An Overview of Auditing

17849 Words Jan 12th, 2015 72 Pages
Chapter 1
An overview of auditing

Multiple Choice

1. The three major professional accounting bodies in Australia are:
a. ICAA, CPA and ASIC.
b. CPA Australia, NIA and AARF.
c. ATO, AUASB and ASIC.
d. ICAA, CPA Australia and NIA.

The correct option is d. Feedback: Section 1.3 The auditing environment

2. Which body has a mission ‘to develop, in the public interest, high-quality auditing and assurance standards and related guidance to enhance the relevance, reliability and timeliness of information provided to users of audit and assurance services’?
a. the IAASB.
b. the AASB.
c. the AUASB.
d. the FRC.

The corrects option is c. Feedback: Section 1.4 Auditing standards

3. Which of these is not an objective of the
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auditors and users of audited financial reports.
b. auditors and their clients.
c. CPA Australia/ICAA and the ASIC.
d. auditors and the ASIC.

The correct option is a.
Feedback: Feedback: Section 1.5 Does the audit meet the demands of users?

13. Investors shift financial responsibility for audited financial information to the auditor in order to lower the expected loss from litigation or related settlements. This describes which theory of auditing?
a. explanatory.
b. agency.
c. information hypothesis.
d. insurance hypothesis.

The correct option is d. Feedback: Feedback: Section 1.1 Auditing fundamentals

14. The best test to decide if audits provide good value is:
a. by examining how often audits are associated with company failure
b. by examining whether the audit report is correct
c. by examining the premium the market places on a share price for independently audited information
d. it is not possible to designate any one test as being the best to decide if audits provide good value The correct option is d. Feedback: Section 1.5 Does the audit meet the demands of users?

15. Which of these actions is most likely to remove the audit expectation gap?

a. improving auditing standards
b. educating of audit users about what are reasonable expectations
c. improving auditor’s performance
d. it will require a comprehensive approach combining all three of the above

The correct option is d. Feedback:
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