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WorksheetsAAA - Module 1 Quiz
Total questions: 38
Worksheet time: 21mins
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
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
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
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
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
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
Based on the PWC-TBW Case Study, what was the fundamental principle breached by the auditors?
Objectivity
Integrity
Professional Competence & Due Care
Professional Behaviour
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.
After finalising an engagement, Miriam issues a report to management that identifies gaps noted and provides recommendations on how to address those gaps. The report also includes agreed timelines when gaps will be addressed by management.
Is the above an assurance engagement?
Yes, because Miriam has provided an opinion on what she considers to be gaps and has provided recommendations to address them.
Yes, because Miriam evaluated the organisation against a criteria she had predetermined, identified gaps and also provided recommendations.
No, because it is not clear on who the responsible party is in the above case.
No, because Miriam reported to management and did not provide any assurance.
Which of the following is an example of sustainability reporting?
Corporate Governance statements.
Risk management.
Licensing agreements.
Carbon-neutral statements.
Joe is an auditor of Entity X. What standard would Joe use to perform the review of the annual financial statements?
ISRE 2400 Engagement to Review Financial Statements
ISRE 2410 Review of the Interim Financial Information Performed by the Independent Auditor of the Entity
ASRE 2415 Review of a Financial Report: Company Limited by Guarantee or an Entity Reporting under the ACNC Act or Other Applicable Legislation Regulation
ISA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing
The manner in which an audit opinion is expressed can be described as?
Strong.
Positive.
Negative.
Balanced.
What is the name given to the assurance obtained from testing 100% of the population?
High.
Total.
Absolute.
Reasonable.
What type of assurance would you get from an audit engagement?
High
Absolute
Maximum
Reasonable
What is the name given to a type of engagement where the same party is responsible for measuring and evaluating the subject matter as well as reporting on the findings in the final report?
Direct.
Indirect
Attestation.
Self-assurance.
What type of assurance would you get from a review engagement?
Low.
Limited.
Moderate.
Reasonable.
Which of the following is not a component that is required for the application of professional judgment?
Ability to use knowledge.
Ability to diagnose issues.
Ability to solve problems.
Ability to follow instructions.
Sam is not feeling well and he visits a doctor.
What component of professional judgment would be required for the doctor to identify Sam’s sickness?
Ability to solve.
Ability to research.
Ability to diagnose.
Ability to communicate.
Which of the following is most likely to require the application of professional judgment?
Marking a multiple choice exam.
The application of accounting standards.
The calculation of a mathematical formula.
Working out the GST from a shopping receipt.
What is the name given to the application of a questioning mind?
Professionalism
Professional judgement.
Professional scepticism.
Professional competence.
What is the general name given to the benchmark against which performance or compliance is measured?
Laws.
Rules.
Criteria.
Framework.
What is the key reason why an auditor needs to understand the organisation’s business model?
To identify risks of material misstatements.
To outsource highly technical areas to an expert
To keep at pace with changing business models
To provide better service to clients in the niche industry
Owen Inc. recently started utilising a large number of free lancers to assist in developing products for the organisation. The organisation did not however have adequate supervision over work performed by them.
What are the potential risks that could arise as a result of this?
Revenue could be materially misstated.
Inventory could be materially misstated.
Warranty provisions may be materially misstated.
Payroll could be materially misstated.
Faida Enterprises has started selling its products through online channels. Faida’s management has decided to use a little known newly established online platform which charges much lower fees than the reputable online marketplaces.
Which of the following statement is likely to be correct?
The risk of material misstatement will not be impacted regardless of the online platform that Faida uses.
The risk of material misstatement will likely be lower since Faida is using a little known online platform with much less users than the large online platforms. The risk of errors and fraud is therefore lower
The risk of material misstatement will likely increase as Faida is using a little known platform as opposed to established marketplaces.
The auditor will need to first assess the effectiveness of the controls of the little known platform before considering the risk of material misstatement.
What is the primary reason why an auditor should adopt technological innovation in the audit process?
To provide an absolute assurance on the financials since it is possible to review 100% of data using the latest technological advancement in CAATs, Artificial intelligence and robotics.
To improve audit quality
To significantly reduce the audit timelines and provide those charged with governance and members of the Company with more detailed financial analysis which supports the audit conclusion.
To ensure audit firms are also utilising disruptive technologies that can improve business practises and the financial statements.
Can automation result in the auditor performing less mechanical tasks and applying less professional judgement to analyse differences and anomalies?
No, auditors cannot rely on automation and technological advancement to perform mechanical tasks as they remain responsible for issuing an appropriate audit opinion. Auditors should therefore ensure that they are closely involved in any mechanical or rule-based tasks.
Yes, automation will significantly reduce both mechanical tasks and professional judgement required to be exercised by the auditor. This is because automation can analyse significantly large data.
No, automation will only reduce mechanical tasks. Professional judgement is unlikely to significantly reduce due to technological innovation.
No, mechanical tasks are unlikely to reduce as the auditor needs to still be closely involved in running audit procedures but professional judgement will significantly reduce as technology can analyse much more data than the auditor can.
Otis Accountancy Services, a small audit firm, has just won a new client after submitting an audit proposal. The client however utilises very sophisticated technology and has a paperless office. The audit firm has however not kept at pace with technology and therefore prefers obtaining physical documentation as well as utilising very basic technology.
What key fundamental principle is likely to be breached as a result of the above if Otis performs the audit of their new client?
Integrity.
Objectivity.
Professional behaviour.
Professional competence and due care.
Which of the following is a standard issued by the International Auditing and Assurance Standards Board?
International Accounting Standards (IAS)
International Standards on Quality Control (ISQC)
Preamble to Australian Auditing Standards.
Code of Ethics for Professional Accountants.
Which of the following relating to the different types of assurance engagements is correct?
In a review engagement, the auditor is more likely to provide reasonable assurance.
A limited assurance engagement carries a lower risk than a reasonable assurance engagement.
The form in which the opinion is expressed differs between a reasonable and limited assurance engagement.
A reasonable assurance engagement has less evidence gathering procedures than a limited assurance engagement.
Which of the following is not an element of an assurance engagement?
Criteria.
Subject matter.
Assurance report.
Engagement letter.
Which of the following is an example of an engagement covered by ISAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information?
Tax consulting engagements.
Performing agreed upon procedures.
Compilation of financial information.
Providing an opinion on a prospectus.
Which of the following is an example of an attestation engagement?
An opinion by a practitioner on an integrated report prepared by management.
A report by the internal auditor referring to the outcome of the tests they performed.
An opinion provided by management relating to the effectiveness of internal controls that they evaluated.
A report prepared by an assurer in relation to the accuracy of non-financial data that the assurer measured.
Which of the following is not a characteristic of suitable criteria?
Reliability.
Neutrality.
Comparability.
Understandability.
Which of the following is not a component of assurance engagement risk?
Control risk.
Inherent risk.
Business risk.
Detection risk.
PhantomTick is the newly appointed auditor of Zam Ltd. The CFO of Zam Ltd is the audit partner’s brother-in-law and was instrumental in convincing the audit committee to appoint PhantomTick as external auditors.
The audit committee is adamant that they did not choose PhantomTick based on the CFO’s relationship with the audit partner. The audit committee justified the appointment of PhantomTick on the basis that PhantomTick not only promised to limit their audit fee to a maximum of 10 per cent of the previous year fee, but the firm also promised a positive opinion.
With regard to the promises made by PhantomTick, which of the following represents the fundamental principles that the audit firm has most likely breached?
Professional competence and due care.
Confidentiality and professional behaviour.
Confidentiality and professional competence and due care.
Professional competence and due care and professional behaviour.
PhantomTick is the newly appointed auditor of Zam Ltd. The CFO of Zam Ltd is the audit partner’s brother-in-law and was instrumental in convincing the audit committee to appoint PhantomTick as external auditors.
The audit committee is adamant that they did not choose PhantomTick based on the CFO’s relationship with the audit partner. The audit committee justified the appointment of PhantomTick on the basis that PhantomTick not only promised to limit their audit fee to a maximum of 10 per cent of the previous year fee, but the firm also promised a positive opinion.
Which of the following is the most likely threat arising from the audit partner's relationship with the CFO
Advocacy.
Familiarity.
Self-review.
Self-interest.
