Question 1

To which of the following parties does the auditor owe a duty of care under contract?

Accepted Answer

A) The company itself. 
B) The board of directors. 
C) Shareholders as individuals. 
D) Potential investors. 
A) The company itself. 
B) The board of directors. 
C) Shareholders as individuals. 
D) Potential investors. A

Question 2

In the Caparo case, the court held that the auditor owes a duty of care to:

Accepted Answer

A) all users of the published financial report. 
B) only those parties specified in the engagement letter. 
C) the shareholders as a body, but not individual shareholders or third parties. 
D) all shareholders, but not third parties. 
A) all users of the published financial report. 
B) only those parties specified in the engagement letter. 
C) the shareholders as a body, but not individual shareholders or third parties. 
D) all shareholders, but not third parties. C

Question 3

Who is responsible for assessing whether company auditors meet the required competency standards for registration?

Accepted Answer

A) Auditing and Assurance Standards Board. 
B) Australian Securities and Investments Commission. 
C) Companies Auditors and Liquidators Disciplinary Board. 
D) Financial Reporting Council. 
A) Auditing and Assurance Standards Board. 
B) Australian Securities and Investments Commission. 
C) Companies Auditors and Liquidators Disciplinary Board. 
D) Financial Reporting Council. B

Question 4

The court found that Roberts & Associates had performed a negligent audit of Pinnacle Ltd, but the plaintiff did not receive damages because the court found insufficient proof of causation.Causation means that:

Accepted Answer

A) the auditor caused the misstatement of the financial report. 
B) the auditor's failure to perform a proper audit caused the damages. 
C) the auditor was negligent, but the plaintiff suffered no real damages. 
D) the plaintiff was an unforeseen third-party user of the financial report. 
A) the auditor caused the misstatement of the financial report. 
B) the auditor's failure to perform a proper audit caused the damages. 
C) the auditor was negligent, but the plaintiff suffered no real damages. 
D) the plaintiff was an unforeseen third-party user of the financial report.

Question 5

The types of actions by members of accounting bodies that may result in disciplinary action being taken by the member's accounting body include:

Accepted Answer

A) if the member is found guilty of a fraud. 
B) if the member practises while bankrupt or insolvent. 
C) if the member continues practising despite being declared of unsound mind. 
D) All of the given answers are correct. 
A) if the member is found guilty of a fraud. 
B) if the member practises while bankrupt or insolvent. 
C) if the member continues practising despite being declared of unsound mind. 
D) All of the given answers are correct.

Question 6

In pursuing its quality control objectives with respect to acceptance of a client, an audit firm is not likely to:

Accepted Answer

A) make enquiries of the proposed client's legal adviser. 
B) review financial reports of the proposed client. 
C) make enquiries of previous auditors. 
D) review the personnel practices of the proposed client. 
A) make enquiries of the proposed client's legal adviser. 
B) review financial reports of the proposed client. 
C) make enquiries of previous auditors. 
D) review the personnel practices of the proposed client.

Question 7

Which of the following are elements of an audit firm's quality control that should be considered in establishing its quality control policies and procedures? Personnel management
Monitoring
Engagement performance

Accepted Answer

A) Yes Yes
No 
B) Yes Yes
Yes 
C) Yes No
Yes 
D) No Yes
Yes 
A) Yes Yes
No 
B) Yes Yes
Yes 
C) Yes No
Yes 
D) No Yes
Yes

Question 8

Which of the following types of companies can only be used by an audit firm with the consent of the National Council of Chartered Accountants Australia and New Zealand?

Accepted Answer

A) Nominee company. 
B) Service company. 
C) Practice company. 
D) All of the given answers are correct. 
A) Nominee company. 
B) Service company. 
C) Practice company. 
D) All of the given answers are correct.

Question 9

Which of the following bodies is able to impose penalties on auditors who have failed to carry out their duties properly?

Accepted Answer

A) Financial Reporting Council. 
B) Companies Auditors and Liquidators Disciplinary Board. 
C) Auditing and Assurance Standards Board. 
D) Australian Securities Exchange. 
A) Financial Reporting Council. 
B) Companies Auditors and Liquidators Disciplinary Board. 
C) Auditing and Assurance Standards Board. 
D) Australian Securities Exchange.

Question 10

An auditor who is approached by their accounting body to undergo a quality control audit must:

Accepted Answer

A) provide audit files to the investigators without delay. 
B) obtain the client's permission to disclose information to the investigators prior to giving them any information. 
C) cooperate in every way without delay. 
D) disclose to the investigators any potential quality control problems that the member is aware of. 
A) provide audit files to the investigators without delay. 
B) obtain the client's permission to disclose information to the investigators prior to giving them any information. 
C) cooperate in every way without delay. 
D) disclose to the investigators any potential quality control problems that the member is aware of.

Question 11

Harry & Joseph rendered an unmodified auditor's opinion on the financial report of a company that sold shares in a public offering.Based on a false statement in the financial report, Harry & Joseph is being sued by an investor who purchased shares in this public offering.Which of the following represents a viable defence?

Accepted Answer

A) The investor has not met the burden of proving fraud by Harry amp; Joseph. 
B) The false statement is immaterial in the overall context of the financial report. 
C) Detection that the statement was false occurred after the date of the auditor's report. 
D) The investor did not actually rely upon the false statement. 
A) The investor has not met the burden of proving fraud by Harry amp; Joseph. 
B) The false statement is immaterial in the overall context of the financial report. 
C) Detection that the statement was false occurred after the date of the auditor's report. 
D) The investor did not actually rely upon the false statement.

Question 12

The AWA case established that:

Accepted Answer

A) reasonable care and skill means following the auditing standards. 
B) auditors have a duty to closely supervise and review the work of inexperienced audit staff. 
C) auditors are only liable for the proportion of damages attributable to their actions. 
D) auditors have a duty of care only to the shareholders as a group. 
A) reasonable care and skill means following the auditing standards. 
B) auditors have a duty to closely supervise and review the work of inexperienced audit staff. 
C) auditors are only liable for the proportion of damages attributable to their actions. 
D) auditors have a duty of care only to the shareholders as a group.

Question 13

The largest accounting organisation in Australia is:

Accepted Answer

A) Chartered Accountants Australia and New Zealand. 
B) CPA Australia. 
C) Institute of Public Accountants. 
D) International Federation of Accountants. 
A) Chartered Accountants Australia and New Zealand. 
B) CPA Australia. 
C) Institute of Public Accountants. 
D) International Federation of Accountants.

Question 14

Which accounting body in Australia was established under Royal Charter?

Accepted Answer

A) CPA Australia. 
B) Chartered Accountants Australia and New Zealand. 
C) Institute of Public Accountants. 
D) None of the given answers are correct. 
A) CPA Australia. 
B) Chartered Accountants Australia and New Zealand. 
C) Institute of Public Accountants. 
D) None of the given answers are correct.

Question 15

The objective of quality control dictates that an audit firm should establish policies and procedures for professional development that provide reasonable assurance that all entry-level personnel:

Accepted Answer

A) prepare working papers that are standardised in form and content. 
B) have the knowledge required to enable them to fulfil the responsibilities assigned. 
C) advance within the organisation. 
D) develop specialties in specific areas of assurance services. 
A) prepare working papers that are standardised in form and content. 
B) have the knowledge required to enable them to fulfil the responsibilities assigned. 
C) advance within the organisation. 
D) develop specialties in specific areas of assurance services.

Question 16

Contributory negligence:

Accepted Answer

A) has always been available as a defence to the auditor. 
B) indicates the auditor has played no part in the plaintiff's loss. 
C) will result in an apportionment of damages arising from the plaintiff's loss between the defendant and the plaintiff. 
D) is used to describe the causal relationship between the actions of the auditor and any loss suffered by a plaintiff. 
A) has always been available as a defence to the auditor. 
B) indicates the auditor has played no part in the plaintiff's loss. 
C) will result in an apportionment of damages arising from the plaintiff's loss between the defendant and the plaintiff. 
D) is used to describe the causal relationship between the actions of the auditor and any loss suffered by a plaintiff.

Question 17

Which of the following bodies monitors the operation of the Australian Accounting Standards Board?

Accepted Answer

A) Australian Securities Exchange. 
B) Financial Reporting Council. 
C) Australian Securities and Investments Commission. 
D) Auditing and Assurance Standards Board. 
A) Australian Securities Exchange. 
B) Financial Reporting Council. 
C) Australian Securities and Investments Commission. 
D) Auditing and Assurance Standards Board.

Question 18

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to:

Accepted Answer

A) enable the audit firm to attest to the reliability of the client. 
B) satisfy the audit firm's duty to the public concerning the acceptance of new clients. 
C) minimise the likelihood of association with clients whose management lacks integrity. 
D) anticipate before performing any fieldwork whether an unmodified opinion can be expressed. 
A) enable the audit firm to attest to the reliability of the client. 
B) satisfy the audit firm's duty to the public concerning the acceptance of new clients. 
C) minimise the likelihood of association with clients whose management lacks integrity. 
D) anticipate before performing any fieldwork whether an unmodified opinion can be expressed.

Question 19

Australian auditing standards (ASAs) issued by the Australian Auditing and Assurance Standards Board (AUASB) are intended to be applied to:

Accepted Answer

A) all audit, review, other assurance and related engagements conducted by external firms. 
B) only audits of entities listed on the Australian Securities Exchange. 
C) all audits of companies incorporated under the Corporations Act 2001. 
D) all audit, review, other assurance and related engagements where the entity has more than five shareholders. 
A) all audit, review, other assurance and related engagements conducted by external firms. 
B) only audits of entities listed on the Australian Securities Exchange. 
C) all audits of companies incorporated under the Corporations Act 2001. 
D) all audit, review, other assurance and related engagements where the entity has more than five shareholders.

Question 20

Which of the following statements best explains why the auditing profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance?

Accepted Answer

A) Ethical standards that emphasise excellence in performance over material rewards establish a reputation for competence and character. 
B) Vigorous enforcement of an established code of ethics is the best way to prevent unscrupulous acts. 
C) A distinguishing mark of a profession is setting appropriate fees. 
D) A requirement for a profession is to establish ethical standards that stress a responsibility to the public, clients and colleagues. 
A) Ethical standards that emphasise excellence in performance over material rewards establish a reputation for competence and character. 
B) Vigorous enforcement of an established code of ethics is the best way to prevent unscrupulous acts. 
C) A distinguishing mark of a profession is setting appropriate fees. 
D) A requirement for a profession is to establish ethical standards that stress a responsibility to the public, clients and colleagues.

To which of the following parties does the auditor owe a duty of care under contract?

In the Caparo case, the court held that the auditor owes a duty of care to:

Who is responsible for assessing whether company auditors meet the required competency standards for registration?

The court found that Roberts & Associates had performed a negligent audit of Pinnacle Ltd, but the plaintiff did not receive damages because the court found insufficient proof of causation.Causation means that:

The types of actions by members of accounting bodies that may result in disciplinary action being taken by the member's accounting body include:

In pursuing its quality control objectives with respect to acceptance of a client, an audit firm is not likely to:

Which of the following are elements of an audit firm's quality control that should be considered in establishing its quality control policies and procedures? Personnel management Monitoring Engagement performance

Which of the following types of companies can only be used by an audit firm with the consent of the National Council of Chartered Accountants Australia and New Zealand?

Which of the following bodies is able to impose penalties on auditors who have failed to carry out their duties properly?

An auditor who is approached by their accounting body to undergo a quality control audit must:

The AWA case established that:

The largest accounting organisation in Australia is:

Which accounting body in Australia was established under Royal Charter?

The objective of quality control dictates that an audit firm should establish policies and procedures for professional development that provide reasonable assurance that all entry-level personnel:

Contributory negligence:

Which of the following bodies monitors the operation of the Australian Accounting Standards Board?

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to:

Australian auditing standards (ASAs) issued by the Australian Auditing and Assurance Standards Board (AUASB) are intended to be applied to:

Which of the following statements best explains why the auditing profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance?

Assurance and Auditing: An Overview

Ethics, Independence and Corporate Governance

Overview of Elements of the Financial Report Audit Process

Planning, Understanding the Entity and Assessing Business Risk

Assessing Inherent Risk, and Other Specific Business Risks

Understanding and Assessing Internal Control

Tests of Controls

Substantive Tests of Transactions and Balances

Completion and Review

The Auditors Reporting Obligations

Other Assurance Services and Advanced Topics

Internal Auditing

Audit and Assurance Services in the Public Sector

Filters

Exam 2: Audit Regulation, Structure of the Profession and Auditors Liability

To which of the following parties does the auditor owe a duty of care under contract?

In the Caparo case, the court held that the auditor owes a duty of care to:

Who is responsible for assessing whether company auditors meet the required competency standards for registration?

The court found that Roberts & Associates had performed a negligent audit of Pinnacle Ltd, but the plaintiff did not receive damages because the court found insufficient proof of causation.Causation means that:

The types of actions by members of accounting bodies that may result in disciplinary action being taken by the member's accounting body include:

In pursuing its quality control objectives with respect to acceptance of a client, an audit firm is not likely to:

Which of the following are elements of an audit firm's quality control that should be considered in establishing its quality control policies and procedures? Personnel management Monitoring Engagement performance

Which of the following types of companies can only be used by an audit firm with the consent of the National Council of Chartered Accountants Australia and New Zealand?

Which of the following bodies is able to impose penalties on auditors who have failed to carry out their duties properly?

An auditor who is approached by their accounting body to undergo a quality control audit must:

The AWA case established that:

The largest accounting organisation in Australia is:

Which accounting body in Australia was established under Royal Charter?

The objective of quality control dictates that an audit firm should establish policies and procedures for professional development that provide reasonable assurance that all entry-level personnel:

Contributory negligence:

Which of the following bodies monitors the operation of the Australian Accounting Standards Board?

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to:

Australian auditing standards (ASAs) issued by the Australian Auditing and Assurance Standards Board (AUASB) are intended to be applied to:

Which of the following statements best explains why the auditing profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance?

Assurance and Auditing: An Overview

Ethics, Independence and Corporate Governance

Overview of Elements of the Financial Report Audit Process

Planning, Understanding the Entity and Assessing Business Risk

Assessing Inherent Risk, and Other Specific Business Risks

Understanding and Assessing Internal Control

Tests of Controls

Substantive Tests of Transactions and Balances

Completion and Review

The Auditors Reporting Obligations

Other Assurance Services and Advanced Topics

Internal Auditing

Audit and Assurance Services in the Public Sector

Filters