Question 1

Can a public accounting firm accept an audit client if a principal within the firm has a direct shareholding in the prospective client?

Accepted Answer

The Corporations Act (s.324CH)and the Code of Ethics for Professional Accountants Subsections 290.104 to 290.134 address this issue.No practice may accept or maintain a company as an audit client if any person (or his or her near relative)in the practice has a material shareholding in that company.

Question 2

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

Accepted Answer

A)  familiarity and intimidation. 
B)  self-interest, self-review, and advocacy. 
C)  both A and B 
D)  the work environment. 
A)  familiarity and intimidation. 
B)  self-interest, self-review, and advocacy. 
C)  both A and B 
D)  the work environment. C

Question 3

Which of the following is NOT a reason often given for acting unethically?

Accepted Answer

A)  All legal behaviour is ethical. 
B)  It is a course of action undertaken by everyone else. 
C)  There is a reduced likelihood of being discovered. 
D)  It was not known that the action was unethical. 
A)  All legal behaviour is ethical. 
B)  It is a course of action undertaken by everyone else. 
C)  There is a reduced likelihood of being discovered. 
D)  It was not known that the action was unethical. D

Question 4

Where the fees from an audit client are more than 15% of total fees, the public accounting firm should ensure:

Accepted Answer

A)  that the audit work is reviewed by an accountant, not a member of the audit team. 
B)  adequate quality control procedures are in place and that the audit work is reviewed by an accountant, not a member of the audit team. 
C)  that all members of the audit team are independent, both in fact and in appearance. 
D)  that adequate quality control procedures are in place. 
A)  that the audit work is reviewed by an accountant, not a member of the audit team. 
B)  adequate quality control procedures are in place and that the audit work is reviewed by an accountant, not a member of the audit team. 
C)  that all members of the audit team are independent, both in fact and in appearance. 
D)  that adequate quality control procedures are in place.

Question 5

Which one of the following would represent an ethical dilemma for an auditor?

Accepted Answer

A)  being asked to undertake a non-assurance service for an audit client 
B)  being asked to complete the audit for a non-profit organisation for no fee 
C)  being treated with cancellation of the audit by a client for not agreeing with management's treatment of an accounting issue 
D)  being approached to tender for the audit of a newly formed company 
A)  being asked to undertake a non-assurance service for an audit client 
B)  being asked to complete the audit for a non-profit organisation for no fee 
C)  being treated with cancellation of the audit by a client for not agreeing with management's treatment of an accounting issue 
D)  being approached to tender for the audit of a newly formed company

Question 6

The annual audit is the cornerstone of corporate governance.

Accepted Answer

A) True 
 B)False

Question 7

Part B of the Code of Ethics for Professional Accountants 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 8

Auditors may disclose confidential information to a third party if:

Accepted Answer

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

Question 9

In the Code of Ethics for Professional Accountants, the first principle of professional conduct, entitled Integrity, applies only to members in public practice and not to members who work as accountants in business, government, or education.

Accepted Answer

A) True 
 B)False

Question 10

Which is NOT a valid circumstance where working papers may be given to a third party?

Accepted Answer

A)  when requested by a successor auditor 
B)  when permission is granted by the client 
C)  when required by law 
D)  both A and B 
A)  when requested by a successor auditor 
B)  when permission is granted by the client 
C)  when required by law 
D)  both A and B

Question 11

Auditors should NOT use confidential auditee information for personal gain:

Accepted Answer

A)  unless requested to do so by the client. 
B)  without the permission of the client. 
C)  without the permission of the client and the audit engagement partner. 
D)  under any circumstances. 
A)  unless requested to do so by the client. 
B)  without the permission of the client. 
C)  without the permission of the client and the audit engagement partner. 
D)  under any circumstances.

Question 12

In the Code of Ethics for Professional Accountants, the advantage of general statements of ideal conduct, as opposed to specific rules of behaviour, is the:

Accepted Answer

A)  emphasis on positive activities. 
B)  tendency to define the rules as maximum rather than minimum standards. 
C)  ability to enforce the ideals. 
D)  enforceability of minimum behaviour and performance standards. 
A)  emphasis on positive activities. 
B)  tendency to define the rules as maximum rather than minimum standards. 
C)  ability to enforce the ideals. 
D)  enforceability of minimum behaviour and performance standards.

Question 13

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

Question 14

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

Question 15

Explain why there is a special need for ethical conduct in the auditing profession.

Accepted Answer

Since users (e.g.the general public)of s

Question 16

The Code of Ethics for Professional Accountants adopts a conceptual framework that involves:

Accepted Answer

A)  a system of safeguards that reduce threats to an acceptable level. 
B)  a framework for identifying, evaluating, and resolving threats to the fundamental principles. 
C)  a principles approach because it is impossible to anticipate every situation that might generate an ethical problem for a professional accountant. 
D)  all of the above 
A)  a system of safeguards that reduce threats to an acceptable level. 
B)  a framework for identifying, evaluating, and resolving threats to the fundamental principles. 
C)  a principles approach because it is impossible to anticipate every situation that might generate an ethical problem for a professional accountant. 
D)  all of the above

Question 17

Which one of the following policies and procedures is NOT required by ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information?

Accepted Answer

A)  leadership responsibilities for quality on audits 
B)  remunerating the auditor fairly and responsibly 
C)  ethical requirements (including independence) 
D)  acceptance and continuance of client relationships and specific engagements 
A)  leadership responsibilities for quality on audits 
B)  remunerating the auditor fairly and responsibly 
C)  ethical requirements (including independence) 
D)  acceptance and continuance of client relationships and specific engagements

Question 18

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 19

The reasons for the resignation of an incumbent auditor must be reported to the:

Accepted Answer

A)  client. 
B)  ASX. 
C)  AARF. 
D)  ASIC. 
A)  client. 
B)  ASX. 
C)  AARF. 
D)  ASIC.

Question 20

The ASX Corporate Governance Principles do NOT include:

Accepted Answer

A)  respecting the rights of shareholders. 
B)  remunerating fairly and responsibly. 
C)  safeguarding integrity in financial reporting. 
D)  maximising the profits of shareholders. 
A)  respecting the rights of shareholders. 
B)  remunerating fairly and responsibly. 
C)  safeguarding integrity in financial reporting. 
D)  maximising the profits of shareholders.

Can a public accounting firm accept an audit client if a principal within the firm has a direct shareholding in the prospective client?

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

Which of the following is NOT a reason often given for acting unethically?

Where the fees from an audit client are more than 15% of total fees, the public accounting firm should ensure:

Which one of the following would represent an ethical dilemma for an auditor?

The annual audit is the cornerstone of corporate governance.

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

Auditors may disclose confidential information to a third party if:

In the Code of Ethics for Professional Accountants, the first principle of professional conduct, entitled Integrity, applies only to members in public practice and not to members who work as accountants in business, government, or education.

Which is NOT a valid circumstance where working papers may be given to a third party?

Auditors should NOT use confidential auditee information for personal gain:

In the Code of Ethics for Professional Accountants, the advantage of general statements of ideal conduct, as opposed to specific rules of behaviour, is the:

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

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:

Explain why there is a special need for ethical conduct in the auditing profession.

The Code of Ethics for Professional Accountants adopts a conceptual framework that involves:

Which one of the following policies and procedures is NOT required by ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information?

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.

The reasons for the resignation of an incumbent auditor must be reported to the:

The ASX Corporate Governance Principles do NOT include:

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

Can a public accounting firm accept an audit client if a principal within the firm has a direct shareholding in the prospective client?

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

Which of the following is NOT a reason often given for acting unethically?

Where the fees from an audit client are more than 15% of total fees, the public accounting firm should ensure:

Which one of the following would represent an ethical dilemma for an auditor?

The annual audit is the cornerstone of corporate governance.

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

Auditors may disclose confidential information to a third party if:

In the Code of Ethics for Professional Accountants, the first principle of professional conduct, entitled Integrity, applies only to members in public practice and not to members who work as accountants in business, government, or education.

Which is NOT a valid circumstance where working papers may be given to a third party?

Auditors should NOT use confidential auditee information for personal gain:

In the Code of Ethics for Professional Accountants, the advantage of general statements of ideal conduct, as opposed to specific rules of behaviour, is the:

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

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:

Explain why there is a special need for ethical conduct in the auditing profession.

The Code of Ethics for Professional Accountants adopts a conceptual framework that involves:

Which one of the following policies and procedures is NOT required by ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information?

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.

The reasons for the resignation of an incumbent auditor must be reported to the:

The ASX Corporate Governance Principles do NOT include:

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