Professional Ethics in Accounting Study Guide Questions
Course Introduction
Professional Ethics in Accounting explores the ethical responsibilities and dilemmas faced by accounting professionals in various organizational settings. The course examines the fundamental principles of ethical behavior as outlined by professional accounting bodies, including integrity, objectivity, professional competence, confidentiality, and professional behavior. Through case studies, real-world examples, and discussion of regulatory frameworks, students develop the skills to identify, analyze, and resolve ethical issues. Emphasis is placed on ethical decision-making processes, the role of corporate governance, and the importance of maintaining public trust in the accounting profession.
Recommended Textbook
Auditing Assurance Services and Ethics in Australia 10th Edition by Alvin Arens
Available Study Resources on Quizplus
19 Chapters
2045 Verified Questions
2045 Flashcards
Source URL: https://quizplus.com/study-set/1218 Page 2
Chapter 1: Demand for audit and assurance services
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/24076
Sample Questions
Q1) An auditor could determine how many items need to be selected from the population for a particular audit test by consulting:
A) ASA 500.
B) ASA 530.
C) ASA 300.
D) none of the above
Answer: B
Q2) Public accounting firms utilise online resources and databases to:
A) stay current with emerging business issues.
B) stay current with emerging standard setting issues.
C) obtain industry data useful for auditing.
D) all of the above
Answer: D
Q3) To operate effectively, internal auditors:
A) report on the financial statements of the organisation.
B) are independent of the organisation.
C) are independent of the line functions in an organisation.
D) none of the above
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Auditors legal environment
Available Study Resources on Quizplus for this Chatper
89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/24077
Sample Questions
Q1) In the Esanda Finance Corporation Ltd v Peat Hungerfords case, the court:
A) confirmed the auditors' duties as stated in the Pacific Acceptance case.
B) stated the auditors were aware of the intention of the third party's reliance on the audit report.
C) stated auditors must undertake the audit with reasonable skill and care.
D) all of the above
Answer: B
Q2) Which one of the following statements is correct about criminal actions brought against auditors in Australia?
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.
Answer: D
Q3) In Al Saudi Banque, a duty of care was found not to be owed to prospective lenders.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Audit quality and ethics
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/24078
Sample Questions
Q1) Which one of the following statements is NOT correct? Expulsion from CPA Australia or the ICAA for disciplinary reasons:
A) prevents an individual from practising as a public accountant.
B) should be seen as a weighty social sanction.
C) might provide a basis for the Companies Auditors and Liquidators Disciplinary Board to suspend or cancel registration.
D) should be seen as a weighty economic sanction.
Answer: A
Q2) What is the 'expectation gap' and to what causes has it been attributed?
Answer: The expectation gap is the difference between the views of the auditors and the expectations of other stakeholders regarding the appropriate roles and responsibilities of auditors and the performance of auditors.This has been attributed to the nature of auditing, including reliance on sampling and subjective evidence, and the application of hindsight rather than what is known and reasonable at the time.
Q3) What rules prohibit an auditor from being an employee, officer, or director of an audit client?
Answer: The Corporations Act (s.324CH)and the Joint Code of Ethics for Professional Accountants, subsection 290.149.
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Audit responsibilities and objectives
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/24079
Sample Questions
Q1) An auditor should recognise that the application of auditing procedures may produce evidential matter indicating the possibility of errors or fraud; therefore, an auditor should:
A) extend the work to audit most recorded transactions and records of an entity.
B) design audit tests to detect unrecorded transactions.
C) not depend on internal accounting control features that are designed to prevent or detect errors or irregularities.
D) plan and perform the engagement with an attitude of professional scepticism.
Q2) How does the auditor obtain sufficient appropriate audit evidence about management assertions in the financial statements?
Q3) The transaction-related audit objective that deals with whether recorded transactions have actually occurred is the completeness objective.
A)True
B)False
Q4) The completeness assertion concerns whether recorded transactions included in the financial statements actually occurred.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Audit evidence
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/24080
Sample Questions
Q1) Ratios and other analytical procedures need to be recalculated manually by the auditor each time an adjusting entry is made to the client's statements.
A)True
B)False
Q2) Which of the following types of evidence commonly serve alone to provide reliable evidence to satisfy any audit objective?
A) analytical procedures
B) observation
C) inquiries of client
D) all of the above
Q3) Knowledge of the client's business combined with analytical procedures assist in identifying possible oversights in an audit.
A)True
B)False
Q4) Cost should never be a consideration when making decisions about evidence for a given audit.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Audit planning and documentation
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/24081
Sample Questions
Q1) Auditors should plan engagements properly to:
A) ensure a cost-effective audit.
B) gain a clear understanding of the client.
C) avoid client misunderstandings.
D) all of the above
Q2) Discuss each of the five steps involved in accepting an audit engagement and initial planning.
Q3) The development of the audit program is the final stage in:
A) the client acceptance decision.
B) audit planning.
C) the engagement letter.
D) documenting independence.
Q4) When considering the desirability of staff continuity on an engagement, an audit partner must always:
A) be satisfied that the team has the appropriate competence and capabilities.
B) ensure the client is satisfied.
C) ensure confidentiality is not compromised.
D) ensure the audit staff is satisfied.
Q5) Discuss the factors an auditor should consider before accepting a company as an audit client.
8
To view all questions and flashcards with answers, click on the resource link above.
Chapter7: Materiality and risk
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/24082
Sample Questions
Q1) There are several factors the auditor should consider when assessing inherent risk.Discuss four of these factors, and for each factor, explain the factor's effect on the auditor's assessment of inherent risk.
Q2) Risk is:
A) measured by tolerable error.
B) to be avoided in the audit.
C) a measure of uncertainty.
D) all of the above
Q3) If an auditor believes the client will have financial difficulties after the audit report is issued, and external users will be relying heavily on the financial statements, the auditor will probably set acceptable audit risk as high.
A)True
B)False
Q4) An aim of allocating a preliminary judgement about materiality to balance sheet accounts is to:
A) minimise audit costs and maintain audit quality.
B) determine the level of audit to accumulate.
C) increase audit quality.
D) reduce audit risk.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Internal control and control risk
Available Study Resources on Quizplus for this Chatper
119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/24083
Sample Questions
Q1) The financial statements are NOT likely to correctly reflect applicable accounting standards if the:
A) company's controls do not promote efficiency.
B) controls affecting the reliability of financial reporting are inadequate.
C) company's controls do not promote effectiveness.
D) all of the above
Q2) Why do the procedures used to gain an understanding of internal control and assess control risk vary for smaller clients?
Q3) Which one of the following statements regarding auditor documentation of the client's internal controls is correct?
A) No one particular form of documentation is necessary, and the extent of documentation may vary.
B) No documentation is necessary, although it is desirable.
C) Documentation must include procedural write-ups.
D) Documentation must include flowcharts.
Q4) The less control risk there is, the smaller the amount of planned substantive evidence required.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Fraud auditing
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/24084
Sample Questions
Q1) Explain how revenue accounts are especially susceptible to fraud.
Q2) ASA 240 states that in exercising professional scepticism, 'the auditor makes a critical assessment, with a questioning mind, of the validity of audit evidence obtained and is alert to audit evidence that contradicts or brings into question the reliability of documents and responses to inquiries and other information obtained from management and those charged with governance'.
A)True
B)False
Q3) Auditor responses to fraud risk include which of the following?
A) Change the overall conduct of the audit to respond to identified fraud risks.
B) Design and perform procedures to address the risk of management override of controls.
C) Design and perform audit procedures to address identified risks.
D) all of the above
Q4) What are the three actions management should take to prevent, deter, and detect fraud?
Q5) When risks of material misstatements due to fraud are identified, how should auditors adjust their audit approach?
Q6) Describe 'premature revenue recognition' and give an example.
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: The impact of information technology on the audit process
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/24085
Sample Questions
Q1) One disadvantage of IT systems is the potential elimination of the control provided by division of duties of independent persons normally present in manual systems.
A)True
B)False
Q2) In IT systems, if general controls are effective, it increases the auditor's ability to rely on application controls to reduce control risk.
A)True
B)False
Q3) Assume you are using generalised audit software (GAS)during your audit of accounts receivable.Discuss four kinds of tests or audit procedures you can perform with the GAS if the client's data are in machine-readable form.
Q4) The perceived importance of IT within an organisation is often dictated by the attitude of the audit committee.
A)True
B)False
Q5) Discuss what is meant by the term 'auditing through the computer'.
Q6) Discuss the advantages and benefits of using generalised audit software.
Q7) Identify the six categories of general controls and give one example of each.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Overall audit plan and audit program
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/24086
Sample Questions
Q1) When designing an audit program for tests of details of balances, the auditor should make assumptions about inherent risk and control risk, as well as predictions concerning the outcome of tests of controls, substantive tests of transactions, and analytical procedures.
A)True
B)False
Q2) In the context of an audit of financial statements, substantive tests are audit procedures that:
A) assess the detection risk of each audit objective.
B) assess the control risk for each audit objective.
C) test whether transactions are correct.
D) test for dollar misstatements.
Q3) The timing of phase I audit procedures are typically:
A) before the balance sheet date.
B) on or after the balance sheet date.
C) anytime.
D) at the end of fieldwork.
Q4) Tests of details of balances are always substantive tests.
A)True
B)False
Page 13
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: Audit of the sales and collection cycle: Tests of controls
and substantive tests of transactions
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/24087
Sample Questions
Q1) Describe each of the six key control activities for sales.
Q2) Explain what 'lapping' means and discuss the internal control deficiency that allows it to occur.Also discuss the procedures the auditor can perform to detect lapping.
Q3) The parts of the audit most affected by the tests of controls and substantive tests of transactions for the sales and collection cycle are the balances in:
1)accounts receivable.
2)cash.
3)bad debt expense.
4)provision for doubtful debts.
A) 1, 3, 4
B) 2, 3, 4
C) 1, 2, 3
D) 1, 2, 3, 4
Q4) It is common to test sales for proper classification as part of testing for:
A) valuation.
B) completeness.
C) accuracy.
D) cutoff.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Completing tests in the sales and collection cycle:
Accounts receivable
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/24088
Sample Questions
Q1) What is the advantage of using the negative form of confirmations?
A) Customer's silence proves that the balance is correct.
B) Larger sample sizes can be used without increasing the costs above what would have been required for positive confirmations.
C) It is appropriate in all circumstances.
D) Follow-up procedures are scheduled automatically.
Q2) In the audit of accounts receivable, list the factors that affect the planned detection risk for tests of details of balances.
Q3) Comparing the provision for doubtful debts as a percentage of accounts receivable with previous years can help detect errors in the bad debts expense account.
A)True
B)False
Q4) The results of substantive tests of sales and cash receipts transactions are used to determine the level of planned detection risk for each accounts receivable balance-related audit objective.
A)True
B)False
Q5) Describe how the auditor tests the rights objective for accounts receivable.
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Audit sampling
Available Study Resources on Quizplus for this Chatper
144 Verified Questions
144 Flashcards
Source URL: https://quizplus.com/quiz/24089
Sample Questions
Q1) The use of haphazard sample selection is allowed under current professional auditing standards.
A)True
B)False
Q2) Except for the definition of what is being measured, the mean-per-unit estimate is calculated in exactly the same manner as the:
A) ratio estimate.
B) attributes sampling's CUDR.
C) error bound.
D) difference estimate.
Q3) Monetary-unit sampling selects individual dollars as the sampling unit, but in practice auditors do not audit individual dollars.
A)True
B)False
Q4) There are 14 steps to audit sampling for details of balances, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results.Discuss each of the steps included in the 'evaluate the results' section for non-statistical sampling.
Q5) Discuss what is meant by 'representative sample'.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Audit of transaction cycles and financial statement balances I
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/24090
Sample Questions
Q1) Discuss the four aspects of the audit of cost accounting with which the auditor is most concerned.
Q2) Comparing expenses to prior years' expenses is an effective analytical procedure for accounts payable because expenses from year to year are:
A) relatively stable.
B) variable.
C) erratic.
D) dynamic.
Q3) When the client's physical inventory takes place before the last day of the year, it is still necessary to perform an accounts payable cutoff at the time of the physical count.In addition, the auditor must verify whether all acquisitions taking place between the physical count and the end of the year were added to:
A) accounts payable and cost of goods sold.
B) the physical inventory and accounts payable.
C) the physical inventory.
D) accounts payable.
Q4) State the primary determinants of the amount of time needed to perform the physical observation of inventory.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Audit of transaction cycles and financial statement balances II
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/24091
Sample Questions
Q1) The audit of the bank reconciliation will normally lead to the discovery of theft of cash by interception of cash receipts from customers before they are recorded, with the account written off as a bad debt.
A)True
B)False
Q2) Discuss two analytical procedures commonly performed during the audit of the cash account.
Q3) What are the most important objectives when auditing dividends payable?
Q4) The general cash account is considered significant in almost all audits:
A) where the ending balance is material.
B) even when the ending balance is immaterial.
C) where either the beginning or ending balance is material.
D) except those of not-for-profit organisations.
Q5) Which one of the general tests of details of balance objectives is NOT considered vital in the audit of borrowings?
A) existence
B) valuation
C) completeness
D) realisable value
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Completing the audit
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/24092
Sample Questions
Q1) Auditors do not need to design and perform procedures in every audit to review for contingent liabilities and subsequent events as part of their phase IV testing.
A)True
B)False
Q2) The auditor's responsibility for 'reviewing the subsequent events' of a client is normally limited to the period of time beginning with the:
A) start of the financial year under audit and ending with the balance sheet date.
B) balance sheet date and ending with the date of the annual general meeting.
C) start of the financial year under audit and ending with the date of the auditor's report.
D) balance sheet date and ending with the date of the auditor's report.
Q3) Footnote disclosure in the financial statement is necessary if the contingent liability: A) is remote.
B) is probable.
C) is reasonably possible.
D) has occurred.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Audit reporting
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/24093
Sample Questions
Q1) Where there are scope limitations, the size of potential errors is important in determining the appropriate form of the audit report.
A)True
B)False
Q2) The most common case in which conditions beyond both the client's and the auditor's control cause a scope limitation is an engagement agreed upon after the client's balance sheet date.
A)True
B)False
Q3) The audit report date indicates the:
A) last day of the financial period.
B) date on which the financial report was filed with ASIC.
C) last date on which users may institute a lawsuit against either the client or the auditor.
D) last day of the auditor's responsibility for the review of significant events that occurred after the date of the financial report.
Q4) What are the nine distinct parts of a standard audit report?
Q5) Discuss how materiality affects audit reporting decisions.
Q6) Under what conditions is a disclaimer of opinion issued?
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Other auditing and assurance engagements
Available Study Resources on Quizplus for this Chatper
102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/24094
Sample Questions
Q1) Of the three types of assurance engagements, examination engagements provide a higher level of assurance than agreed-upon procedures engagements and review engagements.
A)True
B)False
Q2) When performing a review of interim information for a public company, the accountant ordinarily does not perform tests of the accounting records, independent confirmations, or physical examinations.
A)True
B)False
Q3) A financial statement review includes obtaining an understanding of internal control.
A)True
B)False
Q4) A financial statement review emphasises four broad areas.State the four areas which are emphasised.
Q5) The use of negative assurances is inappropriate in review reports.
A)True
B)False
Q6) Discuss each of the three phases of a performance audit.
Page 21
To view all questions and flashcards with answers, click on the resource link above.