Acca f8 audit & assurance chapter 3 auditors' rights & regulation 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 3

Answers and explanations are provided at the end

📚 Study Tips

Focus on auditor appointment procedures and rights

Understand resignation and removal processes

Learn about regulatory bodies and their roles

Review professional standards and their setters

📝 PART 1: QUESTIONS (50 Questions)

Question 1: Which of the following is true with respect to the

appointment of auditors?

A Auditors are appointed by the members every year

B Auditors must be appointed by the board of directors every year

Chapter 3: Auditors' Rights, Appointment, Removal, Resignation & Regulation

-Practice Quiz (50 Questions)

C Auditors are appointed by the board of directors every three years

D Auditors are appointed by the members and automatically stay inoffice until resignation or removal

Question 2: Which of the following is NOT a right of a

statutory auditor?

A To receive notice of and attend general meetings

B To attend board meetings

C To receive information and explanations from officers of the

company

D To have access to all company accounting books and records

Question 3: In which of the following situations must the auditor deliver a written 'statement of circumstances'? (Select the situation that ALWAYS requires a statement)

A If the auditor resigns before expiry of their term of office

B If the auditor does not seek reappointment at the next annualgeneral meeting for any reason

C If the auditor proposes to issue a modified auditor's report

D If the auditor is removed from office

Question 4: Which body sets International Standards on Auditing (ISAs)?

A IESBA (International Ethics Standards Board for Accountants)

B PIOB (Public Interest Oversight Board)

C ACCA (Association of Chartered Certified Accountants)

D IAASB (International Auditing and Assurance Standards Board)

Question 5: What is the minimum notice period required for removing an auditor?

A 14 days

B 21 days

C 28 days

D 35 days

Question 6: Which of the following is a qualification

requirement for statutory auditors in the UK?

A Must be a member of any professional accounting body

B Must hold a Recognised Qualifying Body (RQB) qualification and

be registered with a Recognised Supervisory Body (RSB)

C Must have at least 10 years of accounting experience

D Must be approved by the Financial Reporting Council only

Question 7: What is the role of the Financial Reporting Council (FRC) in audit regulation?

A To conduct all statutory audits

B To set International Standards on Auditing

C To regulate the audit profession and monitor audit quality

D To appoint auditors for all listed companies

Question 8: Which of the following circumstances would

disqualify someone from acting as a company's auditor?

A Being a member of ACCA

B Being an officer or employee of the company

C Having auditing experience with other companies

D Being located in a different city from the company

Question 9: What must happen if an auditor becomes aware of their disqualification after appointment?

A They can continue until the next AGM

B They must resign immediately

C They must seek approval from the FRC

D They can continue with board approval

Question 10: Which body is responsible for setting International Financial Reporting Standards (IFRS)?

A To explain the audit procedures performed

B To detail any circumstances that should be brought toshareholders' attention

C To recommend a replacement auditor

D To summarize the financial position of the company

Question 12: Which of the following is a right of auditors at general meetings?

A To vote on all resolutions

B To speak on any matter concerning them as auditor

C To propose new directors

D To chair the meeting

Question 13: What is the role of Recognised Supervisory Bodies (RSBs)?

A To set auditing standards

B To supervise and monitor their members who act as statutoryauditors

C To conduct statutory audits

D To appoint auditors for companies

Question 14: Which of the following best describes the

'cooling-off' period for audit partners?

A A period when auditors cannot work

B A mandatory break before an audit partner can return to audit thesame client

C Time required between audit appointments

D A period for professional development

Question 15: What is audit firm rotation?

A Changing audit team members annually

B The mandatory change of audit firm after a specified period

C Rotating audit procedures each year

D Moving audit files between offices

Question 16: Which of the following is NOT typically

considered a Public Interest Entity (PIE)?

A Listed companies

B Banks

C Insurance companies

D Small private companies

Question 17: What is the maximum period an audit firm can audit a PIE before mandatory rotation?

A 5 years

B 7 years

A Setting auditing standards

B Setting ethical standards for professional accountants

C Regulating audit firms

D Setting financial reporting standards

Question 20: Which of the following is a key principle of auditor independence?

A Auditors should maximize their fees

B Auditors should avoid all relationships that could impair objectivity

C Auditors should only audit companies in their local area

D Auditors should provide as many services as possible to clients

Question 21: What is the purpose of audit quality reviews?

A To increase audit fees

B To monitor and improve the quality of audits

C To reduce the number of auditors

D To eliminate audit requirements

Question 22: Which of the following is a responsibility of audit committees?

A Conducting the audit

B Preparing financial statements

C Overseeing the external audit process

D Setting executive remuneration

Question 23: What is meant by 'audit tenure'?

A The length of time an auditor has been qualified

B The period an audit firm has been auditing a particular client

C The time taken to complete an audit

D The auditor's employment contract length

Question 24: Which of the following services is generally prohibited for auditors of PIEs?

A Statutory audit services

B Tax compliance services

C Internal audit services

D Agreed-upon procedures

Question 25: What is the role of the Public Interest Oversight Board (PIOB)?

A Setting auditing standards

B Overseeing the standard-setting activities of IFAC

C Conducting audits of public companies

D Regulating national audit markets

Question 26: Which document must be filed with the registrar when an auditor resigns?

A Notice of resignation only

B Statement of circumstances only

C Both notice of resignation and statement of circumstances

D Audit report summary

Question 27: What is the significance of the 'true and fair view' concept in auditing?

A It determines audit fees

B It is the basis for the auditor's opinion on financial statements

C It sets the audit timeline

D It determines auditor qualifications

Question 28: Which of the following is a key feature of the audit regulatory framework?

A Self-regulation only

B Independent oversight and monitoring

C No quality controls

D Unlimited audit tenure

Question 29: What is the purpose of continuing professional development (CPD) for auditors?

A To increase audit fees

B To maintain and enhance professional competence

C To reduce audit work

D To eliminate audit requirements

Question 30: Which of the following best describes

'professional skepticism'?

A Assuming all clients are dishonest

B An attitude of professional doubt and critical assessment

C Refusing to trust any evidence

D Always issuing qualified opinions

Question 31: What is the role of engagement quality control review?

A To replace the audit

B To provide an objective evaluation of significant judgments andconclusions

C To reduce audit costs

D To eliminate audit procedures

Question 32: Which of the following is a threat to auditor independence?

A Having appropriate qualifications

B Following auditing standards

C Having a financial interest in the audit client

D Maintaining professional competence

Question 33: What is the purpose of audit documentation?

A To increase file storage costs

B To provide evidence of work performed and conclusions reached

C To make audits longer

D To confuse audit teams

Question 34: Which body is responsible for monitoring

compliance with auditing standards in the UK?

A Companies House

B HM Revenue & Customs

C Financial Reporting Council (FRC)

D Bank of England

Question 35: What is meant by 'audit failure'?

A When an audit takes too long

B When an auditor fails to detect material misstatements that shouldhave been detected

C When audit fees are too high

D When an audit team is too small

Question 36: Which of the following is a key component of audit quality?

A Low audit fees

B Fast completion of audits

C Appropriate application of professional skepticism

D Minimal documentation

Question 37: What is the role of root cause analysis in audit quality?

A To increase audit fees

B To identify underlying causes of audit deficiencies

C To reduce audit work

D To eliminate auditing standards

Question 38: Which of the following is a key principle of the International Code of Ethics?

A To check file temperature

B To review audit files before the audit report is issued

C To reduce file storage

D To eliminate documentation

Question 40: Which of the following best describes audit methodology?

A The fees charged for audits

B The systematic approach and procedures used to conduct audits

C The location where audits are performed

D The qualifications of audit staff

Question 41: What is the significance of materiality in

auditing?

A It determines audit fees

B It helps auditors focus on items that could influence user decisions

C It sets the audit timeline

D It determines auditor qualifications

Question 42: Which of the following is a key element of audit firm governance?

A Maximizing profits

B Tone at the top and leadership commitment to quality

C Minimizing staff training

D Reducing documentation requirements

Question 43: What is the role of the audit partner in charge of

an engagement?

A To minimize audit costs

B To take overall responsibility for the audit and the audit opinion

C To delegate all work to junior staff

D To avoid client contact

Question 44: Which of the following is a key consideration in auditor appointment?

A Lowest fee proposal

B Fastest completion time

C Auditor independence and competence

D Geographic proximity only

Question 45: What is the purpose of audit quality indicators?

A To increase audit fees

B To measure and monitor audit quality

C To reduce audit work

D To eliminate auditing standards

Question 46: Which of the following is a responsibility of audit firm leadership?

A Conducting all audits personally

B Setting the tone for quality and establishing quality control

systems

C Minimizing training costs

D Avoiding regulatory contact

Question 47: What is the significance of the audit opinion?

A It determines the company's share price

B It provides assurance on the reliability of financial statements

C It guarantees the company's future success

D It eliminates all business risks

Question 48: Which of the following best describes the

concept of reasonable assurance?

A Absolute certainty about financial statements

B High, but not absolute, level of assurance

C No assurance provided

D Limited assurance only

Question 49: What is the role of professional judgment in auditing?

A To eliminate the need for standards

B To make decisions based on relevant training, knowledge, andexperience

C To reduce audit work

D To increase audit fees

Question 50: Which of the following is a key benefit of audit regulation?

A Increased audit costs

B Enhanced public confidence in financial reporting

C Reduced number of auditors

D Elimination of audit requirements

✅ PART 2: ANSWERS & EXPLANATIONS

Question 1

✅ Correct Answer: D Auditors are appointed by the members

and automatically stay in office until resignation or removal

📚 Explanation:

Under the Companies Act 2006, auditors are appointed by the

members (shareholders) and automatically stay in office until they

resign, are removed, or become disqualified They do not need to bereappointed annually unless they resign or are removed

Question 2

✅ Correct Answer: B To attend board meetings

📚 Explanation:

Auditors do not have the right to attend board meetings Their

rights include receiving notice of and attending general meetings,

receiving information and explanations from officers, and having

access to accounting books and records

Question 4

✅ Correct Answer: D IAASB (International Auditing and

Assurance Standards Board)

📚 Explanation:

The International Auditing and Assurance Standards Board (IAASB)sets International Standards on Auditing (ISAs) The IAASB is anindependent standard-setting body that serves the public interest bysetting high-quality international standards for auditing, assurance,and quality control

Question 5

✅ Correct Answer: C 28 days

📚 Explanation:

Under the Companies Act 2006, a minimum of 28 days' notice must

be given to remove an auditor This allows the auditor time to

prepare and circulate their representations to shareholders beforethe meeting

Question 6

✅ Correct Answer: B Must hold a Recognised Qualifying Body (RQB) qualification and be registered with a Recognised

Supervisory Body (RSB)

📚 Explanation:

To act as a statutory auditor in the UK, an individual must hold anappropriate qualification from a Recognised Qualifying Body (RQB)and be registered with a Recognised Supervisory Body (RSB) such asICAEW, ICAS, or ACCA

Question 7

✅ Correct Answer: C To regulate the audit profession and

monitor audit quality

📚 Explanation:

The FRC is the UK's independent regulator responsible for regulatingthe audit profession, monitoring audit quality, setting UK auditingstandards, and overseeing the professional bodies that supervisestatutory auditors

independence

Question 9

✅ Correct Answer: B They must resign immediately

any matter concerning them as auditor However, they cannot vote(unless they are also shareholders) or chair meetings.

Question 13

✅ Correct Answer: B To supervise and monitor their members who act as statutory auditors

📚 Explanation:

RSBs (such as ICAEW, ICAS, ACCA) supervise and monitor their

members who act as statutory auditors, ensuring they maintain

appropriate standards and comply with regulations

Question 18

✅ Correct Answer: C Financial Reporting Council (FRC)

📚 Explanation:

The Financial Reporting Council (FRC) sets the UK Corporate

Governance Code, which provides principles and provisions for goodcorporate governance for UK listed companies

Accountants, which covers independence, integrity, objectivity, andother ethical principles.

Question 21

✅ Correct Answer: B To monitor and improve the quality of audits

📚 Explanation:

Audit quality reviews are conducted by regulatory bodies and

professional bodies to monitor and improve the quality of audits,ensuring auditors comply with standards and maintain professionalcompetence