35 Multiple Choice Questions worth 1 mark each
(all questions to be answers)
1. ABC firm are the auditors of XYZ Company. The partner responsible for the audit has recently spent a week working with XYZ as a paid consultant on their internal control systems. The ethical principle that has been breached is: a. auditor independence. b. auditor appointment. c. auditor rotation. d. auditor competence.
2. The term audit expectation gap refers primarily to differences in expectations between: a. auditors and users of audited financial reports. b. auditors and their clients. c. CPA Australia/ICAA and the ASIC. d. auditors and the ASIC.
3. …show more content…
14. Auditors are accountable in law for their professional conduct. This accountability arises under: a. Common law. b. Statute law. c. Tort law. d. All of the above.
15. The so-called 'deep-pockets' theory in relation to alleged audit failures, refers to: a. the auditor being the only party left with sufficient funds to indemnify the plaintiff's losses. b. the requirement to hold a public practice certificate. c. several widely reported business failures that resulted in significant loss to investors. d. the gap between the potential liability and the available insurance cover.
16. The term 'privity of contract' refers to: a. The contractual relationship that exists between two or more contracting parties. b. The fact that an audit is to be performed in accordance with professional standards. c. The fact that an auditor appointed to conduct a statutory audit cannot reduce their liability by contract (s. 241). d. The mandatory requirement that there must be an engagement letter setting out the terms of the audit contract.
17. The mandatory requirement that there must be an engagement