Question 1

List and describe the six-step process for resolving ethical dilemmas.

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Question 2

An audit partner may own shares in a company that is an audit client if the value of the shares is immaterial.

Accepted Answer

Audit independence rules strictly prohibit an audit partner from owning any shares in an audit client, regardless of the value, to maintain objectivity and independence in the audit process.

Question 3

Discuss the ways in which both the accounting profession and society itself encourages public accountants to conduct themselves in a professional manner.What factors influence the ethical conduct of audit practitioners?

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Question 4

Explain the 'conceptual approach' referred to in APES 110.

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Question 5

The professional bodies' ethical rules have the force of law applicable to auditing standards.

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Question 6

Does the Code of Ethics for Professional Accountants permit a public accounting firm to undertake bookkeeping and audit services for the same client?

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Question 7

The Code of Ethics for Professional Accountants should be considered as individual rules applicable to individual members according to their circumstances.

Accepted Answer

The Code of Ethics for Professional Accountants should be considered as a universal set of principles and rules applicable to all members, regardless of their individual circumstances. Adherence to these principles is essential for maintaining the integrity and credibility of the accounting profession.

Question 8

When audit working papers are viewed by another party as part of a peer review, the permission of the client must be obtained.

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Question 9

Explain the difference between 'independence in appearance 'and 'independence in fact', and explain why each is important to the value of the auditing function.

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Question 10

In the Code of Ethics for Professional Accountants, the first principle of professional conduct, entitled Integrity, applies only to members in public practice and not to members who work as accountants in business, government, or education.

Accepted Answer

The first principle of professional conduct, Integrity, applies to all members of the accounting profession regardless of their field of work, whether it is public practice, business, government, or education.

Question 11

The ASX listing rules require listed companies who do not have an audit committee to establish an audit committee within three years.

Accepted Answer

The ASX listing rules require that if a listed entity does not have an audit committee because it is not part of the S&P/ASX 300 Index, it must disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. There is no specific requirement for all listed companies to establish an audit committee within three years.

Question 12

What is the 'expectation gap' and to what causes has it been attributed?

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Question 13

There are five fundamental principles of professional conduct set out in Part A of the Code of Ethics for Professional Accountants.List each and briefly discuss each in the context of provision of audit services.

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Question 14

What is auditor independence and why is it so important?

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Question 15

Explain why there is a special need for ethical conduct in the auditing profession.

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Question 16

Can a public accounting firm accept an audit client if a principal within the firm has a direct shareholding in the prospective client?

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Question 17

To preserve audit independence, the review partner must rotate every 5 years.

Accepted Answer

According to the International Standards on Auditing (ISA), the review partner must rotate every 5 years to preserve audit independence. This is to ensure objectivity and to avoid familiarity that could compromise the auditor's ability to exercise professional skepticism.

Question 18

A public accounting firm currently audits XYZ Co., a publicly listed company.The firm has been approached by XYZ Co.to also provide valuation services on all its property, plant, and equipment.Can the firm provide these services?

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Question 19

The Code of Ethics for Professional Accountants adopts a conceptual framework approach because it is impossible to anticipate every situation that might create an ethical problem for a professional accountant.

Accepted Answer

A conceptual framework approach provides a set of principles and values that can guide professional accountants in making ethical decisions, rather than giving prescriptive rules for every possible situation. This allows for flexibility and adaptability in a rapidly changing business environment.

Question 20

What rules prohibit an auditor from being an employee, officer, or director of an audit client?

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Quiz 3: Audit quality and ethics