International Auditing Test Questions
Course Introduction
International Auditing explores the standards, practices, and challenges of auditing in a global context. This course examines the similarities and differences between national and international auditing standards, such as the International Standards on Auditing (ISAs), and how they are applied across various jurisdictions. Students will gain insight into the role of professional organizations, cross-border regulatory frameworks, and ethical considerations, while analyzing key issues such as audit quality, risk assessment, and reporting in multinational environments. The course prepares students to understand and navigate the complexities of auditing financial statements for companies operating in the global marketplace.
Recommended Textbook
International Accounting 5th Edition by Frederick D.
S. Choi
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12 Chapters
677 Verified Questions
677 Flashcards
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Chapter 1: Introduction to International Accounting
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Sample Questions
Q1) What is the term used to describe the possibility that a foreign currency will decrease in U.S. dollar value over the life of an asset such as Accounts Receivable?
A) Foreign exchange translation
B) Foreign exchange risk
C) Hedging
D) Foreign currency options
Answer: B
Q2) Which of the following is the primary role of an internal auditor?
A) To ensure the adoption of IFRS by all foreign companies
B) To prepare the financial statements of the company
C) To uncover errors, inefficiencies, and fraud
D) The prepare the financial budgets for the company
Answer: C
Q3) Which of the following is an example of a "greenfield" investment?
A) Nike contracts with a footwear company in China to make athletic shoes.
B) A Chinese oil company buys a U.S. oil company.
C) Toyota, a Japanese automaker, builds an assembly plant in Ohio.
D) Daimler, a German automaker, merges with Chrysler, a U.S. automaker.
Answer: C
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Page 3
Chapter 2: Worldwide Accounting Diversity
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Sample Questions
Q1) It is generally believed that the 1997 financial crisis in East Asia was partly due to accounting factors in that part of the world. Which of the following accounting values was lacking in that part of the world and thereby contributed to the crisis?
A) Professionalism
B) Statutory control
C) Uniformity
D) Transparency
Answer: D
Q2) The "Fair Presentation/Full Disclosure Model" is a classification scheme used by: A) Germany.
B) Japan.
C) the United States and the United Kingdom.
D) Brazil.
Answer: C
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Chapter 3: International Convergence of Financial Reporting
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Sample Questions
Q1) The IASB is organized under an independent entity called:
A) the SEC.
B) the AFL.
C) the IFRSF.
D) INTERPOL.
Answer: C
Q2) In which of the following countries is the use of IFRS NOT allowed for domestic companies listed on its stock exchanges?
A) United Kingdom
B) Yugoslavia
C) Australia
D) United States
Answer: D
Q3) What basis does the International Accounting Standards Board use in developing IFRS?
A) Detailed rules to govern accounting practice
B) A framework for deriving general principles
C) Typical tax laws of western nations
D) Exceptions or unusual circumstances that require special attention
Answer: B
Page 5
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Chapter 4: International Financial Reporting Standards:
Part I
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Sample Questions
Q1) What types of differences can cause issues between International Financial Reporting Standards and U.S. GAAP?
A) Measurement
B) Alternatives available
C) Disclosure
D) All of the above may be different between IFRS and U.S. GAAP.
Q2) How does the definition of asset impairment differ between IAS 36 and U.S. GAAP?
A) U.S. GAAP does not consider selling price in determining impairment, but IAS 36 does.
B) U.S. GAAP considers cash flows in assessing value of continued use, but does not discount them, whereas IAS 36 requires discounting in assessing asset impairment.
C) Asset impairment is more likely to occur under IAS 36 than under U.S. GAAP.
D) All of the above are differences between IAS 36 and U.S. GAAP.
Q3) Under U.S. GAAP, interest on loans secured to acquire fixed assets must be:
A) expensed in the period they are incurred.
B) capitalized as part of the fixed asset cost.
C) either expensed currently or capitalized as part of the fixed asset cost.
D) charged against revenue in the year the asset is put into service.
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Page 6
Chapter 5: International Financial Reporting Standards:
Part II
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Sample Questions
Q1) According to IAS 37, how should contingent assets be recognized?
A) They should be disclosed in the notes to the financial statements if the inflow of resources is probable.
B) They should be recognized like any other asset, with a debit to "contingent assets."
C) They should not be disclosed anywhere in the financial statements due to their uncertainty.
D) They should only be disclosed in the notes to the financial statements if the inflows of resources are virtually certain.
Q2) Under IFRS 2, with respect to choice-of-settlement share-based payments, if the supplier chooses the cash settlement, the entity is deemed to have issued a compound financial instrument consisting of debt and equity. When cash is received, how does the supplier apply it?
A) Only against the equity portion
B) Apportioned between debt and equity based on relative fair market value of each component
C) Only against current year liabilities
D) Only against the debt portion
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Chapter 6: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) Under U.S. GAAP, where are changes in the fair value of derivatives reported?
A) As part of "Accumulated Other Comprehensive Income" on the Balance Sheet
B) They are not recognized until the options are exercised
C) Retained Earnings
D) None of the above
Q2) Northland Corporation recorded £1,000,000 in Accounts Receivable for sales to customers in the United Kingdom and recorded Accounts Payable of 2,000,000 Yuan for product purchased from China. If Northland recorded a foreign currency exchange loss on its receivables and a foreign currency gain on its payables, what must have happened to each currency?
A) Yuan appreciated, Pound depreciated
B) Yuan depreciated, Pound appreciated
C) Yuan appreciated, Pound appreciated
D) Yuan depreciated, Pound depreciated
Q3) Under U.S. GAAP, what method of amortizing discounts or premiums on forward contracts must be used?
A) Weighted average method or accelerated method
B) Sum of digit method only
C) Effective interest rate method or straight line method
D) Straight line method only
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Chapter 7: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) International accounting standards define functional currency as:
A) the currency of the parent company.
B) the currency of the primary economic environment in which the subsidiary operates.
C) the currency of the primary economic environment in which the parent operates.
D) the currency used by a subsidiary for its financial reporting.
Q2) Under the current rate method of translating foreign currency financial statements, what is the amount of the balance sheet exposure?
A) It is equal to the amount of assets recorded by the subsidiary.
B) It is equal to the amount of liabilities recorded by the subsidiary.
C) It is equal to the foreign operation's net asset position.
D) It is equal to total assets plus total liabilities.
Q3) Which of the following is a non-derivative hedging instrument?
A) Forward contract on foreign currency
B) Foreign currency call option
C) Foreign currency borrowing
D) Foreign currency put option
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Chapter 8: International Taxation
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Sample Questions
Q1) Under the American Jobs Creation Act of 2004, how many FTC baskets are used to classify foreign source income?
A) 9
B) 2
C) 12
D) 11
Q2) What is the U.S. policy concerning taxing income of a foreign branch of a U.S. corporation?
A) Tax is imposed on the foreign branch income in the year it is earned.
B) Tax is paid on the foreign branch's income when the profits are returned to the U.S. parent as dividends.
C) The government of the U.S. does not tax foreign source income.
D) Tax credits for losses incurred by the foreign branch are recognized by the parent currently, but taxes on profits are deferred until dividends are paid.
Q3) In general, why do countries wish to avoid double taxation on corporations?
A) The calculations of the taxes are excessively complex.
B) It discourages foreign direct investment.
C) Enforcement of the tax law becomes excessively burdensome.
D) It contributes to accounting diversity.
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Page 10
Chapter 9: International Transfer Pricing
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Sample Questions
Q1) For what reason are the transfer prices of imports more closely monitored worldwide than are exports?
A) Political implications
B) Effect on local job availability
C) Impact on a country's balance of trade
D) All of the above
Q2) The monetary amount used to record intercompany transactions is called:
A) exchange rate.
B) transfer price.
C) conversion rate.
D) incremental cost.
Q3) Of the signals that may cause a taxing authority to audit a company's transfer price, which one is the most important?
A) The nature of the business of the multinational corporation
B) Unexpectedly low profit
C) Profits higher than expected for a specific industry
D) Parent company located in an emerging economy
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Chapter 10: Management Accounting Issues in Multinational Corporations
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Sample Questions
Q1) Which of the following items are controlled by the parent company?
A) Lost production due to labor strikes
B) Foreign exchange losses
C) Sales revenue determined by discretionary transfer pricing
D) Restrictions on foreign exchange spending
Q2) Schlamp & Co. is considering building a manufacturing facility in Country Z, which has changed it labor laws frequently and dramatically in the past decade. What kind of risk is created by these legislative actions?
A) Physical risk
B) Political risk
C) Financial risk
D) Economic risk
Q3) What term is used to describe the process involving revising existing goals and adopting new goals?
A) Strategy formulation
B) Strategic planning
C) Strategy implementation
D) Capital budgeting
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Chapter 11: Auditing and Corporate Governance: An International Perspective
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Sample Questions
Q1) How does the principle of "joint and several liability" affect auditors in countries where it is applied?
A) This limits civil liability to only those people who conducted the audit negligently.
B) All partners in the accounting firm can be personally liable for the negligence of any one partner.
C) All audit partners are liable for the actions of the firm only up to the level of their investment in the firm.
D) It creates limited liability for auditors accused of wrong-doing by their clients.
Q2) Under Securities and Exchange Commission regulations, who may be a member of an audit committee for a listed company?
A) Any member of the corporate board of directors
B) Any member of the corporate board of directors who is not a Certified Public Accountant (CPA)
C) Only members of the corporate board of directors who do not have a material interest in the company
D) Any manager or director of the corporation
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Chapter 12: International Sustainability Reporting
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Sample Questions
Q1) Which best describes the categories in which GRI standards are organized?
A) Environmental, Social, and Governmental
B) Universal, Economic, Environment, and Social
C) Economic, Governmental, and Social
D) Governmental, Private, and Economic
Q2) Which of the following is an example of a specific disclosure required for GRI 305: Environment - Emissions?
A) Habitats protected or restored
B) Percentage of recycled materials used in manufacturing
C) Direct greenhouse gas emissions by weight
D) Percentage of recycled materials used in manufacturing & Direct greenhouse gas emissions by weight
Q3) Which of the following sustainability topics is most likely to be highly material to a social media company, such as Facebook?
A) Data security
B) Child labor in the factories of suppliers
C) Biodiversity impacts on endangered species.
D) Product safety
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