Question 1

Threats to auditor independence can come from various sources.Which of these is referred to in the Code of Ethics as a self-review threat?

Accepted Answer

A self-review threat occurs when an auditor is in a position to evaluate their own work, such as preparing original data used in the financial statements they are auditing.

Question 2

Which of these jeopardises audit independence?

Accepted Answer

Familiarity with a client and their systems can lead to a lack of objectivity and impartiality, which jeopardizes audit independence.

Question 3

What is not a category of safeguards that can be used by professional accountants?

Accepted Answer

The CALDB (Companies Auditors and Liquidators Disciplinary Board) does not develop safeguards for professional accountants. Safeguards are typically created by the profession, legislation, regulation, or within the client's systems and engagements.

Question 4

The fundamental ethical characteristics required of professional accountants are:

Accepted Answer

Professional accountants are expected to uphold competence, objectivity, and integrity as fundamental ethical characteristics to ensure trust and credibility in their work.

Question 5

The purpose of ethical decision making models is to:

Accepted Answer

The purpose of ethical decision making models is to help the auditor arrive at a well-informed and ethical decision. It provides a systematic and structured approach to consider all relevant facts, applicable standards, and possible alternatives in making ethical decisions. It does not direct the auditor on which action to take or supplement the code of ethics, but it does help in identifying the appropriate standard to use.

Question 6

John resigned from an assurance engagement because his independence was impaired.He was concerned that if he did not resign then ASIC would have a case against the firm and its reputation would suffer as a result.This is an example of:

Accepted Answer

John's decision to resign is based on the consequences of his actions, specifically the potential negative impact on the firm's reputation and legal standing, which aligns with consequentialism.

Question 7

The word 'ethics' is derived from the Greek word ethos, meaning character.Which of these is not a doctrine or theory of ethics?

Accepted Answer

Theology is a branch of study that deals with religious beliefs and practices, while the other options (consequentialism, utilitarianism, and deontology) are all doctrines or theories of ethics.

Question 8

The conceptual approach to independence requires that there is:

Accepted Answer

The conceptual approach to independence emphasizes both independence in mind (actual independence) and independence in appearance (perceived independence by others).

Question 9

In relation to specific threats to auditor independence, taxation services supplied to audit clients:

Accepted Answer

The answer of In relation to specific threats to auditor...

Question 10

Which of these bodies in Australia established a code of professional conduct?

Accepted Answer

The Accounting Professional & Ethical Standards Board (APESB) is responsible for establishing a code of professional conduct for accountants in Australia.

Question 11

The main area of practice covered in the IFAC Code of Ethics for Professional Accountants is:

Accepted Answer

The IFAC Code of Ethics for Professional Accountants covers fundamental principles that are applicable to all professional accountants as well as those in public practice and in business. Therefore, the correct choice is D, all the above.

Question 12

Which of the following would characterise a duty of a professional person?

Accepted Answer

A professional person is typically characterized by holding membership in a professional body, providing services objectively and confidentially, and accepting the enforceability of the professional body's code of conduct.

Question 13

The statement about auditor independence that is true is:

Accepted Answer

Statutory law recognizes the need for audit independence. This is to ensure that auditors can perform their work objectively and without any undue influence from the companies they are auditing. Shareholders may appoint auditors, but their independence is protected by law. However, this does not mean that auditors have no right to be heard at the AGM. They may be invited to attend and provide their expert opinions on financial matters.

Question 14

Which of these is not identified as a type of threat to compliance with the fundamental principles in the IFAC Code applicable to professional accountants in public practice?

Accepted Answer

Advertising is not identified as a type of threat to compliance with the fundamental principles in the IFAC Code for professional accountants.

Question 15

Threats to auditor independence can come from various sources.Which of these is referred to in the Code of Ethics as a self-interest threat?

Accepted Answer

A self-interest threat arises when an auditor has a financial interest in the client, such as a loan or guarantee (option A), or when the auditor is overly dependent on the client for fees (option B). Both situations can compromise the auditor's objectivity and independence.

Question 16

According to Greenwood which of these is not necessarily an attribute of a profession?

Accepted Answer

The answer of According to Greenwood which of these is...

Question 17

Using the same senior personnel on an assurance engagement over a long period may create what type of threat to audit independence?

Accepted Answer

Using the same senior personnel over a long period can lead to a familiarity threat, where the auditor becomes too sympathetic to the client's interests or too trusting of the client's management.

Question 18

The view that ethics is not just a matter of what people do but what people are, is known as:

Accepted Answer

The view that ethics is not just a matter of what people do but what people are, is known as virtue ethics. Virtue ethics is a branch of ethical theory that emphasizes the cultivation of character or virtues in determining ethical behavior, rather than adherence to rules or consequences of actions. It holds that a person who possesses desirable character traits, such as honesty and compassion, will naturally behave in an ethical manner.

Question 19

The significance of economic, financial or other relationships in determining independence in appearance is evaluated by:

Accepted Answer

Independence in appearance is crucial for ensuring the credibility of audit reports, and it should be evaluated from the perspective of a reasonable and informed third party. The actions or relationships that could be seen as impairing independence must be evaluated by considering how they would be perceived by such third-party individuals. The other options (B, C, and D) are subject to biases and may not consider the potential impact on the stakeholders of the entity being audited.

Question 20

Which of these views consider moral values to be relative in regard to a particular environment?

Accepted Answer

Ethical relativism is the view that moral values and judgments are not absolute but are relative to the cultural, social, or personal circumstances in which they arise.

Quiz 3: Professional Ethics, Regulation and Liability