Question 1

The impact of e-commerce on public accountants who perform audits of such entities is that:

Accepted Answer

With the increasing prevalence of e-commerce, auditors are now expected to have a basic understanding of the related technologies and processes. They need to be able to assess the risks associated with electronic transactions and ensure that appropriate controls are in place. However, they do not necessarily need to be experts in e-commerce and information technology. Audit firms may also need to hire IT experts, but they do not necessarily have to be partners. Option D is not a viable solution as it violates the independence requirement of auditors.

Question 2

An auditor could determine how many items need to be selected from the population for a particular audit test by consulting:

Accepted Answer

ASA 530, Auditing Standard ASA 530: Audit Sampling, provides guidance on selecting sample sizes for audit procedures. Therefore, the auditor could consult ASA 530 to determine the appropriate sample size for a particular audit test.

Question 3

An attestation service is a type of assurance service in which the public accounting firm issues a written communication that expresses a conclusion about the reliability of a written assertion of another party.

Accepted Answer

This is an accurate definition of an attestation service.

Question 4

Public accounting firms utilise online resources and databases to:

Accepted Answer

Public accounting firms utilise online resources and databases not only to stay current with emerging business and standard-setting issues but also to obtain industry data useful for auditing. Therefore, all of the choices are correct.

Question 5

Which one of the following was NOT an objective of the Institute's Quality Review Program?

Accepted Answer

The Institute's Quality Review Program aimed to enhance client service, increase returns to accounting firms, and reduce risk, but reducing the need for costly peer reviews was not stated as an objective.

Question 6

The International Standards on Auditing (ISAs)are issued by:

Accepted Answer

The International Standards on Auditing (ISAs) are issued by the International Federation of Accountants (IFAC), which is a global organization for the accountancy profession. The IFAC sets international standards for ethics, education, and public sector accounting in addition to auditing standards. The other options - International Institute of Internal Auditors, International Quality Control Association, and United States Securities and Exchange Commission - do not issue the ISAs.

Question 7

Information risk increases as business organisations become larger.

Accepted Answer

As business organisations become larger, there are more employees, more data, and more potential for security breaches, which increases the overall information risk.

Question 8

Review and approval of audit programs by the engagement partner is a characteristic of which of the six objectives of quality control?

Accepted Answer

Review and approval of audit programs by the engagement partner is a part of engagement performance, which is one of the six objectives of quality control. The other objectives are leadership responsibilities, ethical requirements, acceptance and continuance of client relationships and specific engagements, human resources, and monitoring.

Question 9

The primary role of the Auditor-General is the enforcement of the federal tax laws as defined by Parliament and interpreted by the courts.

Accepted Answer

The primary role of the Auditor-General is to provide independent assurance that government operations are conducted with efficiency, effectiveness, and transparency in compliance with applicable laws and regulations. They do not enforce federal tax laws. That falls under the jurisdiction of the Canada Revenue Agency (CRA).

Question 10

The main purpose of the Corporations Act is to:

Accepted Answer

The main purpose of the Corporations Act is to establish appropriate corporate governance mechanisms to promote appropriate decision making by participants and managerial accountability to shareholders. The Act also covers other aspects related to companies, such as their registration, operations, legal liabilities, and reporting requirements. However, the overarching goal of the Act is to enhance the accountability of corporations and their directors, officers, and auditors, and to protect the interests of their stakeholders, including shareholders, employees, customers, and creditors.

Question 11

The criteria used by an external auditor to evaluate published financial statements are known as generally accepted auditing standards.

Accepted Answer

The criteria used by an external auditor to evaluate published financial statements are known as generally accepted accounting principles (GAAP), while generally accepted auditing standards (GAAS) are the standards auditors follow when conducting audits.

Question 12

Auditing standards (ASAs):

Accepted Answer

ASAs are auditing standards that are issued by the AUASB (Australian Auditing and Assurance Standards Board). They establish mandatory requirements for how audits are performed in Australia. These standards do not have the 'force of law' under the Corporations Act 2001, but they are considered essential in ensuring the auditor can issue an opinion on the financial statements with reasonable assurance.

Question 13

The criteria by which an auditor evaluates the information under audit is the same for every audit.

Accepted Answer

The criteria by which an auditor evaluates the information under audit may vary depending on the nature of the audit and the specific objectives of the audit.

Question 14

The primary purpose of a compliance audit is to determine whether the overall financial statements are in compliance with generally accepted accounting principles.

Accepted Answer

The primary purpose of a compliance audit is to determine whether an organization is following laws, regulations, and internal policies and procedures. It does not focus on the overall financial statements, which is the purpose of a financial statement audit.

Question 15

Assurance services are independent professional services that improve the quality of information for decision makers.

Accepted Answer

Assurance services provide objective and independent assessments of information systems and processes, which helps decision makers to make more informed and reliable decisions.

Question 16

If an auditor has determined that the client has an excellent internal control structure:

Accepted Answer

When an auditor assesses a client's internal control structure as excellent, it implies that the control environment effectively mitigates the risk of material misstatements. Consequently, the auditor may decide that less audit evidence is needed compared to a scenario where the internal controls are deemed inadequate, as the risk of error or fraud is lower.

Question 17

The primary purpose of a performance audit is to evaluate whether an organisation is complying with its operating procedures and methods.

Accepted Answer

The primary purpose of a performance audit is to evaluate the effectiveness and efficiency of an organisation's operations and to identify areas for improvement, not just whether they are complying with their operating procedures and methods. Compliance audits focus on adherence to regulatory requirements and internal policies.

Question 18

Public accounting firms are NOT allowed to provide bookkeeping services for audit clients.

Accepted Answer

Public accounting firms can provide bookkeeping services for audit clients under certain conditions, such as not making managerial decisions, to maintain independence as required by relevant professional standards and regulations.

Question 19

Results of compliance audits are typically reported to the Auditor-General.

Accepted Answer

Results of compliance audits are typically reported to the management or governing body of the audited entity, not directly to the Auditor-General. The Auditor-General may oversee or receive reports on various audits, but compliance audit results are primarily for internal use by the audited organization to improve compliance and governance.

Question 20

One consequence of CPA Australia's Quality Assurance Program is likely to be:

Accepted Answer

The Quality Assurance Program of CPA Australia aims to provide feedback and guidance to practitioners, which can help them improve the quality of their services. Therefore, one likely consequence of this program is the provision of information to practitioners that can enhance service quality. The other answer choices are not directly related to the program's objectives and may not be the expected consequences of the program.

Quiz 1: Demand for audit and assurance services