AUD1 CH 1 - 3

What is the primary purpose of an external audit?

• To focus on improving current performance

• To verify the accuracy and truthfulness of financial statements

• To ensure that all employees comply with company policies

• To assess the internal control system

Which of the following is NOT one of the ethical principles governing the auditor’s professional responsibilities?

• Integrity

• Confidentiality

• Objectivity

• Professional conduct

An auditor who allows their personal interests to influence their judgment is violating which ethical principle?

• Integrity

• Professional competence and due care

• Objectivity

• Confidentiality

Which of the following best describes a performance audit?

• An audit to confirm the accuracy of financial statements

• An audit to ensure compliance with relevant laws and regulations

• An audit to ensure compliance with relevant laws and regulations

• An audit to examine tax compliance

Which type of audit focuses on verifying that a business follows relevant laws and regulations?

• Financial Statement Audit

• Tax Audit

• Compliance Audit

• Performance Audit

Who are the typical clients of internal auditors?

• Third parties outside the company

• The management of the company

• Government bodies

• The shareholders of the company

What is the primary difference between auditing and accounting?

• Auditing provides opinions on financial statements, while accounting is concerned with preparing financial statements.

• Auditing is concerned with preparing financial statements, while accounting is concerned with providing opinions on financial statements.

• Auditing deals only with the public sector, while accounting deals with the private sector.

• Auditing ensures compliance with tax regulations, while accounting focuses on profit maximization.

What is the reporting structure for an external auditor?

• Management of the client company

• Auditors’ own team

• Government bodies

• Shareholders of the client company

The Malaysian Financial Reporting Standards (MFRS) are primarily relevant for:

• Auditing financial statements

• Preparing financial statements

• Compliance audits

• Tax audits

According to agency theory, what is the primary concern in the relationship between a principal and an agent?

• Ensuring that the agent and principal share the same level of knowledge

• Guaranteeing that the agent receives a salary equal to the principal’s income

• The potential for the agent to act in their own self-interest, which may conflict with the principal's objectives

• Ensuring the agent’s decisions are made without any financial compensation