Question 1

Discuss the purpose of a privity letter and how the auditor should respond to such a request.

Accepted Answer

A privity letter is a letter from a thir

Question 2

In third-party suits, which of the auditor's defences contends lack of privity of contract?

Accepted Answer

A)  non-negligent performance 
B)  absence of causal connections 
C)  contributory negligence 
D)  lack of duty 
A)  non-negligent performance 
B)  absence of causal connections 
C)  contributory negligence 
D)  lack of duty

Question 3

Which one of the following is a NOT a method to reduce auditors' legal liability?

Accepted Answer

A)  Exercise professional scepticism. 
B)  Perform quality audits. 
C)  Include a disclaimer paragraph in the audit report. 
D)  Employ qualified personnel. 
A)  Exercise professional scepticism. 
B)  Perform quality audits. 
C)  Include a disclaimer paragraph in the audit report. 
D)  Employ qualified personnel.

Question 4

What does NOT result when the auditor issues an erroneous opinion as the result of an underlying failure to comply with the requirements of Australian auditing standards?

Accepted Answer

A)  negligent auditing 
B)  business failure 
C)  criminal liability 
D)  both A and B 
A)  negligent auditing 
B)  business failure 
C)  criminal liability 
D)  both A and B

Question 5

The respective obligations of the client and auditor are outlined in:

Accepted Answer

A)  a letter of recommendation. 
B)  an expert witness's testimony. 
C)  an engagement letter. 
D)  a confirmation letter. 
A)  a letter of recommendation. 
B)  an expert witness's testimony. 
C)  an engagement letter. 
D)  a confirmation letter.

Question 6

Legal liability of auditors in Australia, particularly in relation to third parties, was expanded by the Esanda case in 1997.

Accepted Answer

A) True 
 B)False

Question 7

The monitoring of auditors is the primary legal function of:

Accepted Answer

A)  the Financial Reporting Council (FR
C) . 
B)  each individual firm (for its own staff). 
C)  the professional bodies. 
D)  all of the above 
A)  the Financial Reporting Council (FR
C) . 
B)  each individual firm (for its own staff). 
C)  the professional bodies. 
D)  all of the above

Question 8

Discuss the distinction between contractual and tortious liability in actions by clients against auditors.

Accepted Answer

The distinction between contractual and

Question 9

A function of the Financial Reporting Council (FRC)is to:

Accepted Answer

A)  review particular audits. 
B)  monitor individual audits and auditors. 
C)  require information from a professional body about reviews of a particular audit or disciplinary actions against any particular person. 
D)  all of the above 
A)  review particular audits. 
B)  monitor individual audits and auditors. 
C)  require information from a professional body about reviews of a particular audit or disciplinary actions against any particular person. 
D)  all of the above

Question 10

To be appointed as the auditor of a corporation under the Corporations Act 2001, the relevant person must be a registered company auditor or an authorised audit company.Which of the following are criteria for registration by ASIC?

Accepted Answer

A)  An individual must satisfy requirements in relation to his or her educational qualifications. 
B)  Requirements established in s. 1280 of the Corporations Act. 
C)  An individual must satisfy requirements in relation to his or her character. 
D)  All of the above 
A)  An individual must satisfy requirements in relation to his or her educational qualifications. 
B)  Requirements established in s. 1280 of the Corporations Act. 
C)  An individual must satisfy requirements in relation to his or her character. 
D)  All of the above

Question 11

Auditors are affected by laws that have been developed by passage through governmental agencies.These are referred to as:

Accepted Answer

A)  common law. 
B)  statutory law. 
C)  federal law. 
D)  judicial law. 
A)  common law. 
B)  statutory law. 
C)  federal law. 
D)  judicial law.

Question 12

The Financial Reporting Council's functions include monitoring the adequacy of systems to ensure the adequacy of:

Accepted Answer

A)  professional bodies disciplinary procedures. 
B)  auditor independence. 
C)  professional bodies quality assurance reviews. 
D)  all of the above 
A)  professional bodies disciplinary procedures. 
B)  auditor independence. 
C)  professional bodies quality assurance reviews. 
D)  all of the above

Question 13

Auditors should understand their obligations to clients and third parties under:
1)contract law
2)common law
3)trade practices
4)corporations and securities statutes

Accepted Answer

A)  1, 2, & 4 
B)  1, 2, & 3 
C)  1, 3, & 4 
D)  1, 2, 3, & 4 
A)  1, 2, & 4 
B)  1, 2, & 3 
C)  1, 3, & 4 
D)  1, 2, 3, & 4

Question 14

A contributory negligence defence succeeded in the AWA Ltd v Daniels case.

Accepted Answer

A) True 
 B)False

Question 15

The WA Chip and Pulp Co.case reaffirmed the:

Accepted Answer

A)  importance of auditor independence. 
B)  duty to investigate suspicions of fraud regardless of its materiality. 
C)  duty to conduct the audit with reasonable care and skill. 
D)  duty to inform management if there is a suspicion of a material fraud. 
A)  importance of auditor independence. 
B)  duty to investigate suspicions of fraud regardless of its materiality. 
C)  duty to conduct the audit with reasonable care and skill. 
D)  duty to inform management if there is a suspicion of a material fraud.

Question 16

To succeed in an action against the auditor, the client must be able to show that:

Accepted Answer

A)  the auditor was grossly negligent. 
B)  there is a close causal connection between the auditor's breach of the standard of due care and the damages suffered by the client. 
C)  the auditor was fraudulent. 
D)  there was a written contract. 
A)  the auditor was grossly negligent. 
B)  there is a close causal connection between the auditor's breach of the standard of due care and the damages suffered by the client. 
C)  the auditor was fraudulent. 
D)  there was a written contract.

Question 17

In rare cases, auditors have been held liable for criminal acts.A criminal conviction against an auditor can result only when it is demonstrated that the auditor:

Accepted Answer

A)  caused a financial loss to an innocent third party. 
B)  was negligent. 
C)  employed a negligent assistant. 
D)  was involved knowingly in the presentation of False financial statements. 
A)  caused a financial loss to an innocent third party. 
B)  was negligent. 
C)  employed a negligent assistant. 
D)  was involved knowingly in the presentation of False financial statements.

Question 18

In the Scott Group case, the auditors were found to owe a duty of care to:

Accepted Answer

A)  the contractual parties only. 
B)  a totally unknown third party. 
C)  the body of shareholders as a whole. 
D)  existing creditors. 
A)  the contractual parties only. 
B)  a totally unknown third party. 
C)  the body of shareholders as a whole. 
D)  existing creditors.

Question 19

Explain how an auditor might be able to use a disclaimer of liability.

Accepted Answer

The Corporations Act prevents auditors u

Question 20

In Al Saudi Banque, a duty of care was found not to be owed to prospective lenders.

Accepted Answer

A) True 
 B)False

Discuss the purpose of a privity letter and how the auditor should respond to such a request.

In third-party suits, which of the auditor's defences contends lack of privity of contract?

Which one of the following is a NOT a method to reduce auditors' legal liability?

What does NOT result when the auditor issues an erroneous opinion as the result of an underlying failure to comply with the requirements of Australian auditing standards?

The respective obligations of the client and auditor are outlined in:

Legal liability of auditors in Australia, particularly in relation to third parties, was expanded by the Esanda case in 1997.

The monitoring of auditors is the primary legal function of:

Discuss the distinction between contractual and tortious liability in actions by clients against auditors.

A function of the Financial Reporting Council (FRC)is to:

To be appointed as the auditor of a corporation under the Corporations Act 2001, the relevant person must be a registered company auditor or an authorised audit company.Which of the following are criteria for registration by ASIC?

Auditors are affected by laws that have been developed by passage through governmental agencies.These are referred to as:

The Financial Reporting Council's functions include monitoring the adequacy of systems to ensure the adequacy of:

Auditors should understand their obligations to clients and third parties under: 1)contract law 2)common law 3)trade practices 4)corporations and securities statutes

A contributory negligence defence succeeded in the AWA Ltd v Daniels case.

The WA Chip and Pulp Co.case reaffirmed the:

To succeed in an action against the auditor, the client must be able to show that:

In rare cases, auditors have been held liable for criminal acts.A criminal conviction against an auditor can result only when it is demonstrated that the auditor:

In the Scott Group case, the auditors were found to owe a duty of care to:

Explain how an auditor might be able to use a disclaimer of liability.

In Al Saudi Banque, a duty of care was found not to be owed to prospective lenders.

Demand for audit and assurance services

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Completing the audit

Audit reporting

Other auditing and assurance engagements

Filters

Exam 2: Auditors’ legal environment

Discuss the purpose of a privity letter and how the auditor should respond to such a request.

In third-party suits, which of the auditor's defences contends lack of privity of contract?

Which one of the following is a NOT a method to reduce auditors' legal liability?

What does NOT result when the auditor issues an erroneous opinion as the result of an underlying failure to comply with the requirements of Australian auditing standards?

The respective obligations of the client and auditor are outlined in:

Legal liability of auditors in Australia, particularly in relation to third parties, was expanded by the Esanda case in 1997.

The monitoring of auditors is the primary legal function of:

Discuss the distinction between contractual and tortious liability in actions by clients against auditors.

A function of the Financial Reporting Council (FRC)is to:

To be appointed as the auditor of a corporation under the Corporations Act 2001, the relevant person must be a registered company auditor or an authorised audit company.Which of the following are criteria for registration by ASIC?

Auditors are affected by laws that have been developed by passage through governmental agencies.These are referred to as:

The Financial Reporting Council's functions include monitoring the adequacy of systems to ensure the adequacy of:

Auditors should understand their obligations to clients and third parties under: 1)contract law 2)common law 3)trade practices 4)corporations and securities statutes

A contributory negligence defence succeeded in the AWA Ltd v Daniels case.

The WA Chip and Pulp Co.case reaffirmed the:

To succeed in an action against the auditor, the client must be able to show that:

In rare cases, auditors have been held liable for criminal acts.A criminal conviction against an auditor can result only when it is demonstrated that the auditor:

In the Scott Group case, the auditors were found to owe a duty of care to:

Explain how an auditor might be able to use a disclaimer of liability.

In Al Saudi Banque, a duty of care was found not to be owed to prospective lenders.

Demand for audit and assurance services

Audit quality and ethics

Audit responsibilities and objectives

Audit evidence

Audit planning and documentation

Materiality and risk

Internal control and control risk

Fraud auditing

The impact of information technology on the audit process

Overall audit plan and audit program

Audit of the sales and collection cycle: Tests of controls and substantive tests of transactions

Completing tests in the sales and collection cycle: Accounts receivable

Audit sampling

Audit of transaction cycles and financial statement balances I

Audit of transaction cycles and financial statement balances II

Completing the audit

Audit reporting

Other auditing and assurance engagements

Filters