Question

Question 1 An example of an advocacy threat is encouraging others to buy shares or bonds being sold by the client. a. True b. False Answer: Question 2 An effective audit committee will enhance the independence of the external audit function. a. True b. False Answer:- Question 3 When auditors divest themselves of shares owned in a client company, they are eliminating their self-review threat to independence a. True b. False Answer:

Answer 1

1.Option A.True. The word advocacy threat means the auditor acting in favour of client to promote client shares or to act in favour of client in case of any litigations and claims.

2. Option A. True. One of the functions of audit committe is to overview the functioning of auditors.

3. Option A. True. Since there is an obvious chance that auditor cannot perform his duties as an auditor perfectly when holding the clients shares, it will effect his independence. As he divests himself of shares of client it helps him to act independently

4. Option B. False . The word used for being straight forward and honest is Integrity. Objectivity refers to not showing any bias. It refers to fairness and being impartial.

5. False. Third party is anyother person other than client and shareholders. It is not necessary that shareholder should not use financial statements to make a decision to become a third party