Question 1

An auditor failing to report to ASIC a contravention of the Corporations Act by a client is an example of:

Accepted Answer

A)  a securities violation. 
B)  criminal liability. 
C)  a breach of common law. 
D)  contributory negligence. 
A)  a securities violation. 
B)  criminal liability. 
C)  a breach of common law. 
D)  contributory negligence.

Question 2

The statutory requirements for independence mean an auditor is prohibited from engaging in audit activity if:

Accepted Answer

A)  the auditor is aware of a conflict of interest situation in relation to the client but doesn't take all reasonable steps to resolve it. 
B)  the auditor is not aware of a conflict of interest situation in relation to the client and doesn't take all reasonable steps to resolve it. 
C)  there is a breach of the ethical requirements. 
D)  there is a breach of the auditor registration requirements. 
A)  the auditor is aware of a conflict of interest situation in relation to the client but doesn't take all reasonable steps to resolve it. 
B)  the auditor is not aware of a conflict of interest situation in relation to the client and doesn't take all reasonable steps to resolve it. 
C)  there is a breach of the ethical requirements. 
D)  there is a breach of the auditor registration requirements.

Question 3

The activities and duties of auditors may be subject to considerable statutory direction or influences, including:
1)Crimes Act 1914
2)Trade Practices Act 1974
3)Corporations Act 2001
4)Auditor Independence Act 2004

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 4

That which constitutes reasonable care, skill, and caution in an audit depends on the:

Accepted Answer

A)  particular circumstances of each case. 
B)  level of audit risk involved. 
C)  integrity of management. 
D)  auditing standards existing at the time. 
A)  particular circumstances of each case. 
B)  level of audit risk involved. 
C)  integrity of management. 
D)  auditing standards existing at the time.

Question 5

What is the likelihood of an investor making a takeover bid succeeding in an action for negligence against the auditor of the takeover target?

Accepted Answer

Given the precedent set in the AGC case

Question 6

What is the role of the Financial Reporting Council (FRC)in monitoring the audit profession?

Accepted Answer

The FRC can require a professional body

Question 7

Contributory negligence:

Accepted Answer

A)  failed as a defence in the AWA case. 
B)  cannot be used in cases involving a breach of statutory duty. 
C)  has been interpreted very widely by Australian courts. 
D)  was successfully argued in the Pacific Acceptance case. 
A)  failed as a defence in the AWA case. 
B)  cannot be used in cases involving a breach of statutory duty. 
C)  has been interpreted very widely by Australian courts. 
D)  was successfully argued in the Pacific Acceptance case.

Question 8

Which one of the following statements is correct about Candler v Crane, Christmas & Co?

Accepted Answer

A)  A special relationship did not exist. 
B)  There was no liability for financial loss. 
C)  Losses were not foreseeable. 
D)  all of the above 
A)  A special relationship did not exist. 
B)  There was no liability for financial loss. 
C)  Losses were not foreseeable. 
D)  all of the above

Question 9

The auditor's duty to inform management about irregularities regardless of materiality was established in which one of the following cases?

Accepted Answer

A)  WA Chip and Pulp Co 
B)  Pacific Acceptance 
C)  AWA 
D)  Kingston Cotton Mills 
A)  WA Chip and Pulp Co 
B)  Pacific Acceptance 
C)  AWA 
D)  Kingston Cotton Mills

Question 10

A specific provision of the Corporations Act which could lead to a conflict of interest is the auditor having a loan from the audit client of more than $10,000.

Accepted Answer

A) True 
 B)False

Question 11

A tort is a civil wrong, of which negligence is a good example.

Accepted Answer

A) True 
 B)False

Question 12

Which entities require rotation of auditors?

Accepted Answer

A)  listed companies 
B)  listed companies and other disclosing entities 
C)  charities and other nonprofit organisations 
D)  all entities who owe money to the Australian Taxation Office 
A)  listed companies 
B)  listed companies and other disclosing entities 
C)  charities and other nonprofit organisations 
D)  all entities who owe money to the Australian Taxation Office

Question 13

Which one of the following statements is correct about criminal actions brought against auditors in Australia?

Accepted Answer

A)  They have resulted in substantial damages being awarded when they have been successful. 
B)  None has resulted in prison sentences. 
C)  They have often failed due to lack of causation. 
D)  They have been few in number. 
A)  They have resulted in substantial damages being awarded when they have been successful. 
B)  None has resulted in prison sentences. 
C)  They have often failed due to lack of causation. 
D)  They have been few in number.

Question 14

An auditor holds office for a period of twelve months, with reappointment required annually.

Accepted Answer

A) True 
 B)False

Question 15

If an auditor's suspicion of fraud is aroused, investigations should be extended.

Accepted Answer

A) True 
 B)False

Question 16

It is a criminal offence for an auditor to:

Accepted Answer

A)  conduct an audit without due care. 
B)  fail to detect material fraud. 
C)  withhold information from the client. 
D)  contravene the independence requirements in the Corporations Act. 
A)  conduct an audit without due care. 
B)  fail to detect material fraud. 
C)  withhold information from the client. 
D)  contravene the independence requirements in the Corporations Act.

Question 17

There are four common sources of an auditor's legal liability.One source is liability to the audit client under common law.Briefly summarise the other three sources.

Accepted Answer

The other three sources of an

Question 18

Statutory offences of auditors can arise through:

Accepted Answer

A)  making or authorising False or misleading statements. 
B)  failing to take reasonable steps to ensure that a statement is not False or misleading. 
C)  both of the above 
D)  none of the above 
A)  making or authorising False or misleading statements. 
B)  failing to take reasonable steps to ensure that a statement is not False or misleading. 
C)  both of the above 
D)  none of the above

Question 19

Regulators are the composition of:

Accepted Answer

A)  the Auditing and Assurance Standards Board. 
B)  an entity's audit committee. 
C)  an entity's board of directors. 
D)  corporate governance. 
A)  the Auditing and Assurance Standards Board. 
B)  an entity's audit committee. 
C)  an entity's board of directors. 
D)  corporate governance.

Question 20

The London and General Bank Ltd (No.2)case found that auditors have a duty to report to:

Accepted Answer

A)  directors and shareholders. 
B)  the directors and ASIC. 
C)  anyone who may rely on the audited financial reports. 
D)  shareholders. 
A)  directors and shareholders. 
B)  the directors and ASIC. 
C)  anyone who may rely on the audited financial reports. 
D)  shareholders.

An auditor failing to report to ASIC a contravention of the Corporations Act by a client is an example of:

The statutory requirements for independence mean an auditor is prohibited from engaging in audit activity if:

The activities and duties of auditors may be subject to considerable statutory direction or influences, including: 1)Crimes Act 1914 2)Trade Practices Act 1974 3)Corporations Act 2001 4)Auditor Independence Act 2004

That which constitutes reasonable care, skill, and caution in an audit depends on the:

What is the likelihood of an investor making a takeover bid succeeding in an action for negligence against the auditor of the takeover target?

What is the role of the Financial Reporting Council (FRC)in monitoring the audit profession?

Contributory negligence:

Which one of the following statements is correct about Candler v Crane, Christmas & Co?

The auditor's duty to inform management about irregularities regardless of materiality was established in which one of the following cases?

A specific provision of the Corporations Act which could lead to a conflict of interest is the auditor having a loan from the audit client of more than $10,000.

A tort is a civil wrong, of which negligence is a good example.

Which entities require rotation of auditors?

Which one of the following statements is correct about criminal actions brought against auditors in Australia?

An auditor holds office for a period of twelve months, with reappointment required annually.

If an auditor's suspicion of fraud is aroused, investigations should be extended.

It is a criminal offence for an auditor to:

There are four common sources of an auditor's legal liability.One source is liability to the audit client under common law.Briefly summarise the other three sources.

Statutory offences of auditors can arise through:

Regulators are the composition of:

The London and General Bank Ltd (No.2)case found that auditors have a duty to report to:

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

An auditor failing to report to ASIC a contravention of the Corporations Act by a client is an example of:

The statutory requirements for independence mean an auditor is prohibited from engaging in audit activity if:

The activities and duties of auditors may be subject to considerable statutory direction or influences, including: 1)Crimes Act 1914 2)Trade Practices Act 1974 3)Corporations Act 2001 4)Auditor Independence Act 2004

That which constitutes reasonable care, skill, and caution in an audit depends on the:

What is the likelihood of an investor making a takeover bid succeeding in an action for negligence against the auditor of the takeover target?

What is the role of the Financial Reporting Council (FRC)in monitoring the audit profession?

Contributory negligence:

Which one of the following statements is correct about Candler v Crane, Christmas & Co?

The auditor's duty to inform management about irregularities regardless of materiality was established in which one of the following cases?

A specific provision of the Corporations Act which could lead to a conflict of interest is the auditor having a loan from the audit client of more than $10,000.

A tort is a civil wrong, of which negligence is a good example.

Which entities require rotation of auditors?

Which one of the following statements is correct about criminal actions brought against auditors in Australia?

An auditor holds office for a period of twelve months, with reappointment required annually.

If an auditor's suspicion of fraud is aroused, investigations should be extended.

It is a criminal offence for an auditor to:

There are four common sources of an auditor's legal liability.One source is liability to the audit client under common law.Briefly summarise the other three sources.

Statutory offences of auditors can arise through:

Regulators are the composition of:

The London and General Bank Ltd (No.2)case found that auditors have a duty to report to:

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