Test bank for Audit and
Assuarance,2nd edition by
leung
,Chapter 1: Auditing and governance
Multiple-choice questions
1. The three major professional accounting bodies in Australia are:
a. CAANZ, CPA and ASIC.
b. CPA Australia, IPA and AARF.
c. ATO, 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.
2. Which of these was not an Australian corporate collapse?
a. Harris Scarfe.
b. HIH Insurance Ltd.
c. One.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. To ‘does the audit meet the demands of users’.
*b. To why there is a demand for audits.
c. To what auditing is.
d. To which auditing standards are produced.
The correct option is b.
Learning objective 1.1 ~ explain the fundamental nature and value of audits.
4. Under ASA 200/ IAS 200 the primary objective of a financial report audit is to:
a. Ensure that the company is free from all fraud.
b. 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.
d. 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.
,5. It is not a requirement to be registered as an auditor in Australia to:
a. Be a fit and proper person.
b. Be a member of CPA Australia, CAANZ or other approved body.
c. Has 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.
6. 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. Agency.
b. Explanatory.
*c. Insurance hypothesis.
d. 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. Whether the financial report is presented fairly, in all material respects, in
accordance with the applicable financial reporting framework.
b. Whether the financial report presents a true and fair view, in all material respects, in
accordance with the applicable financial reporting framework.
c. Whether 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.
8. In Australia, all of the following are required to have an annual audit, except:
a. Not-for-profit organisations.
b. Statutory authorities.
*c. Small proprietary companies.
d. All of the above are required to have an annual audit with no exceptions.
The correct option is c.
Learning objective 1.1 ~ explain the fundamental nature and value of audits.
, 9. Which theory of auditing focuses more towards the decision usefulness role of
accounting?
a. Insurance hypothesis.
b. Agency theory.
*c. Information hypothesis.
d. None of the above.
The correct option is c.
Learning objective 1.1 ~ explain the fundamental nature and value of audits.
10. The separation of ownership and control in large organisations has resulted in:
*a. An agency problem.
b. The insurance hypothesis.
c. CLERP.
d. An audit expectation gap.
The correct option is a.
Learning objective 1.1 ~ explain the fundamental nature and value of audits.
11. Any situation where information is prepared by one party and then attested as to its
accuracy by another party is known as:
a. Agency theory.
b. An audit engagement.
c. An 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.
12. Auditing bears what relationship to assurance?
*a. Auditing is a sub-category of assurance.
b. Assurance is a sub-category of auditing.
c. They are different names for the same thing.
d. 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.
13. Governance is a concept that can be applied to:
Assuarance,2nd edition by
leung
,Chapter 1: Auditing and governance
Multiple-choice questions
1. The three major professional accounting bodies in Australia are:
a. CAANZ, CPA and ASIC.
b. CPA Australia, IPA and AARF.
c. ATO, 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.
2. Which of these was not an Australian corporate collapse?
a. Harris Scarfe.
b. HIH Insurance Ltd.
c. One.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. To ‘does the audit meet the demands of users’.
*b. To why there is a demand for audits.
c. To what auditing is.
d. To which auditing standards are produced.
The correct option is b.
Learning objective 1.1 ~ explain the fundamental nature and value of audits.
4. Under ASA 200/ IAS 200 the primary objective of a financial report audit is to:
a. Ensure that the company is free from all fraud.
b. 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.
d. 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.
,5. It is not a requirement to be registered as an auditor in Australia to:
a. Be a fit and proper person.
b. Be a member of CPA Australia, CAANZ or other approved body.
c. Has 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.
6. 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. Agency.
b. Explanatory.
*c. Insurance hypothesis.
d. 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. Whether the financial report is presented fairly, in all material respects, in
accordance with the applicable financial reporting framework.
b. Whether the financial report presents a true and fair view, in all material respects, in
accordance with the applicable financial reporting framework.
c. Whether 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.
8. In Australia, all of the following are required to have an annual audit, except:
a. Not-for-profit organisations.
b. Statutory authorities.
*c. Small proprietary companies.
d. All of the above are required to have an annual audit with no exceptions.
The correct option is c.
Learning objective 1.1 ~ explain the fundamental nature and value of audits.
, 9. Which theory of auditing focuses more towards the decision usefulness role of
accounting?
a. Insurance hypothesis.
b. Agency theory.
*c. Information hypothesis.
d. None of the above.
The correct option is c.
Learning objective 1.1 ~ explain the fundamental nature and value of audits.
10. The separation of ownership and control in large organisations has resulted in:
*a. An agency problem.
b. The insurance hypothesis.
c. CLERP.
d. An audit expectation gap.
The correct option is a.
Learning objective 1.1 ~ explain the fundamental nature and value of audits.
11. Any situation where information is prepared by one party and then attested as to its
accuracy by another party is known as:
a. Agency theory.
b. An audit engagement.
c. An 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.
12. Auditing bears what relationship to assurance?
*a. Auditing is a sub-category of assurance.
b. Assurance is a sub-category of auditing.
c. They are different names for the same thing.
d. 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.
13. Governance is a concept that can be applied to:
