Podcast
Questions and Answers
What should Aaron Patel do after becoming aware of his lack of competence for the audit engagement?
What should Aaron Patel do after becoming aware of his lack of competence for the audit engagement?
- Self-Review
- Suggest that Kelly Company engage another auditor to perform the audit (correct)
- Disclaim an opinion
- Rely on the competence of client's personnel
In large companies, the audit committee should comprise at least which of the following?
In large companies, the audit committee should comprise at least which of the following?
- At least three independent, non-executive directors (correct)
- At least 50% of non-executive directors, including the chairman
- The chairman plus one other non-executive director
- At least one non-executive director, which could be the chairman
Which of the following statements best describes the Agency Theory?
Which of the following statements best describes the Agency Theory?
- A theory that holds that audit has a social benefit and is not a technical exercise for regulation
- A theory that holds that the value of the audit report derives from the nature of the auditor as an independent competent professional
- A theory that recognises the inclination of agents to act in their own interests rather than that of the principals (such as their employers) (correct)
- A theory that recognises that auditing is based on scientific logic with a rational process of observation and evaluation of evidence
Which one of the following qualifications is required for individuals working on audits in the UK?
Which one of the following qualifications is required for individuals working on audits in the UK?
What best describes the purpose of a statutory auditor's consideration of internal control in a financial statements audit for a non-public company?
What best describes the purpose of a statutory auditor's consideration of internal control in a financial statements audit for a non-public company?
An attitude that includes a questioning mind and a critical assessment of audit evidence is referred to as:
An attitude that includes a questioning mind and a critical assessment of audit evidence is referred to as:
Who has primary responsibility for the preparation of financial statements?
Who has primary responsibility for the preparation of financial statements?
In which of the following situations would an audit firm have violated the code of professional conduct in determining its statutory audit fees?
In which of the following situations would an audit firm have violated the code of professional conduct in determining its statutory audit fees?
Which of the following situations is likely to represent a threat to objectivity for the external auditor?
Which of the following situations is likely to represent a threat to objectivity for the external auditor?
Which one of the following threats to independence would not arise on the current audit as a result of an audit team member applying for a full-time position with the client?
Which one of the following threats to independence would not arise on the current audit as a result of an audit team member applying for a full-time position with the client?
The risk that auditors will conclude, based on audit procedures, that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as:
The risk that auditors will conclude, based on audit procedures, that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as:
Which of the following statements best describes the responsibility of the IAASB?
Which of the following statements best describes the responsibility of the IAASB?
Flashcards
Auditor Competence
Auditor Competence
An auditor's required skills and knowledge for a given audit engagement.
Audit Committee
Audit Committee
A committee of directors responsible for overseeing the audit process in a company.
Agency Theory
Agency Theory
A theory explaining conflicts of interest between agents (employees) and principals (employers).
UK Audit Qualifications
UK Audit Qualifications
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Internal Control Consideration
Internal Control Consideration
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Professional Skepticism
Professional Skepticism
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Financial Statement Preparation
Financial Statement Preparation
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Audit Fee Violations
Audit Fee Violations
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Threats to Objectivity
Threats to Objectivity
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Detection Risk
Detection Risk
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Study Notes
MCQ Mock Test Answers - Question 1
- Aaron Patel, a qualified auditor, notices a lack of competence for the Kelly Company audit.
- He should suggest that Kelly Company hire another auditor.
MCQ Mock Test Answers - Question 2
- UK listed companies must establish an audit committee.
- Large companies' audit committees should include at least three independent non-executive directors.
MCQ Mock Test Answers - Question 3
- Agency Theory describes the inclination of agents to act in their own interests.
MCQ Mock Test Answers - Question 4
- Individuals working on audits in the UK must be a member of the ICAEW or ACCA, having passed all professional exams.
MCQ Mock Test Answers - Question 5
- Statutory auditors of non-public companies consider internal controls to determine the nature, timing, scope, and extent of their audit.
MCQ Mock Test Answers - Question 6
- Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence.
MCQ Mock Test Answers - Question 7
- Management is responsible for the preparation of financial statements.
MCQ Mock Test Answers - Question 8
- Situations where an audit firm might violate the code of professional conduct in determining audit fees include:
- A fee being established at a later date by the bankruptcy court
- A fee based on the nature of the engagement
- A fee based on the fees charged by the prior auditor to the client
MCQ Mock Test Answers - Question 9
- Threats to auditor objectivity include:
- Auditors eating in client's subsidized canteen during the audit
- Accepting gifts (like biscuits) from clients
MCQ Mock Test Answers - Question 10
- Threats to auditor independence include self-review, self-interest, intimidation, and advocacy.
MCQ Mock Test Answers - Question 11
- Detection risk is the risk that the auditors will conclude, based on audit procedures, that a material misstatement does not exist when it does.
MCQ Mock Test Answers - Question 12
- Objectives of internal control include:
- Checking the accuracy and reliability of accounting data
- Safeguarding assets
- Encouraging adherence to managerial policies.
MCQ Mock Test Answers - Question 13
- Ongoing monitoring activities for entities can include:
- Periodic internal audits
- Annual financial statements' audits
- Approval of cash disbursements
- Management review of weekly performance reports
MCQ Mock Test Answers - Question 14
- Corporate governance aims to ensure senior managers' interests align with shareholders' interests in the US and UK. This is considered true.
MCQ Mock Test Answers - Question 15
- Auditors are bound by confidentiality, and integrity denotes honesty. Auditors must be independent.
MCQ Mock Test Answers - Question 16
- Material misstatements can be aggregated with others, becoming material.
- Misstatements can be financially immaterial but material because of the nature.
MCQ Mock Test Answers - Question 17
- Shareholders' role in governance is to appoint directors and to ensure a suitable structure. The UK Corporate Governance Code is a guide for FTSE 350 companies.
MCQ Mock Test Answers - Question 18
- A partner in a firm falling in love with a client's treasurer would not be an impaired audit.
MCQ Mock Test Answers - Question 19
- A partner with a family member's investment in a client's company would be considered impairment if participating in the engagement.
MCQ Mock Test Answers - Question 20
- A material investment by an audit senior in a client's company would be considered an impairment of independence.
MCQ Practice 02 Solutions - Question 1
- The IAASB sets auditing standards that are internationally recognized, facilitating convergence of standards.
MCQ Practice 02 Solutions - Question 2
- A Recognized Supervisory Body does NOT include reviewing audits of public limited companies.
MCQ Practice 02 Solutions - Question 3
- Material misstatements can occur in accounts, and auditors must consider the effect of fraud on their audit opinion.
MCQ Practice 02 Solutions - Question 4
- Internal auditors report to those charged with corporate governance.
MCQ Practice 02 Solutions - Question 5
- Internal auditors cannot perform a statutory audit.
MCQ Practice 01 Solutions - Question 1
- Management is primarily responsible for financial statements.
MCQ Practice 01 Solutions - Question 2
- An independent audit provides assurance that financial statements are reliable.
MCQ Practice 01 Solutions - Question 3
- Auditors consider internal controls to determine the scope and nature of their audit.
MCQ Practice 01 Solutions - Question 4
- This question is not answered in the provided material.
Additional Notes
- Audit committee members should not consist entirely of executive directors; non-executive directors are required to be included.
- The chief executive/chairman should not be on the audit committee.
- Audit risk is composed of inherent risk, control risk, and detection risk.
- Auditors have to have absolute knowledge when auditing accounts.
- A checklist, flowchart, questionnaire, and narrative notes are used to document internal controls.
- Auditors use segregation of duties, physical controls, and management controls within their control procedures.
- Qualitative factors affect materiality assessments.
- Independence is required of external auditors.
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Description
Test your knowledge on auditing standards and regulations with this quiz. Covering aspects such as audit committees, professional qualifications, and agency theory, it provides insight into essential audit principles. Perfect for students and professionals looking to enhance their understanding of auditing practices.
