Audit and assurance - Chapter 1: Auditing and governance Chapter 1: A...

Testbank For Audit and assurance 2 nd Edition by Philomena Leung.Paul Coram Barry Cooper Kirsty Redgen Dominic Canestrari-Soh 1 / 4

Chapter 1: Auditing and governance

Chapter 1: Auditing and governance

Multiple-choice questions

1. The three major professional accounting bodies in Australia are:

a.C AANZ, CPA and ASIC.

• CPA Australia, IPA and AARF.

c.A TO, AUASB and ASIC.*d.CAANZ, CPA Australia and IPA.The correct option is d.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

• Which of these was

not an Australian corporate collapse?a.H arris Scarfe.

• HIH Insurance Ltd.

c.O ne.Tel.*d.All were Australian corporate collapses.The correct option is d.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

3. In relation to auditing the information hypothesis relates:

a.T

• ‘does the audit meet the demands of users’.

*b.To why there is a demand for audits.c.T o what auditing is.

• To which auditing standards are produced.

The correct option is b.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

• Under ASA 200/ IAS 200 the primary objective of a financial report audit is to:

a.E nsure that the company is free from all fraud.

• Provide assurance about the future viability of the entity.

*c.To express an opinion as to whether the financial report is prepared in all material aspects, in accordance with a financial reporting framework.

• Ensure the company complies with all aspects of Corporations Law.

The correct option is c.Learning objective 1.1 ~ explain the fundamental nature and value of audits..

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Testbank to accompany Auditing and assurance 2e

• It is

not a requirement to be registered as an auditor in Australia to:

a.B e a fit and proper person.

• Be a member of CPA Australia, CAANZ or other approved body.

c.H as a degree or diploma from a course in accounting (including auditing) of not less than 3 years duration and in commercial law (including company law) of not less than 2 years duration or have other equivalent qualifications acceptable to ASIC.*d.All are requirements to be registered as an auditor in Australia.The correct option is d.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

• Investors shift financial responsibility for audited financial information to the auditor in

order to lower the expected loss from litigation or related settlements. This describes which theory of auditing?a.A gency.

• Explanatory.

*c.Insurance hypothesis.

• Information hypothesis.

The correct option is c.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

7. In Australia, the auditor’s opinion in the audit report must state:

a.W hether the financial report is presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

• Whether the financial report presents a true and fair view, in all material respects, in

accordance with the applicable financial reporting framework.c.W hether the financial report provides a reasonable level of assurance, in all material respects, in accordance with the applicable financial reporting framework.*d.a or b.The correct option is d.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

• In Australia, all of the following are required to have an annual audit,

except:

a.N ot-for-profit organisations.

• Statutory authorities.

*c.Small proprietary companies.

• All of the above are required to have an annual audit with no exceptions.

.

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Chapter 1: Auditing and governance

The correct option is c.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

• Which

theory of auditing focuses more towards the decision usefulness role of accounting?a.I nsurance hypothesis.

• Agency theory.

*c.Information hypothesis.

• None of the above.

The correct option is c.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

• The separation of ownership and control in large organisations has resulted in:

*a.An agency problem.

• The insurance hypothesis.

c.C LERP.

• An audit expectation gap.

The correct option is a.Learning objective 1.1 ~ explain the fundamental nature and value of audits.

11.An y situation where information is prepared by one party and then attested as to its

accuracy by another party is known as:

a.A gency theory.

• An audit engagement.

c.A n assertion engagement.*d.An assurance engagement.The correct option is d.Learning objective 1.2 ~ describe the nature of assurance and how it relates to auditing.

• Auditing bears what relationship to assurance?

*a.Auditing is a sub-category of assurance.

• Assurance is a sub-category of auditing.

c.T hey are different names for the same thing.

• Public

accounting firms perform auditing engagements but not assurance engagements.The correct option is a.Learning objective 1.2 ~ describe the nature of assurance and how it relates to auditing..

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