Chapter 13: Auditing and governance of AIS

Question 1

Sarbanes–Oxley Act requirements include:

a. a prohibition on the audit firm carrying out non-audit services.
b. mandatory rotation of lead audit partners.
c. an internal control report including a statement of management’s responsibility for establishing and maintaining adequate internal control.
d. all of the above.

Answer 1

Sarbanes–Oxley Act requirements include:

a. a prohibition on the audit firm carrying out non-audit services.
b. mandatory rotation of lead audit partners.
c. an internal control report including a statement of management’s responsibility for establishing and maintaining adequate internal control.

d. all of the above.

Question 2

Which of the following statements regarding the concept of the audit is not true?

a. The most common type of audit is the financial statement audit.
b. The financial statement audit provides an objective opinion on an organisation’s financial statements.
c. Financial statement audit provides absolutely guarantee that the financial reports are free of misstatement.
d. Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating those results to interested users.

Answer 2

Which of the following statements regarding the concept of the audit is not true?

a. The most common type of audit is the financial statement audit.
b. The financial statement audit provides an objective opinion on an organisation’s financial statements.

*c. Financial statement audit provides absolutely guarantee that the financial reports are free of misstatement.

d. Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating those results to interested users.

Question 3

An analytical review may involve identifying relationships:

a. by comparing this client’s data for the current year with industry norms.
b. within the same client database for the current year.
c. by comparing this client’s data for the current year with this client’s data in prior time periods.
d. all of the above.

Answer 3

An analytical review may involve identifying relationships:

a. by comparing this client’s data for the current year with industry norms.
b. within the same client database for the current year.
c. by comparing this client’s data for the current year with this client’s data in prior time periods.

d. all of the above.

Question 4

The relationship between internal auditing function and the organisation’s external auditors can be described as:

a. competing.
b. substitutive.
c. enhancing.
d. close.

Answer 4

The relationship between internal auditing function and the organisation’s external auditors can be described as:

a. competing.
b. substitutive.
c. enhancing.

*d. close.

Question 5

Answer 5

Question 6

The external auditors:

a. must not use the work of an internal auditor.
b. can use the work of an internal auditor at whatever way he/she wants.
c. can use the work of an internal auditor subject to guidelines outlined in ASA 610.
d. can use the work of an internal auditor subject to guidelines outlined in IFRS.

Answer 6

The external auditors:

a. must not use the work of an internal auditor.
b. can use the work of an internal auditor at whatever way he/she wants.

*c. can use the work of an internal auditor subject to guidelines outlined in ASA 610.

d. can use the work of an internal auditor subject to guidelines outlined in IFRS.

Question 7

The audit program is essentially a/an:

a. computerised auditing program that is used to audit a system.
b. auditing product provided by an auditing firm.
c. checklist of all the tests and other procedures that the auditor intends to carry out.
d. None of the options is correct.

Answer 7

The audit program is essentially a/an:

a. computerised auditing program that is used to audit a system.
b. auditing product provided by an auditing firm.

*c. checklist of all the tests and other procedures that the auditor intends to carry out.

d. None of the options is correct.

Question 8

Accounting information systems may face:

a. inherent risk.
b. control risk.
c. detection risk.
d. all of the options are correct.

Answer 8

Accounting information systems may face:

a. inherent risk.
b. control risk.
c. detection risk.

*d. all of the options are correct.

Question 9

Answer 9

Question 10

Which of the following statements regarding internal auditing is not true?

a. Internal auditing can improve an organisation’s operations by providing guidance for management decisions.
b. Internal auditing can improve an organisation’s operations by providing guidance for more efficient business operations.
c. Internal auditing is a subjective assurance and consulting activity designed to add value and improve an organisation’s operations.
d. Internal auditing is undertaken by professionals who evaluate and improve an organisation’s risk management, control and governance processes to add value to the organisation.

Answer 10

Which of the following statements regarding internal auditing is not true?

a. Internal auditing can improve an organisation’s operations by providing guidance for management decisions.
b. Internal auditing can improve an organisation’s operations by providing guidance for more efficient business operations.

*c. Internal auditing is a subjective assurance and consulting activity designed to add value and improve an organisation’s operations.

d. Internal auditing is undertaken by professionals who evaluate and improve an organisation’s risk management, control and governance processes to add value to the organisation.

Question 11

The risk of material misstatement resulting from the internal controls in place failing to detect a fraudulent or erroneous transaction is a/an:

a. inherent risk.
b. control risk.
c. detection risk.
d. incontrollable risk.

Answer 11

The risk of material misstatement resulting from the internal controls in place failing to detect a fraudulent or erroneous transaction is a/an:

a. inherent risk.

*b. control risk.

c. detection risk.
d. incontrollable risk.

Question 12

The type of audit that examines the system of internal controls and whether they work is known as:

a. financial audit.
b. information systems audit.
c. IT governance audit.
d. management audit.

Answer 12

The type of audit that examines the system of internal controls and whether they work is known as:

a. financial audit.

*b. information systems audit.

c. IT governance audit.
d. management audit.

Question 13

A firm can only provide reasonable assurance that the firm and its personnel comply with:

a. AUASB Standards.
b. relevant ethical requirements.
c. applicable legal and regulatory requirements.
d. all of the options are correct.

Answer 13

A firm can only provide reasonable assurance that the firm and its personnel comply with:

a. AUASB Standards.
b. relevant ethical requirements.
c. applicable legal and regulatory requirements.

*d. all of the options are correct.

Question 14

Answer 14

Question 15

ASA 700 Forming an Opinion and Reporting on a Financial Report does not outline the auditor’s responsibilities of the:

a. auditor’s report should state that the audit was conducted in accordance with international accounting standards.
b. the audit should be described including procedures on how evidence was obtained.
c. auditor’s report should state that the audit was conducted in accordance with Australian accounting standards.
d. auditor’s report states that the auditor believes that sufficient and appropriate audit evidence was obtained to form an opinion.

Answer 15

ASA 700 Forming an Opinion and Reporting on a Financial Report does not outline the auditor’s responsibilities of the:

*a. auditor’s report should state that the audit was conducted in accordance with international accounting standards.

b. the audit should be described including procedures on how evidence was obtained.
c. auditor’s report should state that the audit was conducted in accordance with Australian accounting standards.
d. auditor’s report states that the auditor believes that sufficient and appropriate audit evidence was obtained to form an opinion.

Question 16

Answer 16

Question 17

The auditor performing an attest service is:

a. an external auditor.
b. an internal auditor.
c. either an external auditor or an internal auditor.
d. an AIS auditor.

Answer 17

The auditor performing an attest service is:

*a. an external auditor.

b. an internal auditor.
c. either an external auditor or an internal auditor.
d. an AIS auditor.

Question 18

Sarbanes-Oxley Act (SOX) has legal force on which of the following?

a. US companies.
b. Companies that are dual-listed on a US stock exchange.
c. Subsidiaries of US companies.
d. All the above.

Answer 18

Sarbanes-Oxley Act (SOX) has legal force on which of the following?

a. US companies.
b. Companies that are dual-listed on a US stock exchange.
c. Subsidiaries of US companies.

*d. All the above.

Question 19

The risk of material misstatement, without regard to the effects of controls, is a/an:

a. inherent risk.
b. control risk.
c. detection risk.
d. incontrollable risk.

Answer 19

The risk of material misstatement, without regard to the effects of controls, is a/an:

*a. inherent risk.

b. control risk.
c. detection risk.
d. incontrollable risk.

Question 20

The purpose of an audit is to:

a. give shareholders a guarantee that the financial statements are correct.
b. give stakeholders a guarantee that the financial statements are correct.
c. enhance the degree of confidence of intended users in the financial report.
d. none of the options is correct.

Answer 20

The purpose of an audit is to:

a. give shareholders a guarantee that the financial statements are correct.
b. give stakeholders a guarantee that the financial statements are correct.

*c. enhance the degree of confidence of intended users in the financial report.

d. none of the options is correct.

Question 21

Answer 21

Question 22

Guidelines in ASA 610 relate to:

a. the level of objectivity associated with the internal audit function.
b. the level of technical competence associated with the internal audit function.
c. whether the activities of the internal audit function has been properly planned, reviewed, supervised and documented.
d. all of the options are correct.

Answer 22

Guidelines in ASA 610 relate to:

a. the level of objectivity associated with the internal audit function.
b. the level of technical competence associated with the internal audit function.
c. whether the activities of the internal audit function has been properly planned, reviewed, supervised and documented.

*d. all of the options are correct.

Question 23

Which of the following is not likely to increase the inherent risk?

a. Director and senior management inexperience.
b. Worsening general economic conditions.
c. Improving foreign exchange rates.
d. External pressures arising from market expectations.

Answer 23

Which of the following is not likely to increase the inherent risk?

a. Director and senior management inexperience.
b. Worsening general economic conditions.

c. Improving foreign exchange rates.

d. External pressures arising from market expectations.

Question 24

ASX’s corporate governance principles suggest that the audit committee should:

a. consist of at least three non-executive directors with an independent chair.
b. review the integrity of the company’s financial reporting.
c. oversee the independence of the external auditors.
d. all of the options are correct.

Answer 24

ASX’s corporate governance principles suggest that the audit committee should:

a. consist of at least three non-executive directors with an independent chair.
b. review the integrity of the company’s financial reporting.
c. oversee the independence of the external auditors.

*d. all of the options are correct.

Question 25

The examination of financial reports to form a view independently from the organisation as to the reliability of the information provided in the reports is referred to as a/an:

a. financial audit.
b. internal audit.
c. external audit.
d. information audit.

Answer 25

The examination of financial reports to form a view independently from the organisation as to the reliability of the information provided in the reports is referred to as a/an:

*a. financial audit.

b. internal audit.
c. external audit.
d. information audit.

Question 26

Answer 26

Question 27

Answer 27

Question 28

Auditors need to be imaginative to identify all possible paths through the AIS. Which of the following sets of test data do they use?

a. Historical test data from systems development.
b. Realistic transactions to test all computational paths generated by the auditors.
c. Realistic transactions based on good accounting practice that test the interface between the work procedures and the AIS.
d. All of the options are correct.

Answer 28

Auditors need to be imaginative to identify all possible paths through the AIS. Which of the following sets of test data do they use?

a. Historical test data from systems development.
b. Realistic transactions to test all computational paths generated by the auditors.
c. Realistic transactions based on good accounting practice that test the interface between the work procedures and the AIS.

*d. All of the options are correct.

Question 29

The objectives of the internal audit function do not vary according to:

a. organisation size.
b. organisation complexity.
c. organisation market share.
d. industry sector.

Answer 29

The objectives of the internal audit function do not vary according to:

a. organisation size.
b. organisation complexity.

*c. organisation market share.

d. industry sector.

Question 30

Which of the following statements regarding an audit committee is true?

a. The Australian and New Zealand approach of the establishment of an audit committee is legislated for mandatory compliance.
b. The US approach of the establishment of an audit committee encourages companies to follow best practice.
c. The existence of an independent audit committee is recognised internationally as an important feature of good corporate governance.
d. All of the options are correct.

Answer 30

Which of the following statements regarding an audit committee is true?

a. The Australian and New Zealand approach of the establishment of an audit committee is legislated for mandatory compliance.
b. The US approach of the establishment of an audit committee encourages companies to follow best practice.

*c. The existence of an independent audit committee is recognised internationally as an important feature of good corporate governance.

d. All of the options are correct.

Question 31

Answer 31

Question 32

Good corporate governance requires effective management oversight. This oversight does not include:

a. internal and external non-financial reporting.
b. internal and external audit.
c. oversight of activities to control and report on fraud.
d. none of the options is correct.

Answer 32

Good corporate governance requires effective management oversight. This oversight does not include:

a. internal and external non-financial reporting.
b. internal and external audit.
c. oversight of activities to control and report on fraud.

*d. none of the options is correct.

Question 33

The auditor performing an attest service is:

a. an external auditor.
b. an internal auditor.
c. either an external auditor or an internal auditor.
d. an AIS auditor.

Answer 33

The auditor performing an attest service is:

*a. an external auditor.

b. an internal auditor.
c. either an external auditor or an internal auditor.
d. an AIS auditor.

Question 34

The risk that an error that could occur in an audit area and could be material, individually or in combination with other errors, will not be prevented or detected and corrected on a timely basis by the internal control system is:

a. inherent risk.
b. control risk.
c. detection risk.
d. incontrollable risk.

Answer 34

The risk that an error that could occur in an audit area and could be material, individually or in combination with other errors, will not be prevented or detected and corrected on a timely basis by the internal control system is:

a. inherent risk.

*b. control risk.

c. detection risk.
d. incontrollable risk.

Question 35

Answer 35

Question 36

In Australia and New Zealand, ASX guidelines encourage the appointment and evaluation of the performance of external auditors to be carried out by:

a. Chief Executive Officer (CEO).
b. board of directors.
c. audit committee.
d. Chief Financial Officer (CFO).

Answer 36

In Australia and New Zealand, ASX guidelines encourage the appointment and evaluation of the performance of external auditors to be carried out by:

a. Chief Executive Officer (CEO).
b. board of directors.

*c. audit committee.

d. Chief Financial Officer (CFO).

Question 37

Answer 37

Question 38

Which of the following statements regarding computer auditing tools and techniques is true?

a. Embedded audit software is a simpler version of an integrated test facility.
b. A more sophisticated example of embedded audit software is continuous auditing using a systems control and review file.
c. Generalised audit software examines transactions dynamically.
d. Generalised audit software is not very flexible.

Answer 38

Which of the following statements regarding computer auditing tools and techniques is true?

a. Embedded audit software is a simpler version of an integrated test facility.

*b. A more sophisticated example of embedded audit software is continuous auditing using a systems control and review file.

c. Generalised audit software examines transactions dynamically.
d. Generalised audit software is not very flexible.

Question 39

Which of the following is not true?

a. Australian Auditing Standards (ASAs) are legally binding auditing standards.
b. Australian Auditing Standards (ASAs) are issued by the Australian Auditing and Assurance Standards Board.
c. Australian Auditing Standards (ASAs) set out audit requirements for listed companies under the Corporations Act.
d. Australian Auditing Standards (ASAs) are legally enforceable legislative instruments.

Answer 39

Which of the following is not true?

a. Australian Auditing Standards (ASAs) are legally binding auditing standards.
b. Australian Auditing Standards (ASAs) are issued by the Australian Auditing and Assurance Standards Board.

*c. Australian Auditing Standards (ASAs) set out audit requirements for listed companies under the Corporations Act.

d. Australian Auditing Standards (ASAs) are legally enforceable legislative instruments.

Question 40

Answer 40

Question 41

Most AIS today are computer-based. Auditing the information system requires the auditors to:

a. treat the computer as a black box and work around it.
b. recognise the special threats inherent in IT and include these in the audit plan.
c. just look at the manual systems and procedures.
d. employ ethical hackers to audit the computer system.

Answer 41

Most AIS today are computer-based. Auditing the information system requires the auditors to:

a. treat the computer as a black box and work around it.

*b. recognise the special threats inherent in IT and include these in the audit plan.

c. just look at the manual systems and procedures.
d. employ ethical hackers to audit the computer system.

Question 42

Failing to detect a fraudulent or erroneous transaction is an example of which type of risk?

a. Control.
b. Inherent.
c. Detection.
d. Completeness.

Answer 42

Failing to detect a fraudulent or erroneous transaction is an example of which type of risk?

*a. Control.

b. Inherent.
c. Detection.
d. Completeness.

Question 43

Which of the following statements regarding an audit committee is not true?

a. An audit committee is set up to oversee accounting and financial reporting.
b. An audit committee has the mandate to cover a wide range of assurance activities including those not related to financial reporting.
c. An audit committee is responsible for considering the effectiveness of the company’s internal control system, including information technology security and control.
d. All ASX listed companies must have an audit committee.

Answer 43

Which of the following statements regarding an audit committee is not true?

a. An audit committee is set up to oversee accounting and financial reporting.
b. An audit committee has the mandate to cover a wide range of assurance activities including those not related to financial reporting.
c. An audit committee is responsible for considering the effectiveness of the company’s internal control system, including information technology security and control.

*d. All ASX listed companies must have an audit committee.

Question 44

In a company with fewer than 200 employees, client personnel procedures require that, for all new employees earning over $60 000 per annum, the new employee authorisation form is approved by the personnel manager in writing. As an auditor, how would you test the operation of this control?

a. Inspecting the new employee authorisation forms for all of those employees.
b. Interviewing the personnel manager.
c. Obtaining from the computer system a printout of all new employees and inspecting it.
d. Inspecting the new employee authorisation forms for a sample of those employees.

Answer 44

In a company with fewer than 200 employees, client personnel procedures require that, for all new employees earning over $60 000 per annum, the new employee authorisation form is approved by the personnel manager in writing. As an auditor, how would you test the operation of this control?

a. Inspecting the new employee authorisation forms for all of those employees.

b. Interviewing the personnel manager.
c. Obtaining from the computer system a printout of all new employees and inspecting it.
d. Inspecting the new employee authorisation forms for a sample of those employees.

Question 45

The control risk associated with manual reviews of computer logs is:

a. high.
b. medium.
c. low.
d. negligible.

Answer 45

The control risk associated with manual reviews of computer logs is:

*a. high.

b. medium.
c. low.
d. negligible.

Question 46

Which of the following is not performed by the internal audit function?

a. Monitoring internal control.
b. Examining financial and operational information.
c. Test transactions.
d. Implement business processes that are more efficient and effective.

Answer 46

Which of the following is not performed by the internal audit function?

a. Monitoring internal control.
b. Examining financial and operational information.
c. Test transactions.

*d. Implement business processes that are more efficient and effective.

Question 47

Answer 47

Question 48

If a firm failed to disclose billions of dollars in short term debt in its annual financial report that has been distributed to shareholders, who should be found guilty?

(i) Directors of the board.
(ii) Internal auditor.
(iii) External auditor.
a. (i) (ii) (iii)
b. (i) (ii)
c. (ii) (iii)
d. (i) (iii)

Answer 48

If a firm failed to disclose billions of dollars in short term debt in its annual financial report that has been distributed to shareholders, who should be found guilty?

(i) Directors of the board.
(ii) Internal auditor.
(iii) External auditor.

*a. (i) (ii) (iii)

b. (i) (ii)
c. (ii) (iii)
d. (i) (iii)

Question 49

The process of the auditor forming an opinion and reporting on whether or not the accounts have been prepared in accordance with generally accepted accounting principles is technically termed as:

a. external audit.
b. internal audit.
c. financial audit.
d. attest service.

Answer 49

The process of the auditor forming an opinion and reporting on whether or not the accounts have been prepared in accordance with generally accepted accounting principles is technically termed as:

a. external audit.
b. internal audit.
c. financial audit.

*d. attest service.

Question 50

Which of the following is not an advantage of using a master audit program?

a. It will typically shorten the audit program preparation time.
b. It will curb the urge to follow up on ideas outside the scope of the MAP.
c. It will provide guidance for less experienced audit team members.
d. It will lessen the likelihood of omitting significant desirable test procedures.

Answer 50

Which of the following is not an advantage of using a master audit program?

a. It will typically shorten the audit program preparation time.

b. It will curb the urge to follow up on ideas outside the scope of the MAP.

c. It will provide guidance for less experienced audit team members.
d. It will lessen the likelihood of omitting significant desirable test procedures.

Question 51

The detection risk associated with identifying breaches of security in an application system is:

a. ordinarily high.
b. ordinarily medium.
c. ordinarily low.
d. negligible.

Answer 51

The detection risk associated with identifying breaches of security in an application system is:

*a. ordinarily high.

b. ordinarily medium.
c. ordinarily low.
d. negligible.

Question 52

The inherent risk associated with an operating system that is used by a major stock exchange is:

a. ordinarily high.
b. ordinarily medium.
c. ordinarily low.
d. negligible.

Answer 52

The inherent risk associated with an operating system that is used by a major stock exchange is:

*a. ordinarily high.

b. ordinarily medium.
c. ordinarily low.
d. negligible.

Question 53

Which of the following is not a test to detect schemes to fraudulently increase profit?

a. Looking for an abnormal number of credits issued in the last month of a financial year.
b. Overvaluing or double-counting inventory.
c. Checking for vendor invoices covering transactions occurring in the ‘old year’ not brought to account until the ‘new year’.
d. Failing to write off inventory which has been discarded, stolen or scrapped.

Answer 53

Which of the following is not a test to detect schemes to fraudulently increase profit?

a. Looking for an abnormal number of credits issued in the last month of a financial year.

b. Overvaluing or double-counting inventory.
c. Checking for vendor invoices covering transactions occurring in the ‘old year’ not brought to account until the ‘new year’.
d. Failing to write off inventory which has been discarded, stolen or scrapped.

Question 54

__________ to determine the appropriate level of audit evidence required to form an opinion when Australian auditing standards direct the auditors work.

a. A high level of professional judgement is not required
b. A high level of professional judgement is required
c. A moderate level of professional judgement is preferred
d. A low level of professional judgement is required

Answer 54

__________ to determine the appropriate level of audit evidence required to form an opinion when Australian auditing standards direct the auditors work.

a. A high level of professional judgement is not required

*b. A high level of professional judgement is required

c. A moderate level of professional judgement is preferred
d. A low level of professional judgement is required

Question 55

Audit quality may be compromised due to:

(i) time constraints.
(ii) management pressure.
(iii) limited resources.
a. (i) (ii) (iii)
b. (i) (ii)
c. (ii) (iii)
d. (i) (iii)

Answer 55

Audit quality may be compromised due to:

(i) time constraints.
(ii) management pressure.
(iii) limited resources.

*a. (i) (ii) (iii)

b. (i) (ii)
c. (ii) (iii)
d. (i) (iii)

Question 56

Which of the following is not a responsibility associated with audit assurance?

a. Compare and analyse risk tolerance and mitigation strategies.
b. Evaluate existing and new controls, costs and effectiveness of monitoring procedures.
c. Define objectives, scope and priorities.
d. Assess exposure, report position and recommend insurance (if necessary).

Answer 56

Which of the following is not a responsibility associated with audit assurance?

a. Compare and analyse risk tolerance and mitigation strategies.
b. Evaluate existing and new controls, costs and effectiveness of monitoring procedures.

*c. Define objectives, scope and priorities.

d. Assess exposure, report position and recommend insurance (if necessary).

Question 57

When testing using test data, the auditor should:

a. calculate test transactions manually.
b. create a sample of test transactions.
c. start from the simplest calculations and proceed from there.
d. all of the options are correct.

Answer 57

When testing using test data, the auditor should:

a. calculate test transactions manually.
b. create a sample of test transactions.
c. start from the simplest calculations and proceed from there.

*d. all of the options are correct.

Question 58

The objective of a financial audit is to:

a. enable the auditor to express an opinion as to whether the financial report is prepared in accordance with all applicable financial reporting frameworks.
b. enable the auditor to express an opinion as to whether the financial report is prepared in accordance with an applicable financial reporting framework.
c. enable the auditor to express an opinion as to whether the financial report is prepared in accordance with an applicable accounting standard.
d. enable the auditor to express an opinion as to whether the financial report is prepared in accordance with all applicable accounting standards.

Answer 58

The objective of a financial audit is to:

a. enable the auditor to express an opinion as to whether the financial report is prepared in accordance with all applicable financial reporting frameworks.

*b. enable the auditor to express an opinion as to whether the financial report is prepared in accordance with an applicable financial reporting framework.

c. enable the auditor to express an opinion as to whether the financial report is prepared in accordance with an applicable accounting standard.
d. enable the auditor to express an opinion as to whether the financial report is prepared in accordance with all applicable accounting standards.

Question 59

Answer 59

Question 60

Which of the following is not an access control?

a. Disabling terminated employees’ accounts promptly.
b. Storing backup files off-site.
c. Logging inactive users out automatically.
d. Reviewing the access control log.

Answer 60

Which of the following is not an access control?

a. Disabling terminated employees’ accounts promptly.

b. Storing backup files off-site.

c. Logging inactive users out automatically.
d. Reviewing the access control log.

Question 61

Which of the following is not a feature of using a generalised audit software package?

a. It can be used to produce reports in any required format.
b. It can be used to generate a random sample of records using statistical techniques.
c. It must be run on a copy of the production database.
d. It may incorporate artificial intelligence and expert systems characteristics.

Answer 61

Which of the following is not a feature of using a generalised audit software package?

a. It can be used to produce reports in any required format.
b. It can be used to generate a random sample of records using statistical techniques.

c. It must be run on a copy of the production database.

d. It may incorporate artificial intelligence and expert systems characteristics.

Question 62

Non-compliance with Accounting Concepts and Standards is:

a. sometimes required.
b. deemed appropriate only in extreme circumstances.
c. unprofessional conduct.
d. all of the options are correct.

Answer 62

Non-compliance with Accounting Concepts and Standards is:

a. sometimes required.
b. deemed appropriate only in extreme circumstances.

*c. unprofessional conduct.

d. all of the options are correct.

Question 63

Which of the following statements regarding the internal audit function is not true?

a. The internal audit function is not all-encompassing.
b. The internal audit function includes the evaluation of controls in business processes.
c. The internal audit function includes the evaluation of controls in information systems and systems development projects.
d. The internal audit function includes the evaluation of controls in systems development projects.

Answer 63

Which of the following statements regarding the internal audit function is not true?

*a. The internal audit function is not all-encompassing.

b. The internal audit function includes the evaluation of controls in business processes.
c. The internal audit function includes the evaluation of controls in information systems and systems development projects.
d. The internal audit function includes the evaluation of controls in systems development projects.

Question 64

Which of the following statements regarding auditors is true?

a. When the auditors are to form an opinion that the final accounts truly and fairly summarise the underlying transactions, they do not necessarily have to have confidence in the integrity of the AIS.
b. If the auditors are to form an opinion that the final accounts truly and fairly summarise the underlying transactions then they must have confidence in the integrity of the AIS.
c. If the auditors are to express confidence in the integrity of the AIS, then they must form an opinion that the final accounts truly and fairly summarise the underlying transactions.
d. The integrity of the AIS and the auditors’ opinion towards the final accounts are irrelevant.

Answer 64

Which of the following statements regarding auditors is true?

a. When the auditors are to form an opinion that the final accounts truly and fairly summarise the underlying transactions, they do not necessarily have to have confidence in the integrity of the AIS.

*b. If the auditors are to form an opinion that the final accounts truly and fairly summarise the underlying transactions then they must have confidence in the integrity of the AIS.

c. If the auditors are to express confidence in the integrity of the AIS, then they must form an opinion that the final accounts truly and fairly summarise the underlying transactions.
d. The integrity of the AIS and the auditors’ opinion towards the final accounts are irrelevant.

Question 65

AUASB stands for:

a. Australian Auditing Standards Board.
b. Auditing and Assurance Standards Board.
c. Australian Accounting Standards Board.
d. Auditing and Accounting Standards Board.

Answer 65

AUASB stands for:

a. Australian Auditing Standards Board.

*b. Auditing and Assurance Standards Board.

c. Australian Accounting Standards Board.
d. Auditing and Accounting Standards Board.

Question 66

Which of the following is performed by the internal audit function?

a. Evaluate risks.
b. Implement improved management control systems.
c. Implement improved risk control systems.
d. Reviewing the organisation’s strategic plans.

Answer 66

Which of the following is performed by the internal audit function?

*a. Evaluate risks.

b. Implement improved management control systems.
c. Implement improved risk control systems.
d. Reviewing the organisation’s strategic plans.

Question 67

Answer 67

Question 68

Which of the following are classed as application controls?

a. E-commerce controls.
b. Processing controls.
c. Database controls.
d. All of the above are classed as application controls.

Answer 68

Which of the following are classed as application controls?

a. E-commerce controls.
b. Processing controls.
c. Database controls.

d. All of the above are classed as application controls.

Question 69

Which of the following is not a responsibility of the Board, Audit Committee and Management?

a. Formulate overall risk classifications.
b. Understand business life cycles, business processes, and critical success factors.
c. Identify and classify risks.
d. Assess the probability of risk and potential consequences.

Answer 69

Which of the following is not a responsibility of the Board, Audit Committee and Management?

a. Formulate overall risk classifications.
b. Understand business life cycles, business processes, and critical success factors.
c. Identify and classify risks.

*d. Assess the probability of risk and potential consequences.

Question 70

Standards Australia has a risk management standard:

a. ASA 610.
b. ISO 9000.
c. AS/NZS ISO 31000:2009.
d. none of the options is correct.

Answer 70

Standards Australia has a risk management standard:

a. ASA 610.
b. ISO 9000.

*c. AS/NZS ISO 31000:2009.

d. none of the options is correct.

Question 71

To test that the system will provide an appropriate response to every invalid input:

a. every possible permutation of valid transactions that could be entered into the system needs to be tested.
b. every possible permutation of invalid transactions that could be entered into the system needs to be tested.
c. every possible permutation of valid and invalid transactions that could be entered into the system needs to be tested.
d. none of the options is correct.

Answer 71

To test that the system will provide an appropriate response to every invalid input:

a. every possible permutation of valid transactions that could be entered into the system needs to be tested.
b. every possible permutation of invalid transactions that could be entered into the system needs to be tested.

*c. every possible permutation of valid and invalid transactions that could be entered into the system needs to be tested.

d. none of the options is correct.

Question 72

Answer 72

Question 73

The purpose of the financial statement audit is for users to be able to ascertain the __________ and __________ of the financial statements of an organisation.

a. credibility; reliability
b. trustworthiness; accuracy
c. correctness; objectivity
d. None of the options is correct.

Answer 73

The purpose of the financial statement audit is for users to be able to ascertain the __________ and __________ of the financial statements of an organisation.

*a. credibility; reliability

b. trustworthiness; accuracy
c. correctness; objectivity
d. None of the options is correct.