Expressing an opinion on whether the financial reports are prepared in accordance with an applicable financial reporting framework is the purpose of A) a compilation. B) a review. C) a consulting engagement. D) an audit 2) What is the first step to developing audit objectives? A) Divide the financial statements into cycles. B) Know general audit objectives for classes of transactions and accounts. C) Understand objectives and responsibilities for the audit. D) Know management assertions about accounts. 3) The objective of issuing an audit opinion on the financial report includes an opinion on the: A) financial statements. B) directors' declaration. C) accompanying notes. D) all of the above 4) The reason auditors accumulate evidence is to: A) satisfy the requirements of the Corporations Act. B) justify the conclusions they have otherwise reached. C) defend themselves in the event of a lawsuit. D) enable them to reach conclusions about the fairness of the financial statements and issue an appropriate audit report. 5) Making fair representations in the financial statements is the responsibility of: A) management. B) the auditor. C) the internal auditor. D) all of the above 6) Which party enhances the confidence of financial report users? A) management B) auditor C) board of directors D) audit committee 7) The accuracy of information included in footnotes that accompany the audited financial statements of a publicly traded company is the primary responsibility of the: A) Australian Securities and Investment Commission. B) independent auditor. C) company's management. D) stock exchange officials. 8) The auditors opinion is to be written so that which party can understand its language and terminology? A) the reader B) investors C) management D) a prudent user 9) Determining whether the clients financial statements are fairly stated is the goal of which function? A) consulting B) auditing C) compilation D) attestation 10) The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to: A) management for the statements and the auditor for the notes. B) the auditor. C) management. D) both management and the auditor equally. 11) When preparing the financial statements, it is acceptable for the auditor to prepare: A) the footnotes for a client. B) the statements for a client. C) a draft of the statements and footnotes for a client. D) a draft of the statements for a client. 12) A directors declaration in accordance with the Corporations Act must state the directors are satisfied the financial statements: A) comply with applicable accounting standards. B) give a true and fair view. C) are in accordance with the Act. D) all of the above 13) Misstatements are usually considered material if the: A) combined uncorrected errors in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements. B) auditor has quantified a measure of materiality. C) combined uncorrected errors and fraud in the financial statements are likely to have changed or influenced the decisions of a reasonable person using the financial statements. D) none of the above 14) The objective of the ordinary examination by the independent auditor is the expression of an opinion on the: A) accuracy of the annual report. B) statements of financial position and financial performance. C) fairness of the financial statements. D) accuracy of the financial statements. 15) What are the two major classifications of fraud? A) intent and rationalization B) misappropriation of assets and materiality C) misappropriation of assets and fraudulent financial reporting D) fraudulent financial reporting and intent 16) An intentional overstatement of sales is an example of: A) fraudulent financial reporting. B) misappropriation of assets. C) an accounting error. D) all of the above 17) The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated. This imposes on the auditor a duty to: A) provide reasonable assurance that material misstatements will be detected. B) be an insurer of the fairness of the statements. C) be equally responsible with management for the preparation of the financial statements. D) be a guarantor of the fairness of the statements. 18) 'The auditor should not assume that management is dishonest, but the possibility of dishonesty must be considered. This illustrates: A) adhering to the Code of Ethics for Professional Accountants. B) an attitude of professional scepticism. C) unprofessional behaviour. D) due diligence. 19) If the auditor were responsible for making certain that all the assertions of management in the statements are correct, then: A) audits would be much easier to complete. B) bankruptcies would be reduced to a very small number. C) audits would not be economically feasible. D) bankruptcies could no longer occur. 20) The auditor's BEST defence when existing material misstatements in the financial statements are NOT uncovered in the audit is that the: A) financial statements are the client's responsibility. B) audit was conducted in accordance with generally accepted accounting principles. C) audit was conducted in accordance with Australian auditing standards. D) client is guilty of contributory negligence. 21) Which level of assurance has the auditor hoped to attain at the completion of the audit? A) absolute B) reasonable C) moderate D) any of the above is considered appropriate 22) What reasoning would an auditor use when no material misstatements are discovered? A) The audit was conducted in accordance with auditor judgement. B) The audit was conducted in accordance with Australian auditing standards. C) Misstatements are the responsibility of management. D) The audit was conducted in accordance with Australian accounting standards. 23) Professional scepticism means that the auditor should: A) not accept the representations of management. B) approach the audit with a questioning mind. C) consider that management is mostly honest. D) only consider written representations from the audit client. 24) What is a common name for fraudulent financial reporting? A) employee fraud B) theft of assets C) defalcation D) management fraud 25) Which one of the following statements is true? A) Usually, errors and fraud are equally difficult for the auditor to uncover. B) It is usually easier for the auditor to uncover fraud than errors. C) It is usually easier for the auditor to uncover errors than fraud. D) none of the above