TEST BANK FOR
MODERN AUDITING
AND ASSURANCE
SERVICES, 6TH
EDITION, PHILOMENA
LEUNG, PAUL CORAM,
BARRY J. COOPER,
PETER RICHARDSON
, Table of Contents
Part 1 THE AUDITING AND ASSURANCE ENVIRONMENT 2
1 An overview of auditing 4
2 Governance and the auditor 44
3 Professional ethics, independence and audit quality 94
4 Other assurance engagements and quality standards 162
5 The auditor’s legal liability 202
Part 2 AUDIT PLANNING 246
6 Overview of the audit of financial reports 248
7 The auditor’s report 280
8 Client evaluation and planning the audit 314
9 Audit risk assessment 366
10 Materiality and audit evidence 414
Part 3 AUDIT TESTING METHODOLOGY 452
11 Tests of controls 454
12 Designing substantive procedures 488
13 Audit sampling 526
Part 4 AUDITING TRANSACTIONS AND BALANCES 566
14 Auditing sales and receivables 568
15 Auditing purchases, payables and payroll 618
16 Auditing inventories and property, plant and equipment 664
17 Auditing cash and investments 708
Part 5 COMPLETING THE AUDIT 756
18 Completing the audit 758
,Chapter 1: An overview of auditing
Multiple-choice questions
1. The three major professional accounting bodies in Australia are:
a. ICAA, CPA and ASIC.
b. CPA Australia, IPA and AARF.
c. ATO, AUASB and ASIC.
d. ICAA, CPA Australia and IPA.
The correct option is d.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
2. Which of these is not an objective of the ASIC?
a. To maintain, facilitate and improve the performance of companies.
b. To establish new institutional arrangements for standard setting.
c. To receive, process and store information given to the Commission
under the laws.
d. All of the above are objectives of the ASIC.
The correct option is b.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
3. Which of the following is true regarding auditors and fraud?
a. Auditors are required to detect all fraud during an audit.
b. Auditors should actively investigate the possibility of fraud if suspicious
circumstances exist.
c. In the Kingston Cotton Mill case it was said that the audit role was not
primarily to detect fraud.
d. b. and c. are true.
The correct option is d.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
, 4. 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.
Section 1.1 Auditing fundamentals
5. ABC firm are the auditors of XYZ Company. The partner responsible for the
audit has recently spent a week working with XYZ as a paid consultant on
their internal control systems. The ethical principle that has been breached
is:
a. auditor competence.
b. auditor rotation.
c. auditor independence.
d. auditor appointment.
The correct option is c.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
6. Which of these is not a reform introduced by CLERP 9 in relation to Auditors
and annual general meetings (AGMs)?
a. Shareholders can submit written questions to the auditor before the
AGM relating to the auditor’s report and the conduct of the audit.
b. The auditor must attend the AGM.
c. The auditor must address the AGM.
d. A reasonable opportunity must be allowed for members as a whole to
ask questions of the auditor and for the auditor to respond.
The correct option is c.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
MODERN AUDITING
AND ASSURANCE
SERVICES, 6TH
EDITION, PHILOMENA
LEUNG, PAUL CORAM,
BARRY J. COOPER,
PETER RICHARDSON
, Table of Contents
Part 1 THE AUDITING AND ASSURANCE ENVIRONMENT 2
1 An overview of auditing 4
2 Governance and the auditor 44
3 Professional ethics, independence and audit quality 94
4 Other assurance engagements and quality standards 162
5 The auditor’s legal liability 202
Part 2 AUDIT PLANNING 246
6 Overview of the audit of financial reports 248
7 The auditor’s report 280
8 Client evaluation and planning the audit 314
9 Audit risk assessment 366
10 Materiality and audit evidence 414
Part 3 AUDIT TESTING METHODOLOGY 452
11 Tests of controls 454
12 Designing substantive procedures 488
13 Audit sampling 526
Part 4 AUDITING TRANSACTIONS AND BALANCES 566
14 Auditing sales and receivables 568
15 Auditing purchases, payables and payroll 618
16 Auditing inventories and property, plant and equipment 664
17 Auditing cash and investments 708
Part 5 COMPLETING THE AUDIT 756
18 Completing the audit 758
,Chapter 1: An overview of auditing
Multiple-choice questions
1. The three major professional accounting bodies in Australia are:
a. ICAA, CPA and ASIC.
b. CPA Australia, IPA and AARF.
c. ATO, AUASB and ASIC.
d. ICAA, CPA Australia and IPA.
The correct option is d.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
2. Which of these is not an objective of the ASIC?
a. To maintain, facilitate and improve the performance of companies.
b. To establish new institutional arrangements for standard setting.
c. To receive, process and store information given to the Commission
under the laws.
d. All of the above are objectives of the ASIC.
The correct option is b.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
3. Which of the following is true regarding auditors and fraud?
a. Auditors are required to detect all fraud during an audit.
b. Auditors should actively investigate the possibility of fraud if suspicious
circumstances exist.
c. In the Kingston Cotton Mill case it was said that the audit role was not
primarily to detect fraud.
d. b. and c. are true.
The correct option is d.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
, 4. 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.
Section 1.1 Auditing fundamentals
5. ABC firm are the auditors of XYZ Company. The partner responsible for the
audit has recently spent a week working with XYZ as a paid consultant on
their internal control systems. The ethical principle that has been breached
is:
a. auditor competence.
b. auditor rotation.
c. auditor independence.
d. auditor appointment.
The correct option is c.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
6. Which of these is not a reform introduced by CLERP 9 in relation to Auditors
and annual general meetings (AGMs)?
a. Shareholders can submit written questions to the auditor before the
AGM relating to the auditor’s report and the conduct of the audit.
b. The auditor must attend the AGM.
c. The auditor must address the AGM.
d. A reasonable opportunity must be allowed for members as a whole to
ask questions of the auditor and for the auditor to respond.
The correct option is c.
Learning objective 1.1 ~ explain what an audit is, what it provides, and why it is
demanded.
