Chapter 6 8. The words that best describes the relationship which should exist between the external auditor and the management of the client company are: mutual trust and respect. advocacy of management's position. skeptical vigilance. adversarial relationship. 9. The most common form of audit opinion is: an adverse opinion. an unqualified opinion. an 'except for' opinion. an inability to form an opinion. 10. Which of the following is not an inherent limitation of an audit? a. Audit testing of selective samples. b. Forming professional judgements in highly specialised areas. c. Time lapse between the balance date and the presentation of the audit report. d. All are inherent limitations. a. 11. In a financial statement audit, the auditor maintains professional relationships with: the board of directors and ASIC. b. the audit committee and the internal auditors. c. management and the professional accounting bodies. shareholders and creditors. . d. ort Answer 6-4 or each of the following items, identify whether they are the responsibility of manag! the auditor. Distribute the annual report to shareholders Deliver the audit report to the entity Obtain and evaluate evidence concerning the financial statements Preparation and presentation of the financial report Designing internal control procedures Express an opinion on the financial statements Selecting appropriate accounting policies Verify financial information is presented in accordance with standards ort Answer 6-5 BC Ltd recently established an audit committee in compliance with the Austra change listing requirements. The committee is made up of Ian Wright, John Small Chapter 6 1. Who is responsible for the appointment of the auditor to a company The Australian Securities and Investment Commission. The audit committee of the company, The members of the company. The managing director of the company. As a general rule, the auditor is appointed by the shareholders at the annual general meeting. Which of the following is not true concerning the appointment of an auditor? In practice the shareholders generally accept the recommendations of the directors concerning the appointment. The appointment stands for 12 months until the next annual general meeting The company is liable to pay reasonable fees and expenses of the auditor. An auditor ceases to hold office after a company goes into liquidation. 3. The Corporations Act requires that auditors are competent. To be suitably qualified the person must: be a fit and proper person to be registered as an auditor. be a member of the ICAA, CPA Australia, the National Institute of Accountants or other prescribed body. hold a degree, diploma or certificate from a university or other prescribed d. all of the above. body. 4. Which of the following is a benefit of the ASIC register of company auditors? The register contains a code of ethics that auditors must follow. The register provides assurance of the qualification, level of competence and experience of the auditor. The register facilitates disciplinary procedures against auditors. All of the above are benefits. 5. The primary reasons for the existence of Auditing Standards is: they provide assurance of the minimum standards that should have been employed by the auditor in arriving at the opinion. they are necessary to maintain a cost-effective service. they will safeguard the auditor when they are sued. d. all of the above. 6. Audit committees are perceived to strengthen the independence of auditors. Which of the following is normally an objective of an audit committee?! a. Ensuring that the entity operates in the best interests of the shareholders. b. Assisting the board of directors to discharge its responsibility to exercise due care, diligence and skill. Giving advice on the selection of the board of directors. All are objectives of an audit committee. The group which has the legal responsibility for removal of the auditor is: management the shareholders. the audit committee. the board of directors. Chapter 6 8. The words that best describes the relationship which should exist between the external auditor and the management of the client company are: mutual trust and respect. advocacy of management's position. skeptical vigilance. adversarial relationship. 9. The most common form of audit opinion is: an adverse opinion. an unqualified opinion. an 'except for' opinion. an inability to form an opinion. 10. Which of the following is not an inherent limitation of an audit? a. Audit testing of selective samples. b. Forming professional judgements in highly specialised areas. c. Time lapse between the balance date and the presentation of the audit report. d. All are inherent limitations. a. 11. In a financial statement audit, the auditor maintains professional relationships with: the board of directors and ASIC. b. the audit committee and the internal auditors. c. management and the professional accounting bodies. shareholders and creditors. . d. ort Answer 6-4 or each of the following items, identify whether they are the responsibility of manag! the auditor. Distribute the annual report to shareholders Deliver the audit report to the entity Obtain and evaluate evidence concerning the financial statements Preparation and presentation of the financial report Designing internal control procedures Express an opinion on the financial statements Selecting appropriate accounting policies Verify financial information is presented in accordance with standards ort Answer 6-5 BC Ltd recently established an audit committee in compliance with the Austra change listing requirements. The committee is made up of Ian Wright, John Small Chapter 6 1. Who is responsible for the appointment of the auditor to a company The Australian Securities and Investment Commission. The audit committee of the company, The members of the company. The managing director of the company. As a general rule, the auditor is appointed by the shareholders at the annual general meeting. Which of the following is not true concerning the appointment of an auditor? In practice the shareholders generally accept the recommendations of the directors concerning the appointment. The appointment stands for 12 months until the next annual general meeting The company is liable to pay reasonable fees and expenses of the auditor. An auditor ceases to hold office after a company goes into liquidation. 3. The Corporations Act requires that auditors are competent. To be suitably qualified the person must: be a fit and proper person to be registered as an auditor. be a member of the ICAA, CPA Australia, the National Institute of Accountants or other prescribed body. hold a degree, diploma or certificate from a university or other prescribed d. all of the above. body. 4. Which of the following is a benefit of the ASIC register of company auditors? The register contains a code of ethics that auditors must follow. The register provides assurance of the qualification, level of competence and experience of the auditor. The register facilitates disciplinary procedures against auditors. All of the above are benefits. 5. The primary reasons for the existence of Auditing Standards is: they provide assurance of the minimum standards that should have been employed by the auditor in arriving at the opinion. they are necessary to maintain a cost-effective service. they will safeguard the auditor when they are sued. d. all of the above. 6. Audit committees are perceived to strengthen the independence of auditors. Which of the following is normally an objective of an audit committee?! a. Ensuring that the entity operates in the best interests of the shareholders. b. Assisting the board of directors to discharge its responsibility to exercise due care, diligence and skill. Giving advice on the selection of the board of directors. All are objectives of an audit committee. The group which has the legal responsibility for removal of the auditor is: management the shareholders. the audit committee. the board of directors