1

The audit engagement partner of Striver & Co recently visited the offices of Plush, a private company, to plan the forthcom
final audit procedures. A week later, each of the five partners of Striver & Co received an unsolicited letter from the manag
director of Plush offering one year's free membership at one of its golf and country clubs. Individual annual membership
normally costs £3,000 and the offer was not made to anyone else.
Which TWO of the following threats to independence are most likely to be present?
Self-review threat.
Familiarity threat.
Self-interest threat.
Advocacy threat.
Which TWO of the following personal relationships are NOT likely to constitute a threat to
2 objectivity?
The auditfor
working partner is marriedauditors
the company’s to the finance directoron
and is working of an
theaudit
auditclient.
of the company she previously
worked for

3 Porter & Co audits one of its clients, Trinity. Which of the following does NOT constitute a threat to objectivity?
A member of the audit team holds a controlling interest in the shares of Trinity.
The audit engagement partner’s wife holds shares in Trinity.
A partner in Porter & Co holds a small number of shares in Trintity
An employee of Porter & Co holds shares in Trinity but does not take part in the audit

4 Which of the following

Auditors muststatements bestany
never, under reflects the auditor’s
circumstances, duty of
disclose confidentiality?
any matters of which they become aware
during the course of the audit to third parties, unless they
Auditors may disclose any matters in relation to criminal activities have thetopermission
the police of
or the client.
taxation
authorities
Auditors mayif requested to do so
disclose matters toby theparties
third police or a tax inspector.
without their client’s consent if it is in the public
interest, and
Auditors maythey
only must do so
disclose if there
matters to isthird
a statutory duty to do
parties without so.client’s consent if the public
their
interest or national security is involved.
Auditors have a statutory and express contractual duty of confidentiality in addition to the
requirements of the ICAEW Code of Ethics.
which of the following facts would prevent one of his partners from acting as the auditor of
5 Grove Ltd?
Mr Smith’s daughter works as a receptionist at Grove.
Mrs Smith owns 13% of the ordinary shares of Grove.
Until 2 years
Mr Smith goesago,
forMr Smith
lunch was
each an with
year employee of Grove.
the Finance Director of Grove around the time of the
audit
Which of the following statements is true in respect of the duties of auditors in relation to
6 confidentiality?
Auditors have a duty to disclose all illegal matters that come to their attention during the course
of the audit
Auditors to never
must the police, tax any
disclose authorities and other
illegal matters thatregulatory bodies.
come to their attention during the course of
the audit to the police, tax authorities or other regulatory bodies.
Auditors must not use information gained during the course of an audit for their personal gain,
or for themay
Auditors gainuse
of ainformation
third party.gained during the course of an audit for their personal gain, or for
the gain of a third party,
Auditors must not disclose provided that the
information gainduring
gained is insignificant.
the course of an audit to another audit
client.

7 Which of the following does NOT give rise to an intimidation threat?

A client offering the audit engagement partner a gift of some expensive jewellery.
A
A client
client threatening
requesting ananauditor
auditortowith litigation.
reduce inappropriately the extent of audit work performed in
order to reduce fees.
A client informing the auditor that the audit will be put out to tender next year as a result of a
disagreement about the way in which information has been reported in the financial statements.
 8 For each of the following threats to independence, select the category that best describes the nature of the threat.
A
A member
member ofof the
the audit teamteam
assurance entering intoa employment
having negotiations
direct financial with the audit client.
interest in the
assurance client.
A professional accountant accepting gifts or preferential treatment from a
client, unless the value is trivial or inconsequential.

9 For each of the following threats to independence, select the category that best describes the nature of the threat.
A firm being
planned threatened
promotion withoccur
will not dismissal
unlessfrom
the aaccountant
client engagement.
agrees with an audit
client’s inappropriate accounting treatment.
A firm being concerned about the possibility of losing a significant client.

10 For each of the following threats to independence, select the category that best describes the nature of the threat.
A member of the audit team entering into employment negotiations with the audit client.
A
Theprofessional accountant
firm performing discovering
a service a significant
for an audit error
client that whenaffects
directly evaluating
the the results of a previous professional
audited financial statements .
compromise their professional or business judgment because of bias, conflict of interest or
11 the undue
comply influence
with relevantoflaws
others
and regulations and avoid any action that the professional
accountant knows or should know may discredit the profession.
 pany, to plan the forthcoming
ited letter from the managing
dual annual membership

to objectivity?

come aware
client.

he course of

esult of a
statements.
ature of the threat.

ature of the threat.

ature of the threat.

of a previous professional service performed by a member of the professional accountant’s firm.