To Purchase
this Complete Test Bank with Answers Click the link Below
https://tbzuiqe.com/product/auditing-and-assurance-services-in-australia-grant-gay-7th-edition-test-bank/
If face any problem or
Further information contact us At tbzuiqe@gmail.com
Sample Test
Chapter 03 Test Bank
Student: ___________________________________________________________________________
|
1.
|
Which of the following statements is
correct?
|
A.
|
Ethics is concerned primarily with the wellbeing of your
client.
|
|
B.
|
Ethics is principally an attitude of mind.
|
|
C.
|
Ethics is principally concerned with having a set of
rules that must be complied with.
|
|
D.
|
Ethics is concerned with creating an environment that
allows entities to make an equitable profit.
|
|
|
2.
|
Ethics require:
|
A.
|
knowledge of moral principles.
|
|
B.
|
skill in applying moral principles.
|
|
C.
|
the development of virtues within the individual.
|
|
D.
|
All of the given answers are correct.
|
|
|
3.
|
Which of the following is an example of
deontological ethics?
|
C.
|
The principle of beneficence.
|
|
|
4.
|
Which of the following is an example of
utilitarianism?
|
A.
|
Greatest benefit for the individual.
|
|
B.
|
Do unto others as you would have them do unto you.
|
|
C.
|
Greatest benefit for the greatest number.
|
|
|
5.
|
If an audit firm considers that it
behaves ethically because it always follows the provisions of APES 110, this
is an example of:
|
D.
|
None of the given answers are correct.
|
|
|
6.
|
Which of the following is an example of
teleological ethics?
|
C.
|
The principle of beneficence.
|
|
|
7.
|
Which of the following is not an
ethical attribute of an external auditor?
|
D.
|
Concern for the public interest.
|
|
|
8.
|
Competence as an independent auditor
includes all of the following except:
|
A.
|
having the technical qualifications to perform an
engagement.
|
|
B.
|
possessing the ability to supervise and evaluate the
quality of staff work.
|
|
C.
|
guaranteeing the accuracy of the work performed.
|
|
D.
|
doing additional research or consulting others.
|
|
|
9.
|
Which of the following is not a fundamental
ethical principle as defined by APES 110?
|
A.
|
Professional behaviour.
|
|
B.
|
True and fair reporting.
|
|
D.
|
Professional competence and due care.
|
|
|
10.
|
Which of the following is not a fundamental
ethical principle as defined by APES 110?
|
D.
|
Professional behaviour.
|
|
|
11.
|
APES 110:
|
A.
|
prohibits tendering for an audit currently done by
another audit firm.
|
|
B.
|
encourages but does not require auditors to refrain from
unwanted solicitation.
|
|
C.
|
requires auditors to act in the public interest.
|
|
D.
|
prohibits offers of employment to employees of another
audit firm without notice.
|
|
|
12.
|
Auditors are required to complete
engagements competently. Competency embraces all of the following except:
|
A.
|
an unbiased mental attitude.
|
|
B.
|
the technical qualifications of the audit staff.
|
|
C.
|
the capacity to exercise judgment.
|
|
D.
|
the ability to research subject matter and consult with
others.
|
|
|
13.
|
Which of the following situations would
be a breach of confidentiality?
|
A.
|
Allowing a potential purchaser of your audit practice to
review your audit working papers.
|
|
B.
|
Allowing the Australian Securities and Investments
Commission access to your audit working papers to conduct a statutory
investigation.
|
|
C.
|
Allowing the auditor of your client’s parent company
access to your audit working papers.
|
|
D.
|
All of the given answers are correct.
|
|
|
14.
|
Which of the following statements is
correct?
|
A.
|
Copies of client records incorporated into audit working
papers must be returned to the client upon request.
|
|
B.
|
Work sheets, in lieu of a general ledger, belong to the
auditor and need not be furnished to the client upon request.
|
|
C.
|
An extensive analysis of inventory prepared by the
client at the auditor’s request are work papers which belong to the auditor
and need not be furnished to the client upon request.
|
|
D.
|
The auditor who retains copies of client records must
return the original records upon request.
|
|
|
15.
|
Vintage Ltd has a year-end of 30 June
20X0. The audit work was completed and the auditor’s report signed on 3
September 20X0. On 1 October, the company requested the current auditor to
resign so that the auditor of their parent company could take over the audit.
The current auditors wrote a resignation letter dated 10 October 20X0
that was received by the company on 15 October 20X0. This letter advised that
the auditor’s resignation was effective from 3 September 20X0. The
resignation letter was also forwarded to the Australian Securities and
Investments Commission (ASIC), requesting its confirmation of the
resignation. ASIC approved the resignation in a letter dated 31 October 20X0.
The effective date of the resignation is:
|
|
16.
|
Williams & Associates is a small
firm with three partners. The audit partner, being the only registered
company auditor in the firm, retired from the firm on 31 August 20X0. On this
date the partner wrote a letter to the Australian Securities and Investments
Commission (ASIC) requesting permission to resign as auditor of all of his
clients. ASIC gave its consent to the resignation effective from 31 October
20X0. The auditor of the audit clients in the period from 31 August to 31
October 20X0 is:
|
B.
|
Williams & Associates.
|
|
C.
|
Australian National Audit Office as nominee.
|
|
D.
|
the next most senior partner of Williams &
Associates.
|
|
|
17.
|
Which of the following is not an
ethical decision-making model?
|
|
18.
|
Which of the following is not a step in
the American Accounting Association ethical decision-making model?
|
A.
|
Define the ethical issues.
|
|
B.
|
Identify the major principles, rules and values.
|
|
C.
|
Assess the consequences.
|
|
D.
|
Determine under what conditions you would allow
exceptions to your stand.
|
|
|
19.
|
Which of the following is not a key
factor to be considered in the framework for decision making in APES 110?
|
A.
|
Fundamental ethical principles.
|
|
B.
|
Established internal procedures.
|
|
C.
|
Alternative courses of action.
|
|
D.
|
Australian Auditing Standards.
|
|
|
20.
|
Independence means that the auditor:
|
A.
|
must be impartial with respect to the client.
|
|
B.
|
must adopt the attitude of a detective during the audit.
|
|
C.
|
has an obligation solely to third parties.
|
|
D.
|
cannot provide any other professional services to an
audit client.
|
|
|
21.
|
An auditor is independent if they are:
|
B.
|
independent in fact and in appearance.
|
|
C.
|
independent in fact and honest.
|
|
D.
|
logical and consistent.
|
|
|
22.
|
Which of the following most completely
describes auditor independence?
|
A.
|
Performing an audit from the viewpoint of the public.
|
|
B.
|
Avoiding the appearance of an interest in the affairs of
an audit client.
|
|
C.
|
Performing the audit with integrity and objectivity.
|
|
D.
|
Accepting the responsibility of acting professionally.
|
|
|
23.
|
Which of the following is a correct
statement with respect to a listed company?
|
A.
|
The Australian Securities and Investments Commission
does not have to be given notice of the removal of an auditor.
|
|
B.
|
An auditor of a public company does not have to have the
approval of the Australian Securities and Investments Commission to resign.
|
|
C.
|
An auditor of a public company must be appointed within
three months of incorporation.
|
|
D.
|
The Australian Securities and Investments Commission
will only allow the auditor to resign other than at the annual general
meeting if adequate disclosure of the resignation is made to members.
|
|
|
24.
|
Which of the following statements is
not true?
|
A.
|
The auditor has a right of access to all books and
records at all reasonable times.
|
|
B.
|
The auditor must report all situations where inadequate
records are being kept.
|
|
C.
|
The auditor has a right to attend and be heard at all
board meetings.
|
|
D.
|
The auditor must review other information attached to
the financial report to ensure consistency with the financial report.
|
|
|
25.
|
To emphasise auditor independence from management,
many entities follow the practice of:
|
A.
|
appointing a partner of the audit firm conducting the
audit to the entity’s audit committee.
|
|
B.
|
having the auditor report to the entity’s audit
committee.
|
|
C.
|
requesting that a representative of the auditor is on
hand at the annual general meeting.
|
|
D.
|
establishing a policy of discouraging social contact
between employees of the entity and the audit staff.
|
|
|
26.
|
Emma Jones is about to begin a
recurring annual audit engagement. As the continuing auditor, her
independence would ordinarily be considered to be impaired if the previous
year’s audit fee:
|
A.
|
was only partially paid and the balance is being
disputed.
|
|
B.
|
has not been paid and will not be paid for at least 12
months.
|
|
C.
|
has not been paid and the client has filed voluntary
bankruptcy.
|
|
D.
|
was settled by litigation.
|
|
|
27.
|
It would not be appropriate for the
auditor to initiate discussion with the audit committee concerning:
|
A.
|
the extent to which the work of internal auditors will
influence the scope of the audit.
|
|
B.
|
details of the procedures that the auditor intends to
apply.
|
|
C.
|
the extent to which change in the company’s organisation
will influence the scope of the audit.
|
|
D.
|
details of potential problems that the auditor believes
might cause a modified opinion.
|
|
|
28.
|
Rebecca Lane was offered the engagement
to audit Beachside Ltd for the year ended 30 June 20X2. She had served as a
director of Beachside Ltd until 30 June 20X0 and her spouse currently owns
1000 of the 10 000 outstanding shares of Beachside Ltd. She should:
|
A.
|
accept the engagement.
|
|
B.
|
let her partner accept and conduct the engagement.
|
|
C.
|
refuse the engagement because she had served as a director.
|
|
D.
|
refuse the engagement because of her spouse’s share
ownership.
|
|
|
29.
|
Under APES 110, an auditor may not:
|
A.
|
be a member of the same club as any directors of an
audit client.
|
|
B.
|
perform bookkeeping services for any audit client.
|
|
C.
|
perform advisory services for any audit client.
|
|
D.
|
have any joint, closely held investment with any
director of an audit client.
|
|
|
30.
|
The ethical rules state that
independence of the external audit firm is considered to be impaired if:
|
A.
|
the audit firm provides management advisory services to
the client.
|
|
B.
|
the audit partner purchases the client’s product at
normal retail prices.
|
|
C.
|
the audit firm has served as the external auditor for
many years.
|
|
D.
|
an immediate relative of one of the partners is the
beneficial owner of shares forming a material part of the share capital of
the client.
|
|
|
31.
|
An auditor strives to achieve
independence in appearance to:
|
A.
|
maintain public confidence in the auditor.
|
|
B.
|
maintain an unbiased mental attitude.
|
|
C.
|
comply with the Corporations Act
2001.
|
|
D.
|
become independent in fact.
|
|
|
32.
|
One of the partners in your audit firm
holds 1% of the shares in an audit client. This is not material to the
partner’s wealth. This is a breach of:
|
B.
|
theCorporations Act
2001.
|
|
C.
|
both APES 110 and the Corporations
Act 2001.
|
|
D.
|
neither APES 110 nor the Corporations Act 2001.
|
|
|
33.
|
Which of the following disclosures to
members would not be required by the Australian Securities and Investments
Commission (ASIC) for them to allow the auditor of a public company to resign
outside of the company’s annual general meeting?
|
A.
|
Details of the outgoing auditor.
|
|
B.
|
Details of any unpaid audit fees of the outgoing
auditor.
|
|
C.
|
Details of the proposed incoming auditor.
|
|
D.
|
Reasons for the change of auditor.
|
|
|
34.
|
Bernard & Associates has audited
the financial report of Basset Pty Ltd (Basset) for several years and had
always been paid promptly for services rendered. Last year’s audit invoices
have not been paid because Basset is experiencing cash flow difficulties and
the current year’s audit is scheduled to commence in one week. With respect
to the past due audit fees, Bernard & Associates should:
|
A.
|
perform the scheduled audit and allow Basset to pay when
the cash flow difficulties are alleviated.
|
|
B.
|
perform the scheduled audit only after arranging a
definite payment schedule and securing notes
signed by Basset.
|
|
C.
|
inform Basset’s management that the past due audit fees
may be considered an impairment
of auditor independence.
|
|
D.
|
inform Basset’s management that the past due audit fees
may be considered a loan on which
interest must be imputed for financial report purposes.
|
|
|
35.
|
In which of the following instances
would the independence of the auditor most likely not be considered to be
impaired?
|
A.
|
They have been retained as the auditor of a
charitable entity in which the spouse of the auditor serves as treasurer.
|
|
B.
|
They have been retained as the auditor of a company in
which the auditor’s investment club owns a 10% interest.
|
|
C.
|
They have been retained as the auditor of a large
manufacturing company that has loaned the auditor $6000.
|
|
D.
|
They have been retained as the auditor of a company from
which the auditor purchased his or her latest motor vehicle at normal list
price.
|
|
|
36.
|
You are the auditor of Express Travel
Ltd, a large travel agent that also handles all your audit firm’s travel
arrangements on normal commercial rates and provides excellent service. The
chief financial officer of Express Travel Ltd has asked if you could help
them overcome an economic downturn by recommending their services to your
other audit clients. However, he has also said that he will understand if you
are not able to do so. What type of threat to your independence does this
request constitute?
|
|
37.
|
You are the auditor of Blue Haze Ltd
and are nearing the completion of the audit work for the current year when
the audit senior, Travis Dean, advises you that he has been offered a job at
Blue Haze Ltd as soon as the current audit is finished. What type of threat
to the auditor’s independence does this situation constitute?
|
|
38.
|
You are the auditor of Speed Ltd and
the chief financial officer has stated that he is concerned that you are
taking up too much of his staff’s time asking unnecessary questions for the
audit. Further, he has indicated that your chances of getting the engagement
to review the implementation of their new computer system engagement will be
greatly improved if you keep your questioning of staff to a minimum during
the current audit. What type of threat to your independence does this
situation constitute?
|
|
39.
|
Audit firm rotation has been
introduced:
|
A.
|
in Europe by the European Parliament.
|
|
B.
|
in the United States by the Public Company Accounting
Oversight Board.
|
|
C.
|
in Australia by the Corporations
Act 2001.
|
|
D.
|
All of the given answers are correct.
|
|
|
40.
|
APES 110 would be violated if an
auditor accepted a fee for services and the fee was:
|
A.
|
fixed by a public authority.
|
|
B.
|
based on a price quotation submitted in competitive
bidding.
|
|
C.
|
based on time spent at standard charge rates.
|
|
D.
|
payable after a specified finding was attained in a
review of a financial report.
|
|
|
41.
|
An acceptable audit fee arrangement is
to:
|
A.
|
accept the client’s corporate bond as part payment of an
audit fee.
|
|
B.
|
quote a fixed fee for an audit, based on an estimate of
the total costs to be incurred.
|
|
C.
|
quote a discounted fee on the expectation of performing
other services for the client.
|
|
D.
|
accept a reduced audit fee because the audit firm
already performs a wide variety of other services for the client.
|
|
|
42.
|
Which of the following statements is
correct?
|
A.
|
Agreeing to a 50% higher fee for providing an unmodified
auditor’s report by the date required for an application for a bank loan is
permissible provided the audit is reviewed by a quality control partner.
|
|
B.
|
Agreeing to a 50% higher fee for a management consulting
engagement on the condition that you find cost savings is permissible for
an audit client provided safeguards are in place.
|
|
C.
|
Auditors are entitled to reasonable fees under APES 110.
|
|
D.
|
Audit fees may be disclosed in the financial report on a
voluntary basis.
|
|
|
43.
|
When a bid price for audit services by
an audit firm is quoted at an unreasonably low level to win the tender, with
any unrecovered audit costs recovered subsequently through other services or
by other means, it is called:
|
|
44.
|
Which of the following best describes
the role of corporate governance?
|
A.
|
Management decides which accounting principles are the
most appropriate.
|
|
B.
|
Shareholders vote to decide who should be members of the
board of directors.
|
|
C.
|
An independent board of directors holds the management
team accountable to shareholders and other constituents.
|
|
D.
|
Management is compensated based on the company’s
profitability.
|
|
|
45.
|
Corporate governance procedures
generally involve policies concerning which of the following matters?
|
A.
|
Compensation arrangements for senior management and
non-executive directors.
|
|
B.
|
Ensuring the board of directors is composed of persons
with an appropriate mix of skills and experience.
|
|
C.
|
Nomination of and communication with the external
auditors.
|
|
D.
|
All of the given answers are correct.
|
|
|
46.
|
The audit committee of a publicly held
company should be made up of:
|
A.
|
representatives of the major shareholders.
|
|
B.
|
the audit partner, the chief financial officer, the
legal counsel and at least one outsider.
|
|
C.
|
representatives from the client’s management, investors,
suppliers and customers.
|
|
D.
|
members of the board of directors who are not employees.
|
|
|
47.
|
Which of the following is not a
requirement of the ASX Corporate Governance Council Principles and
Recommendations?
|
A.
|
The audit committee should consist only of non-executive
directors.
|
|
B.
|
The audit committee should consist of a majority of
independent directors.
|
|
C.
|
The audit committee should consist of at least five
members.
|
|
D.
|
The chair of the audit committee should not be the chair
of the board.
|
|
|
48.
|
The external auditor will normally
report to the audit committee on all the following matters except:
|
A.
|
the responsibilities assumed by the auditor.
|
|
B.
|
deficiencies in the entity’s internal control.
|
|
C.
|
the audit firm’s staffing of the job.
|
|
D.
|
potential problems that could give rise to a modified
auditor’s report.
|
|
|
49.
|
Which of the following is not one of
the key areas covered by the OECD Principles of Corporate Governance?
|
A.
|
Protection of shareholder’s rights.
|
|
B.
|
Responsibilities of the board.
|
|
C.
|
Disclosure and transparency.
|
|
D.
|
Responsibilities of the auditor.
|
|
|
50.
|
Which of the following situations may
indicate that a non-executive director is not independent?
|
A.
|
Having a substantial shareholding.
|
|
B.
|
Having just retired as the chief financial officer.
|
|
C.
|
Having served on the board of directors for a long
period of time.
|
|
D.
|
All the given answers are correct.
|
|
Chapter 03 Test BankKey
|
1.
|
Which of the following statements is
correct?
|
A.
|
Ethics is concerned primarily with the wellbeing of your
client.
|
|
B.
|
Ethics is principally an attitude of mind.
|
|
C.
|
Ethics is principally concerned with having a set of
rules that must be complied with.
|
|
D.
|
Ethics is concerned with creating an environment that
allows entities to make an equitable profit.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.01 Explain the nature and importance of professional ethics, and describe
the three main categories of ethical theory
Topic: Professional
ethics and ethical theory
|
|
2.
|
Ethics require:
|
A.
|
knowledge of moral principles.
|
|
B.
|
skill in applying moral principles.
|
|
C.
|
the development of virtues within the individual.
|
|
D.
|
All of the given answers are correct.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.01 Explain the nature and importance of professional ethics, and describe
the three main categories of ethical theory
Topic: Professional
ethics and ethical theory
|
|
3.
|
Which of the following is an example of
deontological ethics?
|
C.
|
The principle of beneficence.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.01 Explain the nature and importance of professional ethics, and describe
the three main categories of ethical theory
Topic: Professional
ethics and ethical theory
|
|
4.
|
Which of the following is an example of
utilitarianism?
|
A.
|
Greatest benefit for the individual.
|
|
B.
|
Do unto others as you would have them do unto you.
|
|
C.
|
Greatest benefit for the greatest number.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.01 Explain the nature and importance of professional ethics, and describe
the three main categories of ethical theory
Topic: Professional
ethics and ethical theory
|
|
5.
|
If an audit firm considers that it
behaves ethically because it always follows the provisions of APES 110, this
is an example of:
|
D.
|
None of the given answers are correct.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.01 Explain the nature and importance of professional ethics, and describe
the three main categories of ethical theory
Topic: Professional
ethics and ethical theory
|
|
6.
|
Which of the following is an example of
teleological ethics?
|
C.
|
The principle of beneficence.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.01 Explain the nature and importance of professional ethics, and describe
the three main categories of ethical theory
Topic: Professional
ethics and ethical theory
|
|
7.
|
Which of the following is not an
ethical attribute of an external auditor?
|
D.
|
Concern for the public interest.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
8.
|
Competence as an independent auditor
includes all of the following except:
|
A.
|
having the technical qualifications to perform an
engagement.
|
|
B.
|
possessing the ability to supervise and evaluate the
quality of staff work.
|
|
C.
|
guaranteeing the accuracy of the work performed.
|
|
D.
|
doing additional research or consulting others.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
9.
|
Which of the following is not a fundamental
ethical principle as defined by APES 110?
|
A.
|
Professional behaviour.
|
|
B.
|
True and fair reporting.
|
|
D.
|
Professional competence and due care.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
10.
|
Which of the following is not a fundamental
ethical principle as defined by APES 110?
|
D.
|
Professional behaviour.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
11.
|
APES 110:
|
A.
|
prohibits tendering for an audit currently done by
another audit firm.
|
|
B.
|
encourages but does not require auditors to refrain from
unwanted solicitation.
|
|
C.
|
requires auditors to act in the public interest.
|
|
D.
|
prohibits offers of employment to employees of another
audit firm without notice.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
12.
|
Auditors are required to complete
engagements competently. Competency embraces all of the following except:
|
A.
|
an unbiased mental attitude.
|
|
B.
|
the technical qualifications of the audit staff.
|
|
C.
|
the capacity to exercise judgment.
|
|
D.
|
the ability to research subject matter and consult with
others.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
13.
|
Which of the following situations would
be a breach of confidentiality?
|
A.
|
Allowing a potential purchaser of your audit practice to
review your audit working papers.
|
|
B.
|
Allowing the Australian Securities and Investments
Commission access to your audit working papers to conduct a statutory
investigation.
|
|
C.
|
Allowing the auditor of your client’s parent company
access to your audit working papers.
|
|
D.
|
All of the given answers are correct.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
14.
|
Which of the following statements is
correct?
|
A.
|
Copies of client records incorporated into audit working
papers must be returned to the client upon request.
|
|
B.
|
Work sheets, in lieu of a general ledger, belong to the
auditor and need not be furnished to the client upon request.
|
|
C.
|
An extensive analysis of inventory prepared by the
client at the auditor’s request are work papers which belong to the auditor
and need not be furnished to the client upon request.
|
|
D.
|
The auditor who retains copies of client records must
return the original records upon request.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
15.
|
Vintage Ltd has a year-end of 30 June
20X0. The audit work was completed and the auditor’s report signed on 3
September 20X0. On 1 October, the company requested the current auditor to
resign so that the auditor of their parent company could take over the audit.
The current auditors wrote a resignation letter dated 10 October 20X0
that was received by the company on 15 October 20X0. This letter advised that
the auditor’s resignation was effective from 3 September 20X0. The
resignation letter was also forwarded to the Australian Securities and
Investments Commission (ASIC), requesting its confirmation of the
resignation. ASIC approved the resignation in a letter dated 31 October 20X0.
The effective date of the resignation is:
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
16.
|
Williams & Associates is a small
firm with three partners. The audit partner, being the only registered
company auditor in the firm, retired from the firm on 31 August 20X0. On this
date the partner wrote a letter to the Australian Securities and Investments
Commission (ASIC) requesting permission to resign as auditor of all of his
clients. ASIC gave its consent to the resignation effective from 31 October
20X0. The auditor of the audit clients in the period from 31 August to 31
October 20X0 is:
|
B.
|
Williams & Associates.
|
|
C.
|
Australian National Audit Office as nominee.
|
|
D.
|
the next most senior partner of Williams &
Associates.
|
|
|
AACSB: Ethics
Difficulty: Hard
Learning Objective:
03.02 Outline the essence of the accounting bodies’ code of ethics
Topic: Accounting
bodies’ code of ethics
|
|
17.
|
Which of the following is not an
ethical decision-making model?
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.03 Apply sound ethical decision-making techniques
Topic: Applying ethics
|
|
18.
|
Which of the following is not a step in
the American Accounting Association ethical decision-making model?
|
A.
|
Define the ethical issues.
|
|
B.
|
Identify the major principles, rules and values.
|
|
C.
|
Assess the consequences.
|
|
D.
|
Determine under what conditions you would allow
exceptions to your stand.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.03 Apply sound ethical decision-making techniques
Topic: Applying ethics
|
|
19.
|
Which of the following is not a key
factor to be considered in the framework for decision making in APES 110?
|
A.
|
Fundamental ethical principles.
|
|
B.
|
Established internal procedures.
|
|
C.
|
Alternative courses of action.
|
|
D.
|
Australian Auditing Standards.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.03 Apply sound ethical decision-making techniques
Topic: Applying ethics
|
|
20.
|
Independence means that the auditor:
|
A.
|
must be impartial with respect to the client.
|
|
B.
|
must adopt the attitude of a detective during the audit.
|
|
C.
|
has an obligation solely to third parties.
|
|
D.
|
cannot provide any other professional services to an
audit client.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
21.
|
An auditor is independent if they are:
|
B.
|
independent in fact and in appearance.
|
|
C.
|
independent in fact and honest.
|
|
D.
|
logical and consistent.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
22.
|
Which of the following most completely
describes auditor independence?
|
A.
|
Performing an audit from the viewpoint of the public.
|
|
B.
|
Avoiding the appearance of an interest in the affairs of
an audit client.
|
|
C.
|
Performing the audit with integrity and objectivity.
|
|
D.
|
Accepting the responsibility of acting professionally.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
23.
|
Which of the following is a correct
statement with respect to a listed company?
|
A.
|
The Australian Securities and Investments Commission
does not have to be given notice of the removal of an auditor.
|
|
B.
|
An auditor of a public company does not have to have the
approval of the Australian Securities and Investments Commission to resign.
|
|
C.
|
An auditor of a public company must be appointed within
three months of incorporation.
|
|
D.
|
The Australian Securities and Investments Commission
will only allow the auditor to resign other than at the annual general
meeting if adequate disclosure of the resignation is made to members.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
24.
|
Which of the following statements is
not true?
|
A.
|
The auditor has a right of access to all books and
records at all reasonable times.
|
|
B.
|
The auditor must report all situations where inadequate
records are being kept.
|
|
C.
|
The auditor has a right to attend and be heard at all
board meetings.
|
|
D.
|
The auditor must review other information attached to
the financial report to ensure consistency with the financial report.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
25.
|
To emphasise auditor independence from
management, many entities follow the practice of:
|
A.
|
appointing a partner of the audit firm conducting the
audit to the entity’s audit committee.
|
|
B.
|
having the auditor report to the entity’s audit
committee.
|
|
C.
|
requesting that a representative of the auditor is on
hand at the annual general meeting.
|
|
D.
|
establishing a policy of discouraging social contact
between employees of the entity and the audit staff.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
26.
|
Emma Jones is about to begin a
recurring annual audit engagement. As the continuing auditor, her
independence would ordinarily be considered to be impaired if the previous
year’s audit fee:
|
A.
|
was only partially paid and the balance is being
disputed.
|
|
B.
|
has not been paid and will not be paid for at least 12
months.
|
|
C.
|
has not been paid and the client has filed voluntary
bankruptcy.
|
|
D.
|
was settled by litigation.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
27.
|
It would not be appropriate for the auditor
to initiate discussion with the audit committee concerning:
|
A.
|
the extent to which the work of internal auditors will
influence the scope of the audit.
|
|
B.
|
details of the procedures that the auditor intends to
apply.
|
|
C.
|
the extent to which change in the company’s organisation
will influence the scope of the audit.
|
|
D.
|
details of potential problems that the auditor believes
might cause a modified opinion.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
28.
|
Rebecca Lane was offered the engagement
to audit Beachside Ltd for the year ended 30 June 20X2. She had served as a
director of Beachside Ltd until 30 June 20X0 and her spouse currently owns
1000 of the 10 000 outstanding shares of Beachside Ltd. She should:
|
A.
|
accept the engagement.
|
|
B.
|
let her partner accept and conduct the engagement.
|
|
C.
|
refuse the engagement because she had served as a
director.
|
|
D.
|
refuse the engagement because of her spouse’s share
ownership.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
29.
|
Under APES 110, an auditor may not:
|
A.
|
be a member of the same club as any directors of an
audit client.
|
|
B.
|
performbookkeeping services for any audit client.
|
|
C.
|
perform advisory services for any audit client.
|
|
D.
|
have any joint, closely held investment with any
director of an audit client.
|
|
|
AACSB: Ethics
Difficulty: Hard
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
30.
|
The ethical rules state that
independence of the external audit firm is considered to be impaired if:
|
A.
|
the audit firm provides management advisory services to
the client.
|
|
B.
|
the audit partner purchases the client’s product at
normal retail prices.
|
|
C.
|
the audit firm has served as the external auditor for
many years.
|
|
D.
|
an immediate relative of one of the partners is the
beneficial owner of shares forming a material part of the share capital of
the client.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
31.
|
An auditor strives to achieve
independence in appearance to:
|
A.
|
maintain public confidence in the auditor.
|
|
B.
|
maintain an unbiased mental attitude.
|
|
C.
|
comply with the Corporations Act
2001.
|
|
D.
|
become independent in fact.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
32.
|
One of the partners in your audit firm
holds 1% of the shares in an audit client. This is not material to the
partner’s wealth. This is a breach of:
|
B.
|
theCorporations Act
2001.
|
|
C.
|
both APES 110 and the Corporations
Act 2001.
|
|
D.
|
neither APES 110 nor the Corporations Act 2001.
|
|
|
AACSB: Ethics
Difficulty: Easy
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
33.
|
Which of the following disclosures to
members would not be required by the Australian Securities and Investments
Commission (ASIC) for them to allow the auditor of a public company to resign
outside of the company’s annual general meeting?
|
A.
|
Details of the outgoing auditor.
|
|
B.
|
Details of any unpaid audit fees of the outgoing
auditor.
|
|
C.
|
Details of the proposed incoming auditor.
|
|
D.
|
Reasons for the change of auditor.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
34.
|
Bernard & Associates has audited
the financial report of Basset Pty Ltd (Basset) for several years and had
always been paid promptly for services rendered. Last year’s audit invoices
have not been paid because Basset is experiencing cash flow difficulties and
the current year’s audit is scheduled to commence in one week. With respect
to the past due audit fees, Bernard & Associates should:
|
A.
|
perform the scheduled audit and allow Basset to pay when
the cash flow difficulties are alleviated.
|
|
B.
|
perform the scheduled audit only after arranging a
definite payment schedule and securing notes
signed by Basset.
|
|
C.
|
inform Basset’s management that the past due audit fees
may be considered an impairment
of auditor independence.
|
|
D.
|
inform Basset’s management that the past due audit fees
may be considered a loan on which
interest must be imputed for financial report purposes.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
35.
|
In which of the following instances
would the independence of the auditor most likely not be considered to be
impaired?
|
A.
|
They have been retained as the auditor of a
charitable entity in which the spouse of the auditor serves as treasurer.
|
|
B.
|
They have been retained as the auditor of a company in
which the auditor’s investment club owns a 10% interest.
|
|
C.
|
They have been retained as the auditor of a large
manufacturing company that has loaned the auditor $6000.
|
|
D.
|
They have been retained as the auditor of a company from
which the auditor purchased his or her latest motor vehicle at normal list
price.
|
|
|
AACSB: Ethics
Difficulty: Medium
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
36.
|
You are the auditor of Express Travel
Ltd, a large travel agent that also handles all your audit firm’s travel
arrangements on normal commercial rates and provides excellent service. The
chief financial officer of Express Travel Ltd has asked if you could help
them overcome an economic downturn by recommending their services to your
other audit clients. However, he has also said that he will understand if you
are not able to do so. What type of threat to your independence does this
request constitute?
|
|
AACSB: Ethics
Difficulty: Hard
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
|
37.
|
You are the auditor of Blue Haze Ltd
and are nearing the completion of the audit work for the current year when
the audit senior, Travis Dean, advises you that he has been offered a job at
Blue Haze Ltd as soon as the current audit is finished. What type of threat
to the auditor’s independence does this situation constitute?
|
|
AACSB: Ethics
Difficulty: Hard
Learning Objective:
03.04 Explain the concept and importance of auditor independence
Topic: Auditor
independence
|
Comments
Post a Comment