AAA Ethics and fraud

ACCA · Strategic Professional · 7 questions

Name: ____________________ Date: ____________

Which of these is a fundamental ethical principle?
- A Independence of mind only
- B Objectivity
- C Profitability
- D Reliability
The audit firm audits a client and also prepares its accounting records and financial statements. The main threat is:
- A Intimidation
- B Advocacy
- C Familiarity
- D Self-review
An audit senior has just received a significant gift from the audit client. The main threat is:
- A Self-review
- B Familiarity
- C Advocacy
- D Self-interest
An audit partner has been the partner on the audit of a listed client for many years and has a close relationship with its finance director. The main threat is:
- A Advocacy
- B Familiarity
- C Self-review
- D Self-interest
The three conditions in the fraud triangle are:
- A Intent, act and concealment
- B Opportunity, pressure and rationalisation
- C Cost, benefit and risk
- D Detection, prevention and response
The auditor's responsibility for fraud is:
- A None
- B To prevent all fraud
- C To obtain reasonable assurance that the financial statements are free from material misstatement, whether from fraud or error
- D To detect all fraud
Safeguards against an independence threat include:
- A Ignoring it when the fee is small
- B Not documenting
- C Giving the client a discount
- D Using a separate team for non-audit work and review by a partner not on the audit

Answer key

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

The five are integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.
Reviewing your own work creates a self-review threat.
A significant benefit may influence judgement.
A long association may make the partner too sympathetic to the client's interests.
Pressure or incentive, opportunity and rationalisation are the three factors.
Management is responsible for prevention and detection of fraud. The auditor plans and performs the audit with scepticism.
If safeguards cannot reduce the threat to an acceptable level, the firm should decline or withdraw.