WorksheetsChapter 1 (UG)
Total questions: 10
Worksheet time: 10mins
Name
Class
Date
1.
What does an auditor do?
a)
Provide a guarantee on the ongoing viability of a company
b)
Provide an opinion on the financial report
c)
Work with management to porduce a set of financial statements
d)
Ensure that the financial report contains no fraud
2.
1.1 What best describes the ‘agency problem’ that results in a demand for audits?
a)
Shareholders act in their own interests and not in the interests of the company
b)
Banks have different information expectations to shareholders
c)
Managers’ act first in the interests of shareholders to the detriment of creditors
d)
A. Managers act in their own interests rather than the interests of shareholders.
3.
1.1 Regulators use of the audit function to insulate themselves from blame in a corporate failure most relates to which reason for a demand in auditing?
a)
Insurance hypothesis
b)
Agency theory
c)
Information hypothesis
d)
A. None of the above; it’s a separate issue.
4.
What must an auditor consider when undertaking an audit
a)
Ethical standards issued by the professional bodies
b)
Accounting standards
c)
The Corporations Act.
d)
All of the above
5.
1.1 The key reason for the radical audit reforms over the past decade is:
a)
The disparity of revenues and practices between the big firms and the smaller accounting practices
b)
The inability of auditors to meet their liability claims
c)
The alleged accounting fraud and audit failures related to major corporate collapses
d)
A. The perceived pursuit of self –interest by auditors to the detriment of the public interest.
6.
1.1 The purpose of the surveillance program undertaken by ASIC is to:
a)
Obtain evidence on the negligence of auditors and accountants
b)
A. Develop a complete framework of creative accounting mechanisms.
c)
Evaluate the adequacy of compliance with respect to financial reporting
d)
A. Ensure dividends are not paid from financial statements that have been misstated.
7.
1.1 the main objective of CLERP 9 was to:
a)
Ensure Australia’s legal provisions are as close as possible to the US legislation
b)
Strengthen the financial reporting process so as to ensure the integrity of the capital market
c)
A. Review the liability issues of the audit and legal profession.
d)
Evaluate possible conflicts of interest in the auditing profession
8.
1.1 A financial statement audit provides which level of assurance?
a)
A high level of assurance
b)
An acceptable level of assurance
c)
A moderate level of assurance
d)
A. A low level of assurance.
9.
1.1 Who are the primary financial report users that auditors need to be concerned about?
a)
Managers of the audited firm
b)
Banks who provide capital to the firm
c)
The general public
d)
Shareholders of the firm
10.
1.1 What best describes the ‘expectation gap’ as defined by Porter (1993)?
a)
A. Misperceptions of users about what an audit is designed to do.
b)
Poor performance by auditors
c)
Inadequate audit standards
d)
A. All of the above.
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