Question 1

The Corporations Act requires that auditors are competent.To be suitably qualified the person must:

Accepted Answer

The Corporations Act requires auditors to be competent, which includes being a fit and proper person, being a member of a recognized accounting body, and holding relevant qualifications.

Question 2

The work of an internal auditor can be used to complement, but not substitute for, the work of the independent auditor.Which of the following factors is not one of the considerations listed by ASA 610 that is relevant in determining the effect of an internal auditor's work on the audit?

Accepted Answer

Past communications of the internal auditors with management is not a factor listed by ASA 610 for determining the effect of an internal auditor's work on the audit. The other options are relevant considerations.

Question 3

The Australian Securities Exchange (ASX):

Accepted Answer

The Australian Securities Exchange (ASX) specifically requires the top 300 listed companies to have an audit committee as part of its corporate governance principles and recommendations. This is aimed at ensuring financial reporting and disclosure practices are maintained to a high standard.

Question 4

Which of the following is not a benefit arising from having the financial reports audited?

Accepted Answer

Audits generally provide access to more favorable borrowing terms, not less, as they enhance the credibility of financial statements.

Question 5

The body that prepares the auditing standards that apply in Australia is:

Accepted Answer

The Auditing and Assurance Standards Board (AUASB) is responsible for preparing auditing standards in Australia.

Question 6

An auditor must be registered:

Accepted Answer

Auditors in Australia must be registered by the Australian Securities and Investments Commission (ASIC).

Question 7

It is regarded as best practice in regard to the composition of audit committees to:

Accepted Answer

Audit committees should be composed of independent non-executive directors, and it is not best practice to have executive directors, internal auditors, or external auditors as members.

Question 8

As a general rule, the auditor is appointed by the shareholders at the annual general meeting.Which of the following is not true concerning the appointment of an auditor?

Accepted Answer

The answer of As a general rule, the auditor is...

Question 9

The group which has the legal responsibility for removal of the auditor is:

Accepted Answer

The answer of The group which has the legal responsibility...

Question 10

The primary reasons for the existence of Auditing Standards is:

Accepted Answer

Auditing Standards ensure that auditors follow a consistent and minimum level of quality in their work, which helps in forming a reliable opinion.

Question 11

The Corporations Act does not require the audit of which of the following type of entity, except in specified circumstances?

Accepted Answer

Small proprietary companies are generally not required to have an audit under the Corporations Act unless specific circumstances apply, such as being directed by shareholders or ASIC.

Question 12

Audit committees are perceived to strengthen the independence of auditors.Which of the following is normally an objective of an audit committee?

Accepted Answer

The primary objective of an audit committee is to assist the board of directors in fulfilling its oversight responsibilities, which includes ensuring due care, diligence, and skill in financial reporting and auditing processes.

Question 13

S.308 of the Corporations Act requires certain implied conditions to be reported on in an audit report if there is any deficiency, or failure to comply.Which of the following is one of those implied conditions?

Accepted Answer

Section 308 of the Corporations Act requires auditors to report if they have not obtained all necessary information, explanations, and assistance, which is an implied condition for conducting a proper audit.

Question 14

Which of the following is not an inherent limitation of an audit?

Accepted Answer

The answer of Which of the following is not an...

Question 15

The removal and resignation of auditors must be:

Accepted Answer

The removal and resignation of auditors must be both by resolution of the company and with special notice to the ASIC for its consent. This is outlined in the Corporations Act 2001.

Question 16

An engagement letter contains express or implied terms of the contractual arrangement with the client.Which of the following is not one of those terms?

Accepted Answer

The engagement letter typically outlines the auditor's responsibilities, including exercising skill and care, maintaining independence, and providing an opinion on financial statements. However, it does not specifically include reporting the duties of the auditor, which is more about the scope of work rather than a contractual term.

Question 17

Which of the following is a benefit of the ASIC register of company auditors?

Accepted Answer

The ASIC register of company auditors provides assurance of the qualification, level of competence, and experience of the auditor, ensuring they meet the necessary standards to perform audits.

Question 18

Who is responsible for the appointment of the auditor to a company?

Accepted Answer

The members of the company are responsible for appointing the auditor, typically during the annual general meeting.

Question 19

The words that best describes the relationship which should exist between the external auditor and the management of the client company are:

Accepted Answer

Mutual trust and respect is the foundation of a healthy relationship between the external auditor and the management of the client company.

Question 20

When auditors issue an audit report that expresses an audit opinion what duty are they fulfilling?

Accepted Answer

Auditors have a statutory duty to report their findings to the members of the company and to regulatory bodies like ASIC (Australian Securities and Investments Commission) as part of their audit opinion.

Quiz 5: Overview of the Audit Financial Reports