9

Which one of the following is incorrect with respect to working papers?

Accepted Answer

A)  Ordinarily they can only be provided to a third party with the express permission of the auditee. 
B)  They are the property of the client and can be accessed by the client at the conclusion of the audit. 
C)  They can be viewed by another member of the professional bodies during a peer review. 
D)  Information contained in them is legally not viewed as privileged information. 
A)  Ordinarily they can only be provided to a third party with the express permission of the auditee. 
B)  They are the property of the client and can be accessed by the client at the conclusion of the audit. 
C)  They can be viewed by another member of the professional bodies during a peer review. 
D)  Information contained in them is legally not viewed as privileged information.

Question 10

The underlying reason for a high level of professional conduct by any profession is the need:

Accepted Answer

A)  to create barriers to entry. 
B)  to create an appropriate level of professional esteem. 
C)  for public confidence in the quality of service provided. 
D)  to justify self- regulation. 
A)  to create barriers to entry. 
B)  to create an appropriate level of professional esteem. 
C)  for public confidence in the quality of service provided. 
D)  to justify self- regulation.

Question 11

Which one of the following statements is correct? ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information requires audit firms to adopt policies which address:

Accepted Answer

A)  ethical requirements. 
B)  assignment of engagement teams. 
C)  engagement performance. 
D)  all of the above 
A)  ethical requirements. 
B)  assignment of engagement teams. 
C)  engagement performance. 
D)  all of the above

Question 12

The material financial interests rule means that:

Accepted Answer

A)  an auditor cannot be assigned to the audit of a bank with which that auditor has a home mortgage. 
B)  an auditor should be involved in the executive function of a client to maximise the benefits achieved from the engagement. 
C)  a public accounting firm cannot accept an audit client if anyone in the practice has a material shareholding in the potential client. 
D)  an auditor cannot accept payment from the auditee. 
A)  an auditor cannot be assigned to the audit of a bank with which that auditor has a home mortgage. 
B)  an auditor should be involved in the executive function of a client to maximise the benefits achieved from the engagement. 
C)  a public accounting firm cannot accept an audit client if anyone in the practice has a material shareholding in the potential client. 
D)  an auditor cannot accept payment from the auditee.

Question 13

An advantage of general statements (principles of professional conduct) in the Code of Ethics for Professional Accountants is the emphasis on positive activities that encourage a high level of performance.

Accepted Answer

A) True 
 B)False

Question 14

Part B of the Code of Professional Ethics identifies specific guidance on professional conduct in the following area(s):

Accepted Answer

A)  fees and other types of remuneration. 
B)  gifts and hospitality. 
C)  professional appointments. 
D)  all of the above 
A)  fees and other types of remuneration. 
B)  gifts and hospitality. 
C)  professional appointments. 
D)  all of the above

Question 15

The Code of Ethics for Professional Accountants (APES 110) is issued by:

Accepted Answer

A)  AARF. 
B)  ASIC and the ICAA. 
C)  APESB. 
D)  ASIC. 
A)  AARF. 
B)  ASIC and the ICAA. 
C)  APESB. 
D)  ASIC.

Question 16

The Code adopts a conceptual framework approach because it is impossible to anticipate every situation that might create an ethical problem for a professional accountant.

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following is incorrect in relation to setting fees?

Accepted Answer

A)  Fees based on the achievement of certain outcomes are prohibited. 
B)  The basis for agreed fees should be documented. 
C)  The time of all people engaged in the work should be taken into account. 
D)  Fixed fees are less likely to result in compromised independence. 
A)  Fees based on the achievement of certain outcomes are prohibited. 
B)  The basis for agreed fees should be documented. 
C)  The time of all people engaged in the work should be taken into account. 
D)  Fixed fees are less likely to result in compromised independence.

Question 18

Auditors may disclose confidential information to a third party if:

Accepted Answer

A)  they have specific authority to do so. 
B)  there is a professional duty to do so. 
C)  there is a legal duty to do so. 
D)  all of the above 
A)  they have specific authority to do so. 
B)  there is a professional duty to do so. 
C)  there is a legal duty to do so. 
D)  all of the above

Question 19

What is auditor independence and why is it so important?

Accepted Answer

Independence in auditing means taking an

Question 20

Explain the difference between independence in appearance and independence in fact and explain why each is important to the value of the auditing function.

Accepted Answer

Independence in appearance is achieved w

List and describe the six- step process for resolving ethical dilemmas.

Which one of the following situations is most likely to impair independence?

If the outgoing auditor refuses to communicate with the successor auditor:

The annual audit is the cornerstone of corporate governance.

Section 324CH lists 19 relationships that establish a conflict of interest. Which relationship that the auditor may have with the client is NOT included?

The professional bodies' ethical rules have the force of law applicable to auditing standards.

Audit quality means:

The auditor's relationship with financial statement users is different from the relationship that most professionals have with the users of their services because:

Which one of the following is incorrect with respect to working papers?

The underlying reason for a high level of professional conduct by any profession is the need:

Which one of the following statements is correct? ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information requires audit firms to adopt policies which address:

The material financial interests rule means that:

An advantage of general statements (principles of professional conduct) in the Code of Ethics for Professional Accountants is the emphasis on positive activities that encourage a high level of performance.

Part B of the Code of Professional Ethics identifies specific guidance on professional conduct in the following area(s):

The Code of Ethics for Professional Accountants (APES 110) is issued by:

The Code adopts a conceptual framework approach because it is impossible to anticipate every situation that might create an ethical problem for a professional accountant.

Which one of the following is incorrect in relation to setting fees?

Auditors may disclose confidential information to a third party if:

What is auditor independence and why is it so important?

Explain the difference between independence in appearance and independence in fact and explain why each is important to the value of the auditing function.

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Documentation

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Audit of Transaction Cycles and Financial Statement Balances II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters

Exam 3: Audit Quality and Ethics

List and describe the six- step process for resolving ethical dilemmas.

Which one of the following situations is most likely to impair independence?

If the outgoing auditor refuses to communicate with the successor auditor:

The annual audit is the cornerstone of corporate governance.

Section 324CH lists 19 relationships that establish a conflict of interest. Which relationship that the auditor may have with the client is NOT included?

The professional bodies' ethical rules have the force of law applicable to auditing standards.

Audit quality means:

The auditor's relationship with financial statement users is different from the relationship that most professionals have with the users of their services because:

Which one of the following is incorrect with respect to working papers?

The underlying reason for a high level of professional conduct by any profession is the need:

Which one of the following statements is correct? ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information requires audit firms to adopt policies which address:

The material financial interests rule means that:

An advantage of general statements (principles of professional conduct) in the Code of Ethics for Professional Accountants is the emphasis on positive activities that encourage a high level of performance.

Part B of the Code of Professional Ethics identifies specific guidance on professional conduct in the following area(s):

The Code of Ethics for Professional Accountants (APES 110) is issued by:

The Code adopts a conceptual framework approach because it is impossible to anticipate every situation that might create an ethical problem for a professional accountant.

Which one of the following is incorrect in relation to setting fees?

Auditors may disclose confidential information to a third party if:

What is auditor independence and why is it so important?

Explain the difference between independence in appearance and independence in fact and explain why each is important to the value of the auditing function.

Demand for Audit and Assurance Services

Auditors Legal Environment

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Documentation

Materiality and Risk

Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Completing Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling

Audit of Transaction Cycles and Financial Statement Balances I

Audit of Transaction Cycles and Financial Statement Balances II

Completing the Audit

Audit Reporting

Other Auditing and Assurance Engagements

Filters