Test Bank for Modern Auditing and Assurance Services, 6th Edition, Philomena
Leung, Paul Coram, Barry J. Cooper, Peter Richardson
Chapter 1: An overview of auditing
Multiple-choice questions oy
1. The three major professional accounting bodies in Australia are:
oy oy oy oy oy oy oy oy
a. ICAA, CPA and ASIC. oy oy oy
b. CPAAustralia,IPAand AARF. oy oy oy oy
c. ATO, AUASB and ASIC. oy oy oy
d. ICAA, CPA Australia and IPA. oy oy oy oy
The correct option is d.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
2. Which of these is not an objective of the ASIC?
oy oy oy oy oy oy oy oy oy
a. To maintain, facilitate and improve the performance of companies.
oy oy oy oy oy oy oy oy
b. To establish new institutional arrangements forstandard setting.
oy oy oy oy oy oy oy
c. To receive, process and store information given to the Commission un
oy oy oy oy oy oy oy oy oy oy
der the laws. oy oy
d. All of the above are objectives of the ASIC.
oy oy oy oy oy oy oy oy
The correct option is b.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
3. Which of the following is true regarding auditors and fraud?
oy oy oy oy oy oy oy oy oy
a. Auditors are required to detect all fraud during an audit. oy oy oy oy oy oy oy oy oy
b. Auditors should actively investigate the possibility of fraud if suspicious cir
oy oy oy oy oy oy oy oy oy oy
cumstances exist. oy
c. In the Kingston Cotton Mill case it was said that the audit role was not pri
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
marily to detect fraud. oy oy oy
d. b. and c. are true.
oy oy oy oy
The correct option is d.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
,4. Which of these was not an Australian corporate collapse?
oy oy oy oy oy oy oy oy
a. Harris Scarfe. oy
b. HIH Insurance Ltd. oy oy
c. One.Tel.
d. All were Australian corporate collapses.
oy oy oy oy
The correct option is d.
oy oy oy oy
Section 1.1 Auditing fundamentals
oy oy oy
5. ABC firm are the auditors of XYZ Company. The partner responsible for the au
oy oy oy oy oy oy oy oy oy oy oy oy oy
dit has recently spent a week working with XYZ as a paid consultant on their i
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
nternal control systems. The ethical principle that has been breached is:
oy oy oy oy oy oy oy oy oy oy
a. auditor competence. oy
b. auditor rotation. oy
c. auditor independence. oy
d. auditor appointment. oy
The correct option is c.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
6. Which of these is not a reform introduced by CLERP 9 in relation to Auditors and
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
annual general meetings (AGMs)?
oy oy oy oy
a. Shareholders can submit written questions to the auditor before the A oy oy oy oy oy oy oy oy oy oy
GM relating to the auditor’s report and the conduct of the audit.
oy oy oy oy oy oy oy oy oy oy oy
b. The auditor must attend the AGM. oy oy oy oy oy
c. The auditor must address the AGM. oy oy oy oy oy
d. A reasonable opportunity must be allowed for members as a whole to as
oy oy oy oy oy oy oy oy oy oy oy oy
k questions of the auditor and for the auditor to respond.
oy oy oy oy oy oy oy oy oy oy
The correct option is c.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
,7. The statutory body that is responsible for hearing applications in Australia as
oy oy oy oy oy oy oy oy oy oy oy oy
to whether auditors and liquidators have breached the Corporations Act is:
oy oy oy oy oy oy oy oy oy oy
a. ASIC.
b. CALDB.
c. FRC.
d. AUASB.
The correct option is b.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
8. The auditing and accounting body with the highest number of members is:
oy oy oy oy oy oy oy oy oy oy oy
a. The Institute of Public Accountants.
oy oy oy oy
b. CPA Australia. oy
c. The Institute of Chartered Accountants in Australia.
oy oy oy oy oy oy
d. The International Federation of Accountants.
oy oy oy oy
The correct option is b.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
9. In relation to auditing the information hypothesis relates:
oy oy oy oy oy oy oy
a. to ‘does the audit meet the demands of users’.
oy oy oy oy oy oy oy oy
b. to why there is a demand for audits.
oy oy oy oy oy oy oy
c. to what auditing is.
oy oy oy
d. to which auditing standards are produced.
oy oy oy oy oy
The correct option is b.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
10. Under ASA 200/ IAS 200 the primary objective of a financial report audit is to:
oy oy oy oy oy oy oy oy oy oy oy oy oy oy
a. ensure that the company is free from all fraud.
oy oy oy oy oy oy oy oy
b. provide assurance about the future viability of the entity.
oy oy oy oy oy oy oy oy
, c. to express an opinion as to whether the financial report is prepared in all
oy oy oy oy oy oy oy oy oy oy oy oy oy oy
material aspects, in accordance with a financial reporting framework. oy oy oy oy oy oy oy oy
d. ensure the company complies with all aspects of Corporations Law. oy oy oy oy oy oy oy oy oy
The correct option is c.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
11. It is not a requirement to be registered as an auditor in Australia to:
oy oy oy oy oy oy oy oy oy oy oy oy oy
a. be a fit and proper person.oy oy oy oy oy
b. be a member of CPA Australia, the ICAA or other approved body.
oy oy oy oy oy oy oy oy oy oy oy
c. have a degree or diploma from a course in accounting (including auditi
oy oy oy oy oy oy oy oy oy oy oy
ng) of not less than 3 years duration and in commercial law(including c
oy oy oy oy oy oy oy oy oy oy oy oy
ompany law) of not less than 2 years duration or have other equivalent oy oy oy oy oy oy oy oy oy oy oy oy oy
qualifications acceptable to ASIC. oy oy oy
d. all are requirements to be registered as an audtor in Australia.
oy oy oy oy oy oy oy oy oy oy
The correct option is d.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
12. Investors shift financial responsibility for audited financial information to th
oy oy oy oy oy oy oy oy oy
e auditor in order to lower the expected loss from litigation or related settl
oy oy oy oy oy oy oy oy oy oy oy oy oy
ements. This describes which theory of auditing? oy oy oy oy oy oy
a. Agency.
b. Explanatory.
c. Insurance hypothesis. oy
d. Information hypothesis. oy
The correct option is c.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
13. In Australia the auditors opinion in the audit report must state:
oy oy oy oy oy oy oy oy oy oy
a. whether the financial report is presented fairly, in all material respects, in oy oy oy oy oy oy oy oy oy oy oy oy
accordance with the applicable financial reporting framework. oy oy oy oy oy oy
Leung, Paul Coram, Barry J. Cooper, Peter Richardson
Chapter 1: An overview of auditing
Multiple-choice questions oy
1. The three major professional accounting bodies in Australia are:
oy oy oy oy oy oy oy oy
a. ICAA, CPA and ASIC. oy oy oy
b. CPAAustralia,IPAand AARF. oy oy oy oy
c. ATO, AUASB and ASIC. oy oy oy
d. ICAA, CPA Australia and IPA. oy oy oy oy
The correct option is d.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
2. Which of these is not an objective of the ASIC?
oy oy oy oy oy oy oy oy oy
a. To maintain, facilitate and improve the performance of companies.
oy oy oy oy oy oy oy oy
b. To establish new institutional arrangements forstandard setting.
oy oy oy oy oy oy oy
c. To receive, process and store information given to the Commission un
oy oy oy oy oy oy oy oy oy oy
der the laws. oy oy
d. All of the above are objectives of the ASIC.
oy oy oy oy oy oy oy oy
The correct option is b.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
3. Which of the following is true regarding auditors and fraud?
oy oy oy oy oy oy oy oy oy
a. Auditors are required to detect all fraud during an audit. oy oy oy oy oy oy oy oy oy
b. Auditors should actively investigate the possibility of fraud if suspicious cir
oy oy oy oy oy oy oy oy oy oy
cumstances exist. oy
c. In the Kingston Cotton Mill case it was said that the audit role was not pri
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
marily to detect fraud. oy oy oy
d. b. and c. are true.
oy oy oy oy
The correct option is d.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
,4. Which of these was not an Australian corporate collapse?
oy oy oy oy oy oy oy oy
a. Harris Scarfe. oy
b. HIH Insurance Ltd. oy oy
c. One.Tel.
d. All were Australian corporate collapses.
oy oy oy oy
The correct option is d.
oy oy oy oy
Section 1.1 Auditing fundamentals
oy oy oy
5. ABC firm are the auditors of XYZ Company. The partner responsible for the au
oy oy oy oy oy oy oy oy oy oy oy oy oy
dit has recently spent a week working with XYZ as a paid consultant on their i
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
nternal control systems. The ethical principle that has been breached is:
oy oy oy oy oy oy oy oy oy oy
a. auditor competence. oy
b. auditor rotation. oy
c. auditor independence. oy
d. auditor appointment. oy
The correct option is c.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
6. Which of these is not a reform introduced by CLERP 9 in relation to Auditors and
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
annual general meetings (AGMs)?
oy oy oy oy
a. Shareholders can submit written questions to the auditor before the A oy oy oy oy oy oy oy oy oy oy
GM relating to the auditor’s report and the conduct of the audit.
oy oy oy oy oy oy oy oy oy oy oy
b. The auditor must attend the AGM. oy oy oy oy oy
c. The auditor must address the AGM. oy oy oy oy oy
d. A reasonable opportunity must be allowed for members as a whole to as
oy oy oy oy oy oy oy oy oy oy oy oy
k questions of the auditor and for the auditor to respond.
oy oy oy oy oy oy oy oy oy oy
The correct option is c.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
,7. The statutory body that is responsible for hearing applications in Australia as
oy oy oy oy oy oy oy oy oy oy oy oy
to whether auditors and liquidators have breached the Corporations Act is:
oy oy oy oy oy oy oy oy oy oy
a. ASIC.
b. CALDB.
c. FRC.
d. AUASB.
The correct option is b.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
8. The auditing and accounting body with the highest number of members is:
oy oy oy oy oy oy oy oy oy oy oy
a. The Institute of Public Accountants.
oy oy oy oy
b. CPA Australia. oy
c. The Institute of Chartered Accountants in Australia.
oy oy oy oy oy oy
d. The International Federation of Accountants.
oy oy oy oy
The correct option is b.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
9. In relation to auditing the information hypothesis relates:
oy oy oy oy oy oy oy
a. to ‘does the audit meet the demands of users’.
oy oy oy oy oy oy oy oy
b. to why there is a demand for audits.
oy oy oy oy oy oy oy
c. to what auditing is.
oy oy oy
d. to which auditing standards are produced.
oy oy oy oy oy
The correct option is b.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
10. Under ASA 200/ IAS 200 the primary objective of a financial report audit is to:
oy oy oy oy oy oy oy oy oy oy oy oy oy oy
a. ensure that the company is free from all fraud.
oy oy oy oy oy oy oy oy
b. provide assurance about the future viability of the entity.
oy oy oy oy oy oy oy oy
, c. to express an opinion as to whether the financial report is prepared in all
oy oy oy oy oy oy oy oy oy oy oy oy oy oy
material aspects, in accordance with a financial reporting framework. oy oy oy oy oy oy oy oy
d. ensure the company complies with all aspects of Corporations Law. oy oy oy oy oy oy oy oy oy
The correct option is c.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
11. It is not a requirement to be registered as an auditor in Australia to:
oy oy oy oy oy oy oy oy oy oy oy oy oy
a. be a fit and proper person.oy oy oy oy oy
b. be a member of CPA Australia, the ICAA or other approved body.
oy oy oy oy oy oy oy oy oy oy oy
c. have a degree or diploma from a course in accounting (including auditi
oy oy oy oy oy oy oy oy oy oy oy
ng) of not less than 3 years duration and in commercial law(including c
oy oy oy oy oy oy oy oy oy oy oy oy
ompany law) of not less than 2 years duration or have other equivalent oy oy oy oy oy oy oy oy oy oy oy oy oy
qualifications acceptable to ASIC. oy oy oy
d. all are requirements to be registered as an audtor in Australia.
oy oy oy oy oy oy oy oy oy oy
The correct option is d.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
12. Investors shift financial responsibility for audited financial information to th
oy oy oy oy oy oy oy oy oy
e auditor in order to lower the expected loss from litigation or related settl
oy oy oy oy oy oy oy oy oy oy oy oy oy
ements. This describes which theory of auditing? oy oy oy oy oy oy
a. Agency.
b. Explanatory.
c. Insurance hypothesis. oy
d. Information hypothesis. oy
The correct option is c.
oy oy oy oy
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is deman
oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy oy
ded.
13. In Australia the auditors opinion in the audit report must state:
oy oy oy oy oy oy oy oy oy oy
a. whether the financial report is presented fairly, in all material respects, in oy oy oy oy oy oy oy oy oy oy oy oy
accordance with the applicable financial reporting framework. oy oy oy oy oy oy
