Question 1

Which of these is not a reform introduced by CLERP 9 in relation to Auditors and annual general meetings (AGMs)?

Accepted Answer

CLERP 9 did not specifically require auditors to address the AGM; it focused on ensuring auditors' presence and the opportunity for shareholders to ask questions.

Question 2

The oversight structure of financial reporting in Australia had many levels.CALDB is part of which level?

Accepted Answer

CALDB is part of Government regulation.

Question 3

Investors shift financial responsibility for audited financial information to the auditor in order to lower the expected loss from litigation or related settlements.This describes which theory of auditing?

Accepted Answer

The insurance hypothesis suggests that investors view auditors as a form of insurance against financial losses due to inaccurate financial reporting, thus shifting financial responsibility to auditors to reduce potential litigation losses.

Question 4

Under ASA 200/ IAS 200 the primary objective of a financial report audit is to:

Accepted Answer

The primary objective of a financial report audit is to express an opinion as to whether the financial report is prepared, in all material aspects, in accordance with a financial reporting framework. This means that the auditor is providing assurance about the accuracy and completeness of the financial report. The other options (A, B, D) are not the primary objective of a financial report audit. While the auditor may identify fraud or other issues during the course of the audit, their main objective is to provide an opinion on the financial report itself.

Question 5

Auditing bears what relationship to assurance?

Accepted Answer

Auditing is a specific type of assurance service that involves evaluating financial statements to ensure accuracy and compliance with standards.

Question 6

Which body has a mission 'to develop, in the public interest, high-quality auditing and assurance standards and related guidance to enhance the relevance, reliability and timeliness of information provided to users of audit and assurance services'?

Accepted Answer

The answer of Which body has a mission 'to develop,...

Question 7

The three major professional accounting bodies in Australia are:

Accepted Answer

The three major professional accounting bodies in Australia are Chartered Accountants Australia and New Zealand (CAANZ), CPA Australia, and the Institute of Public Accountants (IPA).

Question 8

Which theory of auditing focuses more towards the decision usefulness role of accounting?

Accepted Answer

The Information hypothesis focuses on the decision usefulness role of accounting by emphasizing the importance of providing relevant and reliable information to users for decision-making purposes.

Question 9

Which of the following is true regarding auditors and fraud?

Accepted Answer

Auditors are not required to detect all fraud, but they should investigate if there are suspicious circumstances. The Kingston Cotton Mill case established that the primary role of an audit is not to detect fraud.

Question 10

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:

Accepted Answer

The ethical principle breached is auditor independence, as the auditor's role as a consultant creates a conflict of interest, compromising their objectivity and impartiality.

Question 11

The separation of ownership and control in large organisations has resulted in:

Accepted Answer

The separation of ownership and control in large organizations often leads to an agency problem, where the interests of the managers (agents) may not align with those of the shareholders (owners).

Question 12

Which of these was not an Australian corporate collapse?

Accepted Answer

All the mentioned companies, Harris Scarfe, HIH Insurance Ltd., and One.Tel, were Australian corporate collapses.

Question 13

In Australia, the auditor's opinion in the audit report must state:

Accepted Answer

In Australia, the auditor's opinion can state either that the financial report is presented fairly or that it presents a true and fair view, both in accordance with the applicable financial reporting framework.

Question 14

Which of these is not an objective of the ASIC?

Accepted Answer

The objective of establishing new institutional arrangements for standard setting is not a primary objective of the Australian Securities and Investments Commission (ASIC). ASIC's main objectives focus on regulating companies, markets, and financial services to protect consumers, investors, and creditors.

Question 15

In relation to auditing the information hypothesis relates:

Accepted Answer

The information hypothesis relates to why there is a demand for audits, as it suggests that audits provide valuable information that reduces information asymmetry between management and stakeholders.

Question 16

It is not a requirement to be registered as an auditor in Australia to:

Accepted Answer

All the options listed are requirements to be registered as an auditor in Australia.

Question 17

In relation to changes to auditing regulation it is true that:

Accepted Answer

The Sarbanes-Oxley Act in the USA is known for its rules-based approach, focusing on strict compliance and detailed regulations. In contrast, the CLERP reforms in Australia are more principles-based, emphasizing broader guidelines and professional judgment.

Question 18

In Australia, all of the following are required to have an annual audit, except:

Accepted Answer

In Australia, not-for-profit organisations and statutory authorities are required to have an annual audit. However, small proprietary companies are not required to have an annual audit if they meet certain criteria such as having fewer than 20 employees and revenue of less than $25 million per year.

Question 19

The statutory body that is responsible for hearing applications in Australia as to whether auditors and liquidators have breached the Corporations Act is:

Accepted Answer

CALDB (The Companies Auditors and Liquidators Disciplinary Board) is responsible for hearing applications in Australia as to whether auditors and liquidators have breached the Corporations Act. ASIC (Australian Securities and Investments Commission) is a regulatory body that oversees corporations and financial markets, FRC (Financial Reporting Council) is an independent Australian Government agency responsible for overseeing the effectiveness of the accounting and auditing standards-setting process for the accounting profession and AUASB (Australian Auditing and Assurance Standards Board) is responsible for developing, issuing, and maintaining auditing and assurance standards in Australia.

Question 20

Any situation where information is prepared by one party and then attested as to its accuracy by another party is known as:

Accepted Answer

An assurance engagement is any situation where information is prepared by one party and then attested as to its accuracy by another party.

Quiz 1: An Overview of Auditing

Which of these is not a reform introduced by CLERP 9 in relation to Auditors and annual general meetings (AGMs) ?