Auditing MCQ Exam Review (2022)
Auditing Multiple-Choice Questions Review
Chapter 1
The parties relevant to an assurance engagement are:
● assurance practitioner, users, responsible party.
Agency theory explains that audits are demanded because conflicts can arise between:
● managers and owners.
The insurance hypothesis means:
● an audit acts as insurance.
Performance audits are useful because:
● they are concerned with the economy, efficiency, and effectiveness of an organization's
activities
The function of internal audit is determined by:
● those charged with governance and management.
Reasonable assurance means:
● the auditor has gathered sufficient and appropriate evidence to form a positive
expression of opinion regarding the financial statements.
An auditor disclaims responsibility when:
● the auditor is unable to obtain sufficient evidence about a potentially material and
pervasive matter.
Those charged with governance have a responsibility to ensure that the information in financial
statements is:
● relevant and reliable
● comparable and understandable
● fairly presented
● ALL OF THE ABOVE
The purpose of the Auditing and Assurance Standards Board is:
● to set high-quality auditing and assurance standards.
The audit expectation gap occurs when:
● user beliefs do not align with what an auditor has actually done.
Chapter 2
Professional behaviour means that members of the professional body must:
● uphold the reputation of the profession
Due care means that members of a profession must:
● act diligently.
Professional independence for auditors:
● is the ability to act with integrity, objectivity, and professional scepticism.
A self-interest threat arises when:
● the auditor owns shares in the client's business.
A self-review threat arises when:
● the auditor performs services for the client that are then assured.
Safeguards to independence:
● minimize the risk that a threat to independence will surface.
● deal with a threat when one becomes apparent.
● are developed by the accounting profession, legislators, regulators, clients, and
accounting firms.
● ALL OF THE ABOVE
Audit committees for listed entities per the CSA:
● should have a formal charter.
Generally, the auditor could be legally liable:
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