Chapter 1 (PG)

The parties or matters relevant to an assurance engagement are:

• users, responsible party, subject matter
• assurance practitioner, responsible party
•  responsible party, users, subject matter, criteria
• assurance practitioner, users, responsible party 

An audit of the financial report of Campbell Ltd, an Australian listed company, is being conducted by an external auditor. The external auditor is expected to:  
 

• express an opinion as to the attractiveness of Campbell for investment purposes.
• express an opinion as to whether the financial report is prepared in accordance with an applicable financial reporting framework.
• make a 100% examination of Campbell’s records.
• certify the correctness of Campbell’s financial report.

The essence of a financial report audit is to:  
 

•  examine individual transactions so that the auditor may certify as to their validity.
• detect fraud
• assure the consistent application of correct accounting procedures.
• determine whether the client’s financial reports are fairly stated.

 Financial report auditing can best be described as:  
 

• a regulatory function that prevents the issuance of improper financial information. 
• a professional activity that measures and communicates financial and business data.
• a discipline that attests to the results of accounting and other functional operations and data. 
• a branch of accounting. 

Which of the following statements is not true concerning assurance services?  
 

•  Assurance services focus on improving the quality of information, or its context, for decision makers.
• The growth in assurance services has been driven in part by users’ demands for more relevant and reliable information.
• Auditing services can be viewed as a subset of assurance services.
• Unlike audit engagements, an engagement to perform assurance services does not require the auditor to consider information reliability.

Which of the following is not an attribute of an external auditor?  
 

• Client advocacy
• Integrity.
• Professional competence with regards to underlying subject matter
• Objectivity

The primary responsibility for the adequacy of disclosures in the financial report of a publicly held company rests with:  
 

• those charged with the governance of the company
•  the partner assigned to the audit engagement
• the Australian Securities and Investments Commission
• the auditor in charge of the fieldwork.

The value of an assurance service lies in its ability to:  
 

•  improve information’s relevance and faithful representation
• report on the assurance process.
• improve the consistency of information.
• provide a professional service that is valued by the responsible party

The public has turned to auditors to provide assurance services primarily because:  
 

•  there is a need to develop new revenue streams for accounting firms. 
• the integrity and objectivity of auditors increases the public’s trust that the underlying information is not materially misstated.
• auditors have been proactive in identifying new types of assurance services to market to customers.
• audits do not provide reliable information for decision makers.

Below are a number of potential additional benefits arising from an assurance service:  
 I. recommendations to improve the efficiency of operations.
 II. a positive influence on the behavior of people whose activities are being assured.
 III. recommendations to improve the effectiveness of operations.   Which combination of these is identified in the book as additional benefits?  
 

• I and II only
•  I and III only
• II and III only
• I, II and III.