E3 Quality, ethics and the responsibilities of the auditor

Written by Saad Rahman (ACCA)

ACCA · New at Expertise level · 8 questions

Name: ____________________ Date: ____________

Which of these is a component of a firm's system of quality management?
- A Setting the audit fee
- B Preparing the client's tax return
- C Choosing the client's directors
- D Monitoring and remediation
What does an engagement quality review do?
- A Gives an objective evaluation of significant judgements and conclusions before the report is issued
- B Collects the fee
- C Sets materiality only
- D Prepares the financial statements
In the conceptual framework approach to ethics, what is the correct order?
- A Address, ignore and report
- B Identify, evaluate and address threats
- C Report, identify and ignore
- D Evaluate, hide and accept
An auditor discovers a breach of the Code of Ethics. What should the auditor do first?
- A Ignore it
- B Change the working papers
- C Wait for the client to notice
- D End the activity that caused the breach and assess the consequences
Who is responsible for the prevention and detection of fraud?
- A The tax authority
- B The shareholders
- C The auditor alone
- D Management and those charged with governance
The auditor planned and performed the audit properly but did not detect a well-hidden fraud. What does this show?
- A The audit was invalid
- B The auditor is always liable
- C The financial statements were correct
- D The auditor will not necessarily have failed
Which statement about non-compliance with laws and regulations is correct?
- A The auditor is responsible for compliance
- B Management is responsible for compliance and the auditor considers non-compliance that affects the statements
- C It is never reported
- D It is not relevant to the audit
Which of these is a quality management procedure over engagement resources?
- A Avoiding review
- B Hiding deficiencies
- C Assigning staff with the right skills and enough time
- D Setting the client's fee

Answer key

1. D, 2. A, 3. B, 4. D, 5. D, 6. D, 7. B, 8. C

Other components include governance, ethics, acceptance, performance and resources.
It is used for audits where the risk is higher or required by the standards.
Threats are eliminated, reduced by safeguards, or the activity is ended.
Then those charged with governance should be told.
The auditor obtains reasonable assurance on material misstatement.
The audit has inherent limitations.
Reporting may be required by law or the Code.
Resources are one component.