Auditing · Topic 10

Company Audit and Legal Framework Quiz

Work through 25 multiple-choice questions, one at a time. Submit each answer for feedback. At the end, review your score and see which concepts to revisit.

Review the Q&AAuditing quiz learning path
1. A newly incorporated company asks whether an external audit is legally required. Which auditing concept best fits this case?
2. Directors want to appoint the auditor using a procedure copied from another country. Which auditing concept best fits this case?
3. The signed engagement letter contains wording designed to narrow an auditor’s statutory duty. Which auditing concept best fits this case?
4. The CEO says that the annual audit report should be addressed exclusively to the finance team. Which auditing concept best fits this case?
5. Audit testing suggests a breach that may trigger a duty to notify a regulator. Which auditing concept best fits this case?
6. A newly incorporated company asks whether an external audit is legally required. What is the most appropriate response?
7. Directors want to appoint the auditor using a procedure copied from another country. What is the most appropriate response?
8. The signed engagement letter contains wording designed to narrow an auditor’s statutory duty. What is the most appropriate response?
9. The CEO says that the annual audit report should be addressed exclusively to the finance team. What is the most appropriate response?
10. Audit testing suggests a breach that may trigger a duty to notify a regulator. What is the most appropriate response?
11. A newly incorporated company asks whether an external audit is legally required. Which evidence would be most directly useful?
12. Directors want to appoint the auditor using a procedure copied from another country. Which evidence would be most directly useful?
13. The signed engagement letter contains wording designed to narrow an auditor’s statutory duty. Which evidence would be most directly useful?
14. The CEO says that the annual audit report should be addressed exclusively to the finance team. Which evidence would be most directly useful?
15. Audit testing suggests a breach that may trigger a duty to notify a regulator. Which evidence would be most directly useful?
16. A newly incorporated company asks whether an external audit is legally required. Which conclusion is best supported by the case?
17. Directors want to appoint the auditor using a procedure copied from another country. Which conclusion is best supported by the case?
18. The signed engagement letter contains wording designed to narrow an auditor’s statutory duty. Which conclusion is best supported by the case?
19. The CEO says that the annual audit report should be addressed exclusively to the finance team. Which conclusion is best supported by the case?
20. Audit testing suggests a breach that may trigger a duty to notify a regulator. Which conclusion is best supported by the case?
21. A newly incorporated company asks whether an external audit is legally required. Which shortcut would most directly undermine the work in this case?
22. Directors want to appoint the auditor using a procedure copied from another country. Which shortcut would most directly undermine the work in this case?
23. The signed engagement letter contains wording designed to narrow an auditor’s statutory duty. Which shortcut would most directly undermine the work in this case?
24. The CEO says that the annual audit report should be addressed exclusively to the finance team. Which shortcut would most directly undermine the work in this case?
25. Audit testing suggests a breach that may trigger a duty to notify a regulator. Which shortcut would most directly undermine the work in this case?
Show the answer key
  1. Statutory audit applicability An audit requirement or exemption depends on local law.
  2. Auditor appointment authority Valid appointment depends on meeting the applicable requirements.
  3. Statutory obligations and engagement terms Engagement terms do not automatically displace statutory duties.
  4. Statutory reporting recipients The intended addressee is governed by applicable requirements.
  5. Noncompliance reporting obligations External reporting decisions depend on law, ethics and circumstances.
  6. Check current rules for the entity’s jurisdiction, legal form and relevant exemption criteria An audit requirement or exemption depends on local law.
  7. Identify the appointing body and process under applicable law Valid appointment depends on meeting the applicable requirements.
  8. Evaluate the clause against mandatory legal duties and seek advice as needed Engagement terms do not automatically displace statutory duties.
  9. Identify the proper addressee under local law and the engagement circumstances The intended addressee is governed by applicable requirements.
  10. Determine applicable disclosure duties and ethical obligations, with legal advice as necessary External reporting decisions depend on law, ethics and circumstances.
  11. Authoritative local legislation and the entity’s eligibility facts Check current rules for the entity’s jurisdiction, legal form and relevant exemption criteria.
  12. Governing law, entity documents and appointment resolution Identify the appointing body and process under applicable law.
  13. The executed letter and relevant statutory provision Evaluate the clause against mandatory legal duties and seek advice as needed.
  14. Applicable reporting rules and company governance documents Identify the proper addressee under local law and the engagement circumstances.
  15. The provision creating the duty and documented facts about the suspected breach Determine applicable disclosure duties and ethical obligations, with legal advice as necessary.
  16. An audit requirement or exemption depends on local law Authoritative local legislation and the entity’s eligibility facts would support this assessment.
  17. Valid appointment depends on meeting the applicable requirements Governing law, entity documents and appointment resolution would support this assessment.
  18. Engagement terms do not automatically displace statutory duties The executed letter and relevant statutory provision would support this assessment.
  19. The intended addressee is governed by applicable requirements Applicable reporting rules and company governance documents would support this assessment.
  20. External reporting decisions depend on law, ethics and circumstances The provision creating the duty and documented facts about the suspected breach would support this assessment.
  21. Assuming small-company exemptions apply in every jurisdiction An audit requirement or exemption depends on local law.
  22. Assuming directors always have sole appointment authority Valid appointment depends on meeting the applicable requirements.
  23. Relying on the contract alone to override the law Engagement terms do not automatically displace statutory duties.
  24. Choosing the report addressee solely on management preference The intended addressee is governed by applicable requirements.
  25. Assuming confidentiality always overrides a mandatory reporting obligation External reporting decisions depend on law, ethics and circumstances.

These cases use general auditing principles. Apply the relevant local law and professional standards when evaluating a real engagement. Reference: IAASB standards and pronouncements.