Question 1

You must complete further study after a bachelor's degree to become a member of the ICAA, CPA Australia or the NIA.

Accepted Answer

To become a member of the Institute of Chartered Accountants in Australia (ICAA), CPA Australia or the National Institute of Accountants (NIA), further study is required beyond a bachelor's degree.

Question 2

An operational audit is an example of a compliance audit.

Accepted Answer

An operational audit focuses on evaluating the efficiency and effectiveness of an organization's operations, while a compliance audit focuses on ensuring that the organization is following laws, regulations, and internal policies. While there may be areas of overlap between the two, they are distinct types of audits.

Question 3

An audit engagement is performed by an Auditor to provide a reasonable assurance that the financial report gives a true and fair view of the business activities for the period.

Accepted Answer

This is the definition of an audit engagement. The objective of an audit is to provide a reasonable assurance that the financial report is free from material misstatement and gives a true and fair view of the business activities for the period.

Question 4

It is the auditor's responsibility to prepare the financial statements.

Accepted Answer

It is not the auditor's responsibility to prepare the financial statements. The auditor's role is to independently review and provide an opinion on the financial statements prepared by management.

Question 5

International Auditing and Assurance Standards Board (IAASB) is not responsible for the redrafting of International Auditing Standards (ISAs) to Australian Auditing Standards (ASAs).

Accepted Answer

The responsibility for redrafting ISAs to ASAs lies with the Auditing and Assurance Standards Board (AUASB) in Australia, not with the IAASB.

Question 6

The expectation gap is caused by unrealistic user expectations such as the auditor providing a moderate level of assurance.

Accepted Answer

The answer of The expectation gap is caused by unrealistic...

Question 7

Insurance hypothesis is a means whereby the investor can guarantee the success of their investment.

Accepted Answer

The insurance hypothesis is not a means of guaranteeing the success of an investment. It is a theory that suggests that investors are willing to accept lower returns in exchange for reduced risk through insurance products.

Question 8

The most common types of assurance engagements are financial report audits, confirmation audits, performance audits, comprehensive audits and assurance on corporate social responsibility (CSR) disclosures.

Accepted Answer

The answer of The most common types of assurance engagements...

Question 9

An auditor can provide a reasonable level of assurance on information other than historical financial information.

Accepted Answer

An auditor can provide a reasonable level of assurance on information other than historical financial information, such as a company's internal control over financial reporting or compliance with laws and regulations. This is known as an attestation engagement, and it requires the auditor to follow specific professional standards and guidelines.

Question 10

An audit of a financial report by the contracted auditors will give absolute assurance that the financial reports give a true and fair view of the financial performance of the entity.

Accepted Answer

Although an audit provides reasonable assurance that the financial statements are free of material misstatements, including fraud, it does not provide absolute assurance. Auditors conduct their work using professional judgement and sampling techniques, which means that there is always a risk that material misstatements could go undetected.

Question 11

A reasonable level of assurance is the highest level of assurance that an auditor can provide.

Accepted Answer

The answer of A reasonable level of assurance is the...

Question 12

All modified audit reports are qualified audit opinions.

Accepted Answer

Modified audit reports can include qualified opinions, adverse opinions, or disclaimers of opinion, not just qualified opinions.

Question 13

An assurance engagement is performed by an auditor or consultant to enhance the reliability of the subject matter

Accepted Answer

An assurance engagement is performed to provide a degree of assurance on the reliability of the subject matter. It is typically conducted by an auditor or consultant who is independent of the entity that is responsible for the subject matter, and the assurance is given in the form of a report. The level of assurance provided can vary depending on the nature of the engagement and the objectives of the user.

Question 14

A negative expression of opinion is only given when there is a disagreement with management and the auditor.

Accepted Answer

A negative expression of opinion may also be given for various other reasons, such as limitations in the scope of the audit, misstatements found in the financial statements, or inadequate disclosure of information. It is not strictly limited to a disagreement between management and the auditor.

Question 15

An example of the three parties in an assurance engagement would be:
A) audit client, employee, customer
B) audit client, supplier, auditor
C) auditor, shareholder, general public
D) auditor, general public, employees.

Accepted Answer

In an assurance engagement, the three parties are typically the auditor, the audit client, and a third party. In choice A, the employee and customer are not typically involved in the assurance process. In choice C, the shareholder and general public could be considered third parties, but the general public is not typically involved in assurance engagements. In choice D, the employees may have an interest in the outcome of the assurance engagement, but they are not considered a key party in the process. Therefore, the best choice is B where the three parties are the audit client, the supplier, and the auditor.

Question 16

A compliance audit involves gathering evidence to ascertain whether the person or entity under review has followed the rules, policies, procedures, laws and regulations with which they must conform

Accepted Answer

A compliance audit is conducted to ensure that an individual or corporation meets the set standards, policies, regulations, laws, and rules that govern their actions or operations. The audit is aimed at verifying whether they have complied with the required regulations and policies or not.

Question 17

A no assurance engagement is of little use as no assurance is given to the client.

Accepted Answer

While a no assurance engagement may not provide the same level of assurance as an assurance engagement, it can still provide valuable information and insights to the client. For example, a compilation engagement may not provide assurance, but it can still help the client organize and present their financial information for internal use or third-party review.

Question 18

An assurance engagement can be defined as
A) an engagement to enhance the reliability of the subject matter
B) an engagement of an expert to direct the entity on subject matter
C) an audit to determine the validity of the subject matter
D) an engagement to determine a true and fair view of the entities course of actions

Accepted Answer

An assurance engagement is designed to enhance the reliability of the subject matter, which can include financial statements, performance measures, or other information. It involves an independent auditor providing a professional opinion on the accuracy of the information presented. Therefore, option A is the best choice. Option B refers to advisory services, option C refers to an auditor verifying the accuracy of financial statements, and option D is not directly related to an assurance engagement.

Question 19

The nature of audit procedures refers to the reliance on evidence provided by the client and its management.

Accepted Answer

Audit procedures involve obtaining and evaluating evidence provided by the client and its management to form an opinion on the financial statements.

Question 20

Only current investors (not potential investors) are considered to be users of the financial statements.

Accepted Answer

Both current and potential investors are considered users of financial statements, as they use the information to make decisions about buying, holding, or selling equity or debt instruments.

Quiz 1: Introduction and Overview of Audit and Assurance