1. An auditor strives to achieve independence in appearance to:

Select one:

A. maintain public confidence in the auditor

B. maintain an unbiased mental attitude

C. become independent in fact.

D. comply with the Corporations Act 2001

2. An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the planning phase of the audit by the use of:

Select one:

A. analytical procedures

B. specialised audit programs

C. a preliminary review of internal accounting control

D. tests of transactions and balances

3. Common law requires that the auditor:

Select one:

A. discovers all fraud

B. performs their work with due care

C. checks all transactions

D. guarantees their work

4. Which of the following best describes the reason why an independent auditor reports on financial statements?

Select one:

A. A misstatement of account balances may exist and is generally corrected as the result of the independent auditor's work.

B. A poorly designed internal control system may be in place.

C. A management fraud may exist and it is more likely to be detected by independent auditors.

D. Different interests may exist between the company preparing the statements and the parties using the statements.

5. The essence of a financial report audit is to

Select one:

A. Detect fraud

B. Examine individual transactions so that the auditor may certify as to their validity

C. Determine whether the client's financial reports are fairly stated.

D. Assure the consistent application of correct accounting procedures

6. Analytical procedures used in planning an audit should focus on identifying:

Select one:

A. the various assertions that are embodied in the financial report

B. the predictability of financial data from individual transactions

C. material weaknesses in internal control

D. areas that may represent specific risk relevant to the audit

7. Engagement letters include all of the following except:

Select one:

A. information about the audit fee

B. arrangements involving the use of experts

C. a list of additional services that will be provided

D. a list of adjusting journal entries

8. In the context of agency theory, information asymmetry refers to the idea that:

Select one:

A. information can vary in its relevance

B. management has more information about the entity's true financial position than do the absentee owners

C. information can vary in its comparability

D. management will not act in the best interests of the absentee owners

9. Which of the following is considered to be an enhancing characteristic of financial information that has been audited?

Select one:

A. Occurrence

B. Existence

C. Periodicity

D. Comparability

10. Which of the following is not an ethical attribute of an external auditor?

Select one:

A. Objectivity

B. Independence

C. Concern for the public interest

D. Client advocacy

11. Ethics require:

Select one:

A. skill in applying moral principles

B. All of the given answers are correct

C. knowledge of moral principles

D. the development of virtues within the individual

12, Significant unexpected differences identified by analytical procedures will usually necessitate:

Select one:

A. an explanation in the representation letter

B. addition of an emphasis of matter' paragraph to the auditor's report

C. investigation by the auditor

D. a review of internal control

13. Australian auditing standards (ASAs) issued by the Australian Auditing and Assurance Standards Board (AUASB) contain:

Select one:

A. specific audit procedures to meet the requirements of the standard

B. the penalties for non-compliance with the standard

C. references to the enforcement provisions of the Corporations Act 2001

D. the effective date of the standard

14. Which of the following is not a principle of professional conduct as defined by APES 110?

Select one:

A. Professional behaviour

B. True and fair reporting

C. Professional competence and due care

D. Integrity

15. Ethics require:

Select one:

A. the development of virtues within the individual

B. All of the given answers are correct

C. knowledge of moral principles

D. skill in applying moral principles

16. An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities?

Select one:

A. Unrecorded sales

B. Merchandise purchases charged to selling and general expense

C. Unrecorded purchases

D. Fictitious sales

17. Within the context of quality control, the primary purpose of continuing professional development and training activities is to enable an audit firm to provide personnel with:

Select one:

A. knowledge required to perform a peer review

B. knowledge required to fulfil assigned responsibilities

C. technical training that assures proficiency as an auditor

D. professional education to ensure that audit work is performed with due professional care

18. Which of the following bodies monitors the operation of the Australian Accounting Standards Board?

Select one:

A. Australian Securities and Investments Commission.

B. Australian Securities Exchange.

C. Financial Reporting Council.

D. Auditing and Assurance Standards Board.

19. The independent auditor adds credibility to the client's financial report by:

Select one:

A. testifying under oath about client financial information

B. attaching an auditor's opinion to the client's financial report

C. stating in the auditor's communication of internal-control-related matters that the audit was made in accordance with Australian auditing standards

D. maintaining a clear-cut distinction between management's representations and the auditor's representations