AAA - Module 1 Quiz

Which of the following is a role of the IAASB?

• To issue quality control standards

• To issue international accounting standards

• Provide oversight over the auditing profession

• Its sets ethical standards to serve the public interest

Answer explanation

A is correct because the IAASB issues international standards on auditing and quality control standards.

All other options are incorrect

Module: 1 > Internationalisation of auditing > Page: 5-7

Which of the below only applies to ‘audits and review of historical financial information’ and ‘other assurance engagements’ but does not include ‘related services’?

• IESBA Code of Ethics

• International Standards on Quality Control

• International Standards on Related Services

• International Framework for Assurance Engagements

Answer explanation

"International Framework for Assurance Engagements" is correct because this only applies to audit and assurance engagements. It does not cover related services.

All other options are incorrect.

Module: 5 > Internationalisation of auditing > Page: 5-6

Which of the following is included as a topic in the International Framework For Assurance Engagements?

• Ethical principles

• International Standards on Auditing

• International Standards on Quality Control

• International Standards on Related Services

Answer explanation

"Ethical principles" is correct because this is a key section of the Framework. All other options are incorrect.

Module: 5 > Assurance Engagement Framework > Page: 11-13

You discover that your fairly new client, Geronimo Enterprise has over the past 10 years been involved in money laundering. What issue discussed in Part 3 of APES 110 was not adequately performed?

• Responding with Non-Compliance and Regulations (NOCLAR)

• Independence

• Professional Appointment

• Conflict of Interest

Answer explanation

Inadequate client procedures were performed to identify the threats to the fundamental principles prior to accepting the client

Your client, Precious Mining recently acquired Gollum Iron Ore group, a large entity with significant operations across all continents. Which of the below steps are necessary?

• Decline to perform the audit are fees and other remuneration are likely to iincrease by more than 15% of the firm's revenue

• Consider whether ASAs are applicable since newly acquired organization has operations outside of Australia.

• Perform partner rotation to demonstrate compliance with QC policies since nature of client has changed.

• Peform additional client evaluation procedures to evaluate continuance of the client

An accountant must be independent both in mind and in appearance.

Which of the following is not a component of independence?

• Objectivity

• Professional competence

• Professional scepticism

• Integrity

Which of the following is not a fundamental principle according to APES 110?

• Self-review

• Objectivity

• Integrity

• Confidentiality

Answer explanation

Self-review is a threat to the fundamental principles. B,C and D are all fundamental principles of the Code of Ethics.

Module: 1 > 1.2 Assurance engagement framework > Ethical principles> Page: 12

Mr Red is the CEO of Clothes Pty Ltd. The company has engaged ADDY Accountants Pty Ltd to carry out an audit. Mr Red is, however, married to the audit partner of ADDY Accountants Pty Ltd.

Which of the following is the threat to the fundamental principles if ADDY Accountants Pty Ltd agrees to the engagement and Mr Red is the audit engagement partner?

• Intimidation

• Advocacy

• Familiarity

• Self-interest

Answer explanation

There is a close relationship with the audit client which may result in the assurance practitioner being too sympathetic to the client's interests or too accepting of their work.

Module: 1 > 1.2 Assurance engagement framework > Ethical principles> Page: 13

Based on the PWC-TBW Case Study, what was the fundamental principle breached by the auditors?

• Objectivity

• Integrity

• Professional Competence & Due Care

• Professional Behaviour

Answer explanation

Prosecutors said PWC had every opportunity to find fraud in the case, but failed to do so in a number of occassions. Their alleged negligence is so astounding, they reportedly even had an intern look over billions of dollars worth of transaction. The intern's work was looked over by a PwC employee who said the task was even "above his pay grade", said the financial Times. After finishing her work, the intern told the PwC staff that the amount of asset collateral "feels right"

Joe performs a review of the financial statements of WeClean Services Pty Ltd for the year ended 30 June 2019 and issues a reasonable assurance that the financial statements are free from material misstatements. Joe applied ISREs in performing the engagement.

Which of the below statements is correct?

• Joe is not permitted to perform a review of financial statements that covers a full year.

• Joe should have referred to the above as an assurance engagement as opposed to a review since an assurance is provided.

• Joe should have issued a limited assurance.

• Joe is not permitted to provide a reasonable assurance unless the above was a review based on ISAs.

Answer explanation

Since Joe performed a review of the financial statements, he should have issued a limited assurance. Note that an auditor is permitted to perform an audit or a review. Assurance engagements are composed of audits, reviews and other assurance engagements other than an audit and a review of historical financial information.

Module: 1 > 1.4 Application of standards > Application of ISAEs > Page: 51