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question 1. Who appoints a companys auditor?

1. The Australian Securities and Investment Commission.
2. The audit committee of the company.
3. The members / shareholders of the company.
4. The managing director of the company.

Question 2 What are the main reasons that Auditing Standards exist?

1. they provide assurance of the minimum standards that should have been employed by the auditor in arriving at the opinion.
2. they are necessary to maintain a cost-effective service.
3. they will safeguard the auditor when they are sued.
4. all of the above.

Question 3

Concerning errors, suspicious things/mistakes and illegal acts, the auditor should plan their audit with what sort of attitude?

1. adversarial pursuit.
2. cautious mistrust.
3. seasoned pessimism.
4. professional scepticism.

Question 4

Internal control has been recognised as important by management and auditors for many years.

Which of the following is a major factor contributing to this importance?

1. The operations of the business entity have become so unwieldy that management must rely on the

chief financial officer to effectively control operations.

2. Checks and reviews protect against employee collusion and reduce the chance of employee fraud.
3. Internal control procedures must be utilised to maintain accurate accounting records.
4. It is impractical for auditors to audit most companies within economic fee limitations without relying on the clients system of internal controls.

Question 5

Incompatible duties allow an irregularity to be perpetrated:

1. and concealed through collusive actions.
2. by two or more employees.
3. and concealed by a single employee.
4. by accounting personnel.

Question 6

When planning his/her audit the auditor assesses materiality at which two levels?

1. the preliminary level and the final level.
2. the company level and the divisional level.
3. the financial report level and the account balance level.
4. the account balance level and the transaction level.

Question 7

An auditor planned to place reliance on the clients internal controls but found that they were ineffective. What audit strategy should the auditor now pursue?

1. the lower assessed level of control risk approach.
2. the predominantly substantive approach.
3. a combination of the lower assessed level of control risk approach and the predominantly

substantive approach.

4. the analytical procedures approach.

Question 8

For every audit engagement, the specific audit objectives will normally be:

1. the same for all clients in the same industry.
2. equal to the number of categories of managements financial report assertions.
3. similar for all clients in the same industry.
4. tailored to fit the individual client.

Question 9

Which of the following audit tests would not be considered to be a substantive test?

1. Tests of controls.
2. Tests of details of balances.
3. Analytical procedures.
4. Tests of details of transactions.

Question 10

External audit relying on the work done by internal audit is:

1. strictly prohibited by professional standards.
2. acceptable whenever a client has employed them.
3. acceptable if the auditor reviews and tests their work.
4. acceptable if the auditor re-performs all their work.

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