Chapter 3 f8 acca auditors' rights mcqs

ACCA AA Chapter 3: Auditors Rights, Appointment, Removal, Resignation, and Regulation - Practice Exam (50

Questions)

Part 1: Questions

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

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

D Auditors are appointed by the members and automatically stay in office until resig-nation or removal

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

3 In which of the following situations must the auditor deliver a written ’statement of cir-cumstances’?

A Only if the auditor resigns before expiry of their term of office

B Only if the auditor does not seek reappointment at the next annual general meeting

C If the auditor resigns or is removed from office

D If the auditor proposes to issue a modified auditor’s report

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

A IESBA

B PIOB

C ACCA

D IAASB

5 Which body sets the International Financial Reporting Standards (IFRS)?

A IAASB

B IASB

C IESBA

D FRC

6 Which body sets the UK Corporate Governance Code?

A IAASB

B IASB

C FRC

D IESBA

7 Who typically appoints the auditor of a company under the UK Companies Act?

A The board of directors

B The shareholders

C The audit committee

D The chief executive officer

8 Which of the following is a right of a statutory auditor?

A To set the companys strategic objectives

B To access all company books and records

C To approve executive remuneration

D To manage daily operations

9 An auditor may be removed from office by:

A The board of directors

B The audit committee

C The shareholders

D The chief financial officer

10 The International Ethics Standards Board for Accountants (IESBA) is responsible for:

A Setting auditing standards

B Setting ethical standards for accountants

C Setting financial reporting standards

D Overseeing corporate governance

11 Which of the following is a requirement for an auditors resignation?

A Approval by the board of directors

B A written statement of circumstances

C Approval by the audit committee

D No requirement for a statement

12 The Public Interest Oversight Board (PIOB) is responsible for:

A Setting auditing standards

B Overseeing the standard-setting process

C Setting corporate governance codes

D Auditing public companies

13 Under the UK Companies Act, auditors have the right to:

A Vote at general meetings

B Speak at general meetings on relevant matters

C Set executive remuneration

D Approve financial statements

14 Which of the following is a reason an auditor might resign?

A Disagreement with management

B Approval of financial statements

C Setting company strategy

D Managing internal controls

15 The removal of an auditor requires:

A A board resolution

B A shareholder resolution

C An audit committee decision

D A CEO approval

16 Which body oversees the auditing profession in the UK?

A IAASB

B FRC

C IESBA

D ACCA

17 An auditors right to access information includes:

A Only financial records

B All relevant company records

C Only board meeting minutes

D Only public documents

18 The statement of circumstances is required when an auditor:

A Completes their term

B Resigns or is removed

C Issues an unmodified report

D Attends a board meeting

19 Which of the following is NOT a duty of a statutory auditor?

A To express an opinion on financial statements

B To prepare financial statements

C To ensure compliance with auditing standards

D To report on the truth and fairness of financial statements

20 The IAASB is part of which organization?

A IFAC

B IASB

C FRC

D IESBA

21 Auditors must be independent of the company they audit to:

A Ensure objectivity

B Prepare financial statements

C Manage company operations

D Set corporate strategy

22 Which of the following is a condition for auditor appointment?

A Must be a member of a recognized supervisory body

B Must be an executive director

C Must be employed by the company

D Must be a shareholder

23 The UK Companies Act requires auditors to:

A Approve financial statements

B Express an opinion on financial statements

C Prepare tax returns

D Set executive remuneration

24 Which of the following can appoint an auditor to fill a casual vacancy?

A Shareholders

B Board of directors

C Audit committee

D Chief executive officer

25 The IESBA Code of Ethics emphasizes:

A Financial reporting standards

B Auditor independence and professional conduct

C Corporate governance codes

D Risk management frameworks

26 An auditors resignation must be communicated to:

A The board of directors only

B The shareholders and relevant authorities

C The audit committee only

D The chief financial officer

27 Which of the following is a right of auditors at general meetings?

A To vote on resolutions

B To receive notice and speak on relevant matters

C To propose resolutions

D To approve dividends

28 The FRC in the UK is responsible for:

A Setting international auditing standards

B Overseeing corporate governance and auditing

C Preparing financial statements

D Setting ethical standards

29 An auditors statement of circumstances is submitted to:

A The board of directors

B The shareholders

C The relevant regulatory authority

D The audit committee

30 Which of the following is a requirement for auditor independence?

A Holding shares in the audited company

B Providing non-audit services without restriction

C Avoiding financial relationships with the client

D Being an employee of the company

31 The IAASB sets standards for:

A Financial reporting

B Auditing and assurance engagements

C Corporate governance

D Ethical conduct

32 Auditors are required to comply with:

A Only local laws

B International Standards on Auditing (ISAs)

C Company policies

D Shareholder directives

33 Which of the following is NOT a reason for auditor removal?

A Loss of independence

B Failure to perform duties

C Disagreement with management

D Issuing an unmodified audit report

34 The UK Companies Act allows auditors to:

A Set company strategy

B Access all relevant information

C Approve financial statements

D Manage internal controls

35 Which body oversees the IESBA?

A IAASB

B PIOB

C FRC

D IASB

36 Auditors must report to shareholders if:

A The company changes its strategy

B The financial statements are not true and fair

C The board approves dividends

D The company hires new management

37 The process for auditor removal typically requires:

A A board meeting

B A special resolution by shareholders

C An audit committee recommendation

D A CEO decision

38 Which of the following is a duty of a statutory auditor?

A Preparing financial statements

B Expressing an opinion on financial statements

C Setting executive remuneration

D Managing company operations

39 The ACCA is primarily responsible for:

A Setting auditing standards

B Providing professional qualifications

C Setting financial reporting standards

D Overseeing corporate governance

40 An auditors right to information includes:

A Access to confidential employee records

B Access to all relevant company records

C Access to shareholder personal data

D Access to competitor financials

41 The statement of circumstances is required to:

A Explain the reasons for resignation or removal

B Approve financial statements

C Set company strategy

D Manage internal controls

42 Which of the following enhances auditor independence?

A Providing extensive non-audit services

B Having no financial interest in the client

C Being employed by the client

D Holding shares in the client

43 The UK Companies Act requires auditors to:

A Prepare financial statements

B Comply with auditing standards

C Set corporate governance policies

D Approve dividends

44 Which of the following is a role of the audit committee in auditor appointment?

A Approving the auditors appointment

B Recommending the auditor to shareholders

C Setting auditor remuneration

D Preparing financial statements

45 The IESBA Code applies to:

A Only auditors

B All professional accountants

C Only company directors

D Only shareholders

46 An auditors resignation is effective when:

A The board approves it

B The statement of circumstances is filed

C The audit committee agrees

D The CEO is notified

47 The FRC sets:

A International auditing standards

B UK Corporate Governance Code

C International financial reporting standards

D Ethical standards for auditors

48 Which of the following is a right of auditors under the UK Companies Act?

A To set company dividends

B To receive notice of general meetings

C To approve company strategy

D To manage internal controls

49 The IAASBs standards are:

A Mandatory for all accountants

B Adopted globally but may be adapted locally

C Only for UK companies

D Only for listed companies

50 Which of the following is NOT a requirement for auditor reappointment?

A Shareholder approval

B Auditor independence

C Board recommendation

D Auditor employment by the company

51 The purpose of the auditors statement of circumstances is to:

A Disclose reasons for leaving office

B Approve financial statements

C Set company strategy

D Manage internal controls

Part 2: Answers with Explanations

1 D

Explanation: Under the UK Companies Act, auditors are typically appointed by

share-holders (members) at the annual general meeting (AGM) and remain in office until they resign, are removed, or do not seek reappointment They are not automatically reap-pointed every year (A), nor are they apreap-pointed by the board annually (B) or every three years (C) The appointment continues until a change occurs, making D correct

2 B

Explanation: Statutory auditors have rights under the UK Companies Act to receive

no-tice of and attend general meetings (A), access all company accounting books and records (D), and receive information and explanations from officers (C) However, they do not have a right to attend board meetings (B), as their role is external and focused on auditing, not governance participation

3 C

Explanation: A written statement of circumstances is required when an auditor resigns

before the end of their term or is removed from office, as per the UK Companies Act This statement explains the reasons for leaving to ensure transparency for shareholders and regulators It is not required for issuing a modified audit report (D) or solely for not seeking reappointment (B), though resignation or removal triggers this obligation

4 D

Explanation: The International Auditing and Assurance Standards Board (IAASB), part

of IFAC, sets International Standards on Auditing (ISAs) IESBA (A) sets ethical stan-dards, PIOB (B) oversees standard-setting, and ACCA (C) is a professional body, not a standard-setter

5 B

Explanation: The International Accounting Standards Board (IASB) sets International

Financial Reporting Standards (IFRS) IAASB (A) focuses on auditing, IESBA (C) on ethics, and FRC (D) oversees UK governance and auditing, not IFRS

6 C

Explanation: The Financial Reporting Council (FRC) in the UK sets the UK Corporate

Governance Code IAASB (A) sets auditing standards, IASB (B) sets IFRS, and IESBA (D) sets ethical standards

7 B

Explanation: Under the UK Companies Act, auditors are appointed by shareholders

(members) at the AGM, ensuring independence and accountability to owners The board (A), audit committee (C), or CEO (D) may recommend or influence but do not appoint

8 B

Explanation: Statutory auditors have the right to access all company books and records

to perform their audit Setting strategy (A), approving remuneration (C), or managing operations (D) are not auditor rights

9 C

Explanation: Auditors can only be removed by a shareholder resolution, typically at a

general meeting, ensuring accountability to owners The board (A), audit committee (B),

or CFO (D) lack this authority

10 B

Explanation: The IESBA sets the Code of Ethics for professional accountants, focusing

on integrity, objectivity, and independence It does not set auditing (A), financial report-ing (C), or governance (D) standards

11 B

Explanation: When resigning, auditors must provide a written statement of circumstances

to explain the reasons for resignation, ensuring transparency Approval by the board (A)

or audit committee (C) is not required, and a statement is mandatory (D)

12 B

Explanation: The PIOB oversees the standard-setting processes of bodies like the IAASB

and IESBA to ensure public interest It does not set standards (A), governance codes (C),

or audit companies (D)

13 B

Explanation: Auditors have the right to receive notice of and speak at general meetings

on matters relevant to their audit role, ensuring they can communicate findings They cannot vote (A), set remuneration (C), or approve statements (D)

14 A

Explanation: Auditors may resign due to disagreements with management, such as on

accounting policies or ethical concerns Approving statements (B), setting strategy (C),

or managing controls (D) are not reasons for resignation

15 B

Explanation: Auditor removal requires a shareholder resolution, typically a special

res-olution, to ensure due process The board (A), audit committee (C), or CEO (D) cannot unilaterally remove auditors

16 B

Explanation: The FRC oversees the auditing profession in the UK, including setting

stan-dards and monitoring compliance IAASB (A) sets international stanstan-dards, IESBA (C) sets ethics, and ACCA (D) provides qualifications

17 B

Explanation: Auditors have the right to access all relevant company records, not just

financial records (A), board minutes (C), or public documents (D), to perform their audit effectively

18 B

Explanation: A statement of circumstances is required for resignation or removal to

ex-plain the reasons for leaving office It is not required for completing a term (A), issuing

reports (C), or attending meetings (D).

19 B

Explanation: Auditors do not prepare financial statements (B), which is managements

responsibility Their duties include expressing an opinion (A), ensuring compliance with standards (C), and reporting on fairness (D)

20 A

Explanation: The IAASB is part of the International Federation of Accountants (IFAC).

IASB (B) sets IFRS, FRC (C) is UK-based, and IESBA (D) focuses on ethics

21 A

Explanation: Auditor independence ensures objectivity in forming opinions, avoiding

bias Preparing statements (B), managing operations (C), or setting strategy (D) are not auditor roles

22 A

Explanation: Auditors must be members of a recognized supervisory body (e.g., ACCA)

to be eligible for appointment They cannot be executives (B), employees (C), or share-holders (D) to maintain independence

23 B

Explanation: The UK Companies Act requires auditors to express an opinion on financial

statements, not prepare them (A), prepare tax returns (C), or set remuneration (D)

24 B

Explanation: The board of directors can appoint an auditor to fill a casual vacancy (e.g.,

due to resignation) until the next AGM, when shareholders confirm Audit committee (C) or CEO (D) cannot appoint

25 B

Explanation: The IESBA Code emphasizes auditor independence and professional

con-duct, not financial reporting (A), governance (C), or risk management (D)

26 B

Explanation: An auditors resignation must be communicated to shareholders and filed

with the relevant authority (e.g., Companies House) with a statement of circumstances, not just to the board (A), audit committee (C), or CFO (D)

27 B

Explanation: Auditors have the right to receive notice of and speak at general meetings

on audit-related matters, not vote (A), propose resolutions (C), or approve dividends (D)

28 B

Explanation: The FRC oversees corporate governance and auditing in the UK, including

the UK Corporate Governance Code IAASB (A) sets ISAs, IASB (C) sets IFRS, and IESBA (D) sets ethics

29 C

Explanation: The statement of circumstances is submitted to the regulatory authority

(e.g., Companies House) to ensure transparency It is not sent only to the board (A), shareholders (B), or audit committee (D)

30 C