Audit Committee Quiz

Conoy's internal audit department is currently not well understood or supported by the board. Which TWO of the following statements describe the main advantages of establishing an audit committee?

• The position of the internal audit department will be strengthened within the organisation.

• Corporate governance will be enhanced as the board of directors will report to the audit committee.

• The effectiveness of the internal audit department will be improved as the audit committee will monitor and review its performance on a regular basis.

• The workload of the internal audit department will be better managed as the audit committee will be able to minimise the extent to which the external auditors rely on the work of the internal auditors.

Once established, the audit committee will have many objectives. Which of the following does NOT form part of the audit committee's objectives?

• Safeguarding the privacy of whistleblowers

• Appointing the external auditor

• Monitoring the independence of the external auditor

• Implementing a policy on the supply of non-audit services by the external auditor

Adrian has submitted a proposal to the board to establish an audit committee, and this is currently under consideration. In relation to the proposed membership of the audit committee, choose whether each proposed member should be included. The proposed membership of the audit committee is:

• Adrian Muse (chief internal auditor)

• Penny Dinty (existing executive director with some financial expertise)

• Sharon Header (proposed new non-executive director)

• Fredrick Rowe (proposed new non-executive director)

Which of the following is NOT one of the five fundamental principles of the ACCA Code of Ethics?

• Integrity

• Objectivity

• Independence

• Professional Competence and Due Care

According to the ACCA Code of Ethics, a conflict of interest may arise when:

• The professional accountant has financial interests in the company.

• The professional accountant conducts an audit for a client without any personal connection.

• The professional accountant gives tax advice based solely on existing regulations.

• The professional accountant discloses all personal relationships to the client.

Which of the following best describes confidentiality according to the ACCA Code of Ethics?

• Not using sensitive information for personal gain.

• Refusing to share client information with third parties even when legally required.

• Discussing sensitive information only within the company, regardless of consent.

• Disclosing confidential information without consequences if it benefits the public interest.

What should a professional accountant do if they are asked to perform a task they lack the competence to undertake?

• Accept the task and learn on the job.

• Refuse the task outright.

• Seek appropriate guidance or refer the task to a qualified individual.

• Accept the task only if it is high-paying.

The principle of objectivity in the ACCA Code of Ethics means:

• Maintaining professional relationships without bias or conflicts of interest.

• Being independent of clients at all times.

• Focusing only on numerical accuracy in financial statements.

• Adopting a skeptical mindset in all engagements.

Which of the following is an example of a self-interest threat to objectivity in audit and assurance?

• The auditor has a close family member in a senior management position at the audit client.

• The auditor is auditing a client that provides them with significant fees for non-audit services.

• The auditor has been offered a future job at the audit client.

• The auditor is being pressured by the client to issue an unmodified opinion.

A familiarity threat to objectivity is most likely to occur when:

• An auditor forms a close, long-term relationship with the client.

• The audit client offers non-monetary gifts to the auditor.

• The auditor is responsible for correcting their own work in the financial statements.

• The client disputes the auditor’s recommendations and findings.