Which of the following is true regarding auditors and fraud?

Select one:

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

Which theory of auditing focuses more towards the decision usefulness role of accounting?

Select one:

A.Insurance hypothesis

B.Agency theory

C.Information hypothesis

D.None of the above

The separation of ownership and control in large organisations has resulted in:

Select one:

A.an agency problem

B.the insurance hypothesis

C.CLERP

D.an audit expectation gap

The key benefit to management of there being an internal audit function is that:

Select one:

A.It provides assurance to management that the organisation is complying with its legal requirements.

B.External audit costs are reduced

C.It provides assurance to management that fraudulent activities will be detected

D.It aids management in the areas of risk management, control and governance processes

Earnings management occurs when:

Select one:

A.income and expenses are managed to influence the performance of the entity.

B.financial statements and transactions are manipulated to influence perceptions about the entity

C.executive salaries are increased surreptitiously by including the raises in late night meetings

D.earnings are manipulated to improve the company's tax position

The audit committee should report to the board of directors on which of these matters?

Select one:

A.The use of experts by the independent auditor

B.Recommendations for the appointment or removal of an auditor

C.Audit procedures carried out by the independent auditor

D.All of the above

The Auditor General must report on an exception basis if:

Select one:

A.proper accounting records have been kept.

B.all the necessary information and explanations were obtained.

C.records have been retained for at least 10 years

D.records have not been made available for inspection

Which of these views consider moral values to be relative in regard to a particular environment?

Select one:

A.Teleology

B.Deontology

C.Virtue ethics

D.Ethical relativism

The fundamental ethical characteristics required of professional accountants are:

Select one:

A.competence, objectivity and integrity

B.professionalism, experience and expertise

C.self-interest, self-review and familiarity

D.authority, community sanction and knowledge

The conceptual approach to independence requires that there is:

Select one:

A.independence in mind and actions

B.independence in fact and appearance

C.independence in mind and appearance

D.independence in actions and appearance

Using the same senior personnel on an assurance engagement over a long period may create what type of threat to audit independence?

Select one:

A.Advocacy

B.Intimidation

C.Familiarity

D.Self-interest

An assurance engagement as compared to a non-assurance engagement, requires:

Select one:

A.an opinion to be provided

B.a positive not a negative opinion

C.the assurance practitioner to reduce the assurance risk to a level that is appropriate to the engagement

D.all of the above are required

The suitability of criteria is the basis on which the information about the subject matter is prepared and measured. It is normally based on:

Select one:

A.relevance and reliability

B.neutrality and completeness

C.understandability

D.all of the above

When an auditor performs a review of an interim financial report which of the following steps wouldnotbe part of the review?

Select one:

A.Review of ratios and trends

B.Testing of the computer controls

C.Reading the minutes of the shareholders' meetings

D.Inquiry of management

As a general rule, the auditor is appointed by the shareholders at the annual general meeting. Which of the following isnottrue concerning the appointment of an auditor?

Select one:

A.In practice the shareholders generally accept the recommendations of the directors concerning the appointment.

B.The appointment stands for 12 months until the next annual general meeting.

C.The company is liable to pay reasonable fees and expenses of the auditor

D.An auditor ceases to hold office after a company goes into liquidation.

The removal and resignation of auditors must be:

Select one:

A.by resolution of the company

B.with special notice to the ASIC for its consent

C.both the above

D.none of the above

An engagement letter contains express or implied terms of the contractual arrangement with the client. Which of the following isnotone of those terms?

Select one:

A.To exercise a reasonable degree of skill and care

B.To report the duties of the auditor

C.To be independent of the company

D.To give an opinion on the truth and fairness of the financial statements of the company

The initial phase of a financial statement audit involves the acceptance decision for the client in question. Which of the following isnota consideration during this phase of the audit?

Select one:

A.Determining the existence of related parties

B.Preparation of the engagement letter

C.Ethical considerations

D.Client evaluation

In the investigation of a potential new client, besides inquiring of the existing auditor, the prospective auditor should make inquiries of other third parties. Which of the following is least likely to be included in this inquiry?

Select one:

A.Bankers

B.Customers

C.The chamber of commerce

D.Legal advisers/solicitors

Which of these isnotan ethical consideration for the auditor in deciding whether to accept an audit engagement?

Select one:

A.Identifying intended users of the audited financial statements

B.Evaluate circumstances that would compromise their independence

C.Assessing their competence to perform the audit

D.Determine their ability to use due care in performing the audit