Professional Practice in Auditing
Exam Answer Key
Course Introduction
Professional Practice in Auditing introduces students to the practical aspects of the auditing profession, focusing on the application of auditing standards, ethical responsibilities, and risk assessment in real-world scenarios. The course covers the audit process from planning and evidence collection to reporting and follow-up, emphasizing the auditor's role in ensuring accuracy and integrity in financial statements. Through case studies and simulations, students develop critical thinking and decision-making skills, gaining insight into current issues such as fraud detection, internal controls, and regulatory requirements. The course prepares students for a successful career by bridging theoretical knowledge with the competencies required for professional auditing practice.
Recommended Textbook
Auditing and Assurance Services 6th Edition by Grant Gay
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14 Chapters
681 Verified Questions
681 Flashcards
Source URL: https://quizplus.com/study-set/2630
Page 2
Chapter 1: Assurance and Auditing: An Overview
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45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/52502
Sample Questions
Q1) Financial report auditing can best be described as:
A)a regulatory function that prevents the issuance of improper financial information.
B)a professional activity that measures and communicates financial and business data.
C)a discipline that attests to the results of accounting and other functional operations and data.
D)a branch of accounting.
Answer: C
Q2) Who is the responsible party for the adequacy of the disclosure in the financial report and accompanying footnotes?
A)Auditor in charge of fieldwork.
B)The entity's Board of Directors.
C)Auditor who signs the auditor's report.
D)The Australian Securities and Investments Commission.
Answer: B
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Chapter 2: Audit Regulation, Structure of the Profession and Auditors Liability
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45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/52501
Sample Questions
Q1) An auditor of a company finds that there are rare and exceptional circumstances where they are unable to comply with a relevant requirement in an auditing standard.They are, however, able to perform appropriate alternative audit procedures.To whom do they have to report or document these circumstances?
A)The auditor must report these circumstances to either management or the audit committee and obtain their agreement that the alternative procedures are appropriate.
B)If the auditor can use appropriate alternative audit procedures, no reporting or documentation is required.
C)The auditor is required to document the circumstances in the auditor's report.
D)The auditor is required to document the circumstances in the audit working papers.
Answer: D
Q2) Which accounting body in Australia was established under Royal Charter?
A)CPA Australia.
B)Chartered Accountants Australia and New Zealand.
C)Institute of Public Accountants.
D)None of the given answers are correct.
Answer: B
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Page 4
Chapter 3: Ethics, Independence and Corporate Governance
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45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/52500
Sample Questions
Q1) You are the auditor of Speed Ltd and the chief financial officer has stated that he is concerned that you are taking up too much of his staff's time asking unnecessary questions for the audit.Further, he has indicated that your chances of getting the engagement to review the implementation of their new computer system engagement will be greatly improved if you keep your questioning of staff to a minimum during the current audit.What type of threat to your independence does this situation constitute?
A)Intimidation.
B)Self-interest.
C)Self-review.
D)Advocacy.
Answer: A
Q2) The audit committee of a publicly held company should be made up of:
A)representatives of the major shareholders.
B)the audit partner, the chief financial officer, the legal counsel and at least one outsider. C)representatives from the client's management, investors, suppliers and customers. D)members of the board of directors who are not employees.
Answer: D
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Page 5
Chapter 4: Overview of Elements of the Financial Report
Audit Process
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71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/52499
Sample Questions
Q1) To be appropriate, evidence must be both:
A)reliable and well documented.
B)reliable and relevant.
C)useful and independent.
D)extensive and timely.
Q2) 'Dual-purpose tests' is a term used for:
A)tests of controls that address both the design of the control procedures and their operating effectiveness.
B)tests of transactions that include substantive procedures as well as tests of controls.
C)tests that address both balances and transaction classes.
D)tests performed because of client expectations as well as for gathering audit evidence.
Q3) You are concerned about whether all sales have occurred.The procedure that will be most effective in verifying this assertion is:
A)selecting a sample of invoices and vouching them to delivery dockets.
B)selecting a sample of customers' orders and tracing them to delivery dockets.
C)checking the sequence of delivery dockets.
D)selecting a sample of delivery dockets and tracing them to invoices.
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Chapter 5: Planning, Understanding the Entity and Assessing Business Risk
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45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/52498
Sample Questions
Q1) Which of the following situations would most likely require special audit planning by the auditor?
A)Some items of factory and office equipment do not bear identification numbers.
B)Depreciation methods used for the client's tax return differ from those used for the accounting records.
C)Assets costing less than $500 are expensed even though the expected life exceeds one year.
D)Inventory is comprised of precious gemstones.
Q2) A prospective client's refusal to give permission to communicate with the previous auditor and review certain portions of the previous auditor's working papers will bear directly on the auditor's decision concerning the:
A)ability to establish consistency in the application of accounting principles.
B)apparent scope limitation.
C)integrity of management.
D)adequacy of the planned audit program.
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Chapter 6: Assessing Inherent Risk, and Other Specific
Business Risks
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35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/52497
Sample Questions
Q1) Which of the following factors would most likely increase an auditor's concern about the risk of fraudulent financial reporting?
A)Inability to generate cash flows from operations while reporting substantial earnings growth.
B)Management's lack of interest in increasing the entity's earnings trend.
C)Large amounts of liquid assets that are easily converted into cash.
D)Inability to borrow necessary capital without granting debt covenants.
Q2) The auditor can respond to an increased risk of fraud by taking all of the following actions except:
A)increasing professional scepticism.
B)assigning more experienced personnel to the audit.
C)increasing acceptable audit risk.
D)taking steps to obtain more reliable evidence.
Q3) Which of the following situations does not represent an opportunity to commit fraud?
A)Significant related-party transactions exist.
B)The auditor's relationship with management is strained.
C)Management is dominated by a single person.
D)The financial report includes highly subjective estimates.
Page 8
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Chapter 7: Understanding and Assessing Internal Control
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70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/52496
Sample Questions
Q1) To provide for the greatest degree of independence in performing internal auditing functions, an internal auditor most likely should report to the:
A)chief financial officer.
B)chief executive officer.
C)audit committee.
D)shareholders.
Q2) Totals of amounts in computer-record data fields that are not usually added, but are used only for data-processing control purposes, are called:
A)record totals.
B)hash totals.
C)processing data totals.
D)field totals.
Q3) Which of the following is not one of the five elements of internal control?
A)Corporate governance.
B)Control procedures.
C)Control environment.
D)Information system.
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Chapter 8: Tests of Controls
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60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/52495
Sample Questions
Q1) Tests designed to detect payroll payments made after the end of the year that have been incurred in the current year provide assurance about management's assertion of:
A)Inspection
B)Accuracy
C)Occurrence.
D)Cut-off.
Q2) Selected employee time cards that have been approved by supervisory personnel during the year are compared to the payroll register to ensure that they have been recorded.Which of the following assertions for payroll expense does this test?
A)Occurrence.
B)Completeness.
C)Accuracy.
D)Cut-off.
Q3) Which of the following is a primary function of the purchasing department?
A)Reducing expenditures for goods acquired.
B)Verifying the propriety of goods acquired.
C)Ensuring the acquisition of goods of a specified quality.
D)Authorising the acquisition of goods.
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Chapter 9: Substantive Tests of Transactions and Balances
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80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/52494
Sample Questions
Q1) Which of the following audit procedures would an auditor be least likely to perform using generalised audit software?
A)Inputting test transactions to ensure that the check digit control is operating.
B)Searching records of accounts receivable balances for credit balances.
C)Listing unusually large inventory balances.
D)Selecting accounts receivable for positive and negative confirmation.
Q2) Which of the following audit procedures is least likely to detect an unrecorded liability?
A)Analysis and re-computation of depreciation expense.
B)Analysis and re-computation of interest expense.
C)Reading of the minutes of meetings of the board of directors.
D)Analysis of response to a bank confirmation request.
Q3) Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account?
A)The prior year's depreciation charges were erroneously understated.
B)There were numerous fixed asset retirements during the year.
C)There were numerous fixed asset purchases during the year.
D)A reserve for possible loss on retirement has been recorded.
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Chapter 11: Completion and Review
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) A representation letter issued by a client:
A)is essential for the preparation of the audit program.
B)is a substitute for testing.
C)does not reduce the auditor's responsibility.
D)reduces the auditor's responsibility only to the extent that it is relied upon.
Q2) Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events?
A)Comparing the financial report being reported on with those of previous period.
B)Confirming a sample of material accounts receivable established after year-end.
C)Inquiring as to whether any unusual adjustments were made after year-end.
D)Investigating personnel changes in the accounting department occurring after year-end.
Q3) The audit letter to the client's solicitor should be mailed only by the:
A)client after the auditor has reviewed it for appropriate content.
B)auditor after preparation by the client and review by the auditor.
C)auditor's solicitor after preparation by the client and review by the auditor.
D)client after review by the auditor's solicitor.
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Page 12
Chapter 12: The Auditors Reporting Obligations
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60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/52492
Sample Questions
Q1) Which of the following situations will not result in modification of the auditor's report because of a scope limitation?
A)Restriction imposed by the client.
B)Reliance placed on the report of another auditor.
C)Inability to obtain sufficient competent evidential matter.
D)Inadequacy in the accounting records.
Q2) Under which of the following sets of circumstances might an auditor disclaim an opinion?
A)There are significant uncertainties affecting the financial report.
B)There has been a material change between periods in the method of the application of accounting principles.
C)The principal auditor decides to make reference to the report of another auditor who disclaimed an opinion on the audit of a subsidiary.The subsidiary contributed 6 per cent of operating revenue and profit but very little in other aspects.
D)The financial report contains a departure from generally accepted accounting principles, the effect of which is material.
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Chapter 13: Other Assurance Services and Advanced Topics
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45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/52491
Sample Questions
Q1) Which of the following statements is true regarding the performance of an assurance service on an information system's reliability by an auditor?
A)The service will require the auditor to apply all of the auditing standards.
B)The performing of this service does not require suitable criteria to be available.
C)Performing the service must be undertaken in accordance with approved accounting standards.
D)The service may be performed even though there are no standards currently issued by the Australian Auditing and Assurance Standards Board (AUASB).
Q2) An assurance report on internal control structures is least likely to be issued as a result of a:
A)review of the annual financial report of a large company.
B)performance audit of a government agency.
C)special study of related party transactions.
D)special study of a proposed system involving the internal control structure.
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Chapter 14: Internal Auditing
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25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/52490
Sample Questions
Q1) The types of audit reports provided by an internal auditor are:
A)examination report, review report, or compilation report.
B)unqualified, qualified, adverse, or a disclaimer of opinion.
C)financial report or compliance report.
D)varied and are based on auditor judgment of how best to present the findings.
Q2) When evaluating risks in accordance with the Australian Risk Management Standard AS/NZS ISO 31000, what is the order of steps that it is recommended be undertaken?
A)Identify risks, analyse risks, evaluate risks, treat risks.
B)Identify risks, analyse risks, treat risks, evaluate risks.
C)Identify risks, evaluate risks, treat risks, analyse risks.
D)Identify risks, evaluate risks, analyse risks, treat risks.
Q3) Which of the following is not one of the interrelated components and principles of the COSO Enterprise Risk Management Framework 2013?
A)Risk assessment.
B)Control activities.
C)Substantive testing.
D)Information and communication.
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Page 15
Chapter 15: Audit and Assurance Services in the Public Sector
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25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/52489
Sample Questions
Q1) A typical objective of a performance audit is for the auditor to:
A)determine whether the financial report presents the entity's operations fairly.
B)evaluate the feasibility of attaining the entity's operational objectives.
C)make recommendations for improving efficiency, effectiveness and economy.
D)report on the entity's relative success in attaining profit maximisation.
Q2) A determination of cost savings is most likely to be an objective of a:
A)regularity audit.
B)compliance audit.
C)performance audit.
D)financial audit.
Q3) Which of the following statements best describes the term 'efficiency'?
A)A reduction in costs through better contracting.
B)Clarifying objectives and policies.
C)Greater outputs from the inputs.
D)Rationalisation of facilities.
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