Acca audit & assurance chapter 4 professional ethics mcqs

🎓 ACCA Audit & Assurance

📋 Exam Instructions

This practice test contains 50 multiple choice questions

Each question has 4 options (A, B, C, D) unless otherwise stated

Choose the best answer for each question

All questions are based on ACCA Audit & Assurance Chapter 4

Answers and explanations are provided at the end

📚 Study Tips

Focus on the five fundamental principles

Understand the five categories of threats

Learn about safeguards and their application

Review independence requirements for PIEs

📝 PART 1: QUESTIONS (50 Questions)

Question 1: Which of the following is NOT one of the

fundamental principles as set out in ACCA's Code of Ethics and Conduct?

A Professional behaviour

B Professional competence and due care

Chapter 4: Professional Ethics - Practice Quiz (50 Questions)

C Objectivity

D Honesty

Question 2: To whom does ACCA's Code of Ethics and Conduct apply?

A Only to ACCA members who are auditors

B To all ACCA members, affiliates and students

C Only to all ACCA members

D Only to ACCA members, affiliates and students working in

auditing firms

Question 3: Which of the following are categories of threats to compliance with the fundamental principles? (Select the

option that includes ONLY valid threat categories)

A Familiarity, Advocacy, Self-awareness, Management

B Self-interest, Self-review, Advocacy, Familiarity, Intimidation

C Self-awareness, Management, Self-review, Intimidation

D Advocacy, Management, Self-interest, Objectivity

Question 4: An advocacy threat would arise if the auditor of a client company were to do which of the following?

A Both prepare and audit the financial statements

B Become too sympathetic to the client's interests

C Act on behalf of a competitor company

D Promote the client's position to the extent that objectivity is

compromised

Question 5: Which TWO statements about the conceptual framework approach to independence are true? (Select the best answer that represents both correct statements)

A The auditor should resign if threats are significant AND

Safeguards must be applied to all threats

B Threats must be eliminated or reduced to an acceptable level ANDThe framework must be applied to identify threats

C Safeguards must be applied to all threats AND The auditor shouldresign if threats are significant

D The framework must be applied to identify threats AND

Safeguards must be applied to all threats

Question 6: When audit fees from a client represent a large proportion of total firm fees, what is the correct statement for

a public interest entity (PIE)?

A If fees exceed 15% for two consecutive years, safeguards must beapplied

B If fees exceed 15% for any year, no safeguards are necessary if

disclosed to governance

C If fees exceed 15% for more than two years, the audit firm mustresign

D There are no specific percentage limits for PIEs

Question 7: Which body issues the code of ethics that has been adopted in the ACCA Code of Ethics and Conduct?

A PIOB (Public Interest Oversight Board)

B IESBA (International Ethics Standards Board for Accountants)

C IASB (International Accounting Standards Board)

D IAASB (International Auditing and Assurance Standards Board)

Question 8: Which of the following best describes the principle

of 'Integrity'?

A Being honest and straightforward in all professional relationships

B Maintaining professional knowledge and skill

C Not allowing bias or conflict of interest to override professionaljudgment

D Respecting the confidentiality of information

Question 9: What is meant by 'Professional competence and due care'?

A Working quickly to meet deadlines

B Maintaining professional knowledge and skill at the level required

to ensure competent professional service

C Charging appropriate fees for services

D Following client instructions without question

Question 10: Which of the following is an example of a interest threat?

self-A Having a close family member employed by the audit client

B Having a financial interest in an audit client

C Being pressured to reduce audit work due to fee constraints

D Becoming too trusting of client representations

Question 11: What is a self-review threat?

A When an accountant reviews their own work

B When a professional accountant is required to evaluate the results

of a previous judgment made by themselves or another individual intheir firm

C When an accountant is too familiar with a client

D When an accountant is intimidated by client management

Question 12: Which of the following is an example of a familiarity threat?

A Preparing and auditing the same financial statements

B Having a long association with an audit client

C Promoting shares in an audit client

D Being offered a job by an audit client

Question 13: What is an intimidation threat?

A When an accountant threatens a client

B When a professional accountant is deterred from acting

objectively because of actual or perceived pressures

C When an accountant is too friendly with a client

D When an accountant has financial interests in a client

Question 14: Which of the following is NOT an appropriate safeguard for addressing threats to independence?

A Rotation of senior personnel

B Independent review of work performed

C Increasing audit fees to compensate for the threat

D Consultation with third parties

Question 15: What is the maximum period that a key audit partner can serve on a PIE audit engagement?

Question 17: Which of the following services is generally prohibited for auditors of PIEs?

A Tax compliance services

A The external auditors

B The management team

C The persons with responsibility for overseeing the strategicdirection and obligations of the entity

D The shareholders

Question 19: Which of the following is an example of an advocacy threat?

A Preparing tax returns for an audit client

B Acting as an advocate for an audit client in litigation

C Having a family member employed by the client

D Auditing financial statements prepared by the firm

Question 20: What is the purpose of the conceptual

framework approach?

A To provide a rigid set of rules

B To help identify, evaluate and address threats to compliance withfundamental principles

C To eliminate all ethical dilemmas

D To reduce the need for professional judgment

Question 21: Which of the following is a category of

safeguards?

A Safeguards created by the profession or legislation

B Safeguards created by the client

C Safeguards created by competitors

D Safeguards created by the public

Question 22: What should an accountant do if they cannot reduce threats to an acceptable level?

A Continue with the engagement anyway

B Decline or discontinue the specific professional activity

C Increase fees to compensate for the risk

D Seek approval from the client

Question 23: Which of the following is an example of a work environment safeguard?

A Professional standards set by ACCA

B Quality control policies and procedures within the firm

C Legislation governing auditor independence

D Professional monitoring by regulatory bodies

Question 24: What is meant by 'acceptable level' in the

C Any level approved by the client

D A level set by professional bodies

Question 25: Which of the following relationships would create the most significant threat to independence?

A The auditor's spouse is employed as a senior manager by theaudit client

B The auditor attended university with the client's CEO

C The auditor lives in the same city as the client

D The auditor uses the same bank as the client

Question 26: What is the significance of materiality in ethical considerations?

A Only material threats need to be considered

B Materiality determines the level of safeguards required

C All threats are considered regardless of materiality

D Materiality only applies to financial statement items

Question 27: Which of the following is NOT a requirement for maintaining professional competence?

A Continuing professional development

B Keeping up to date with relevant technical and professional

developments

C Working only in familiar areas

D Acting diligently in accordance with applicable standards

Question 28: What is the primary purpose of audit firm

rotation for PIEs?

A To reduce audit costs

B To enhance auditor independence and audit quality

C To provide opportunities for more audit firms

D To comply with stock exchange requirements

Question 29: Which of the following best describes

'professional behavior'?

A Always agreeing with client management

B Complying with relevant laws and regulations and avoiding

actions that discredit the profession

C Maximizing profits from professional services

D Working long hours to complete assignments

Question 30: What is meant by 'network firm' in the context of independence?

A Any firm that provides similar services

B A firm that belongs to a network that aims at cooperation andshares common brand name, systems or resources

C A firm located in the same geographic area

D A firm that competes for the same clients

Question 31: Which of the following is an appropriate response to an intimidation threat?

A Ignore the threat and continue with the work

B Document the threat and apply appropriate safeguards

C Immediately resign from all client engagements

D Report the client to regulatory authorities

Question 32: What is the role of an engagement quality control reviewer?

A To perform the audit procedures

B To provide an objective evaluation of significant judgments andconclusions

C To prepare the financial statements

D To communicate with regulatory bodies

Question 33: Which of the following services would create a management threat?

A Providing tax advice

B Making management decisions for the client

C Performing agreed-upon procedures

D Conducting a review engagement

Question 34: What is the significance of the 'public interest' in professional ethics?

A It only applies to government clients

B Professional accountants have a responsibility to act in the publicinterest

C It is less important than client interests

D It only applies to listed companies

Question 35: Which of the following is an example of a

contingent fee arrangement?

A A fixed fee regardless of outcome

B A fee that depends on the results of the work performed

C An hourly rate arrangement

D A fee based on the size of the client

Question 36: What should an auditor do if they discover a significant error in prior year financial statements?

A Ignore it if it relates to a prior year

B Discuss with management and consider the implications for thecurrent audit

C Immediately resign from the engagement

D Report directly to shareholders

Question 37: Which of the following is a key consideration when evaluating the significance of threats?

A The size of the audit fee only

B Qualitative and quantitative factors

C The client's preference

D The auditor's experience only

Question 38: What is meant by 'professional skepticism'?

A Being suspicious of all client representations

B An attitude that includes a questioning mind and criticalassessment of audit evidence

C Refusing to trust any evidence provided by the client

D Always assuming fraud is present

Question 39: Which of the following is an appropriate safeguard for a familiarity threat?

A Increasing the audit fee

B Rotating senior audit team members

C Reducing the scope of audit work

D Extending the audit timeline

Question 40: What is the purpose of independence requirements?

A To increase audit costs

B To ensure auditors can express objective opinions

C To limit the number of audit firms

D To protect audit firm profits

Question 41: Which of the following would NOT typically be considered when assessing threats to independence?

A The nature and significance of the threat

B The client's industry sector

C The availability and effectiveness of safeguards

D The auditor's personal financial situation unrelated to the client

Question 42: What is the primary objective of quality control systems in audit firms?

A To reduce audit costs

B To provide reasonable assurance that the firm complies with

professional standards

C To increase audit efficiency only

D To eliminate all audit risks

Question 43: Which of the following is a key element of the IESBA Code's conceptual framework?

A Rigid rules for all situations

B Identification, evaluation and addressing of threats

C Elimination of all professional judgment

D Focus only on financial interests

Question 44: What should be done if a professional

accountant becomes aware of non-compliance with laws and regulations?

A Ignore it if it doesn't affect the financial statements

B Consider the matter and determine appropriate action

C Immediately report to law enforcement

D Resign from the engagement immediately

Question 45: Which of the following best describes the

relationship between ethics and law?

A Ethical requirements are always the same as legal requirements

B Ethical requirements may be more restrictive than legal

requirements

C Legal requirements are always more restrictive than ethical

requirements

D Ethics and law are completely separate with no relationship

Question 46: What is the significance of documentation in ethical decision-making?

A It is not necessary if the decision is obvious

B It provides evidence of the thought process and safeguards

applied

C It is only required for PIE clients

D It should only document the final decision

Question 47: Which of the following situations would require

an auditor to consider withdrawing from an engagement?

A The client requests a reduction in audit fees

B Management refuses to acknowledge their responsibility for

internal control

C The client operates in a high-risk industry

D The audit takes longer than expected

Question 48: What is the minimum period an auditor must wait before joining a PIE audit client in a key management position?

A 1 year

B 2 years

C 3 years

D 5 years

Question 49: Which of the following is considered a 'close business relationship' that would impair independence?

A Purchasing goods from the client at normal commercial terms

B Having a joint venture with the audit client

C Using the same professional services as the client

D Operating in the same industry as the client

Question 50: What action should be taken if an immediate family member of an audit team member is employed by the audit client?

A No action required if disclosed

B The team member should be removed from the audit

C Additional supervision should be provided

D The engagement should be declined

Question 51: Which of the following best describes 'ethical sensitivity'?

A The ability to charge appropriate fees

B The ability to recognize ethical issues when they arise

C The ability to work efficiently

D The ability to maintain client relationships

Question 52: What is the primary purpose of professional indemnity insurance for accountants?

A To increase firm profits

B To protect against claims arising from professional negligence

C To reduce audit fees

D To eliminate all professional risks

Question 53: Which of the following is an example of 'lowballing' in audit pricing?

A Charging premium rates for specialized services

B Quoting significantly low fees to win an engagement with theintention of recovering costs through other services

C Charging fees based on time spent

D Offering discounts for long-term engagements