quiz 5 6
DESCRIPTION
auditingTRANSCRIPT
Question 1
2 out of 2 points
A(n) ________ failure occurs when an auditor issues an erroneous opinion because it failed to comply with requirements of auditing standards.
Answer
Selected Answer:
audit
Correct Answer:
audit
Question 2
2 out of 2 points
The assessment against a defendant of the full loss suffered by a plaintiff regardless of the extent to which other parties shared in the wrongdoing is called:
Answer
Selected Answer:
joint and several liability.
Correct Answer:
joint and several liability.
Question 3
0 out of 2 points
Which of the following required an adequate system of internal control for SEC registrants?
Answer
Selected Answer:
Securities Act of 1934
Correct Answer:
Foreign Corrupt Practices Act of 1977
Question 4
2 out of 2 points
An individual who is not party to the contract between a CPA and the client, but who is known by both and is intended to receive certain benefits from the contract is known as:
Answer
Selected Answer:
a third-party beneficiary.
Correct Answer:
a third-party beneficiary.
Question 5
2 out of 2 points
Audit fraud occurs when:
Answer
Selected Answer:
a misstatement is made and there is both knowledge of its falsity and the intent to deceive.
Correct Answer:
a misstatement is made and there is both knowledge of its falsity and the intent to deceive.
Question 6
2 out of 2 points
Which of the following most accurately describes fraud?
Answer
Selected Answer:
Knowledge and intent to deceive
Correct Answer:
Knowledge and intent to deceive
Question 7
2 out of 2 points
A financial institution sues the audit firm for failure to discover that a borrower's financial statements are materially misstated. This is an example of which of the following legal liability concepts?
Answer
Selected Answer:
Liability to 3rd parties under common law
Correct Answer:
Liability to 3rd parties under common law
Question 8
2 out of 2 points
In connection with the audit of financial statements, an independent auditor could be responsible for failure to detect a material fraud if:
Answer
Selected Answer:
the auditor planned the audit in a negligent manner.
Correct Answer:
the auditor planned the audit in a negligent manner.
Question 9
0 out of 2 points
The preferred defense in third-party suits is:
Answer
Selected Answer:
lack of duty to perform.
Correct Answer:
non-negligent performance.
Question 10
0 out of 2 points
Laws that have been passed by the U.S. Congress and other governmental units are:
Answer
Selected Answer:
federal laws.
Correct Answer:
statutory laws.
Question 11
2 out of 2 points
In third-party suits, which of the auditor's defenses contends lack of privity of contract?
Answer
Selected Answer:
Lack of duty
Correct Answer:
Lack of duty
Question 12
2 out of 2 points
Privity of contract exists between:
Answer
Selected Answer:
auditor and client.
Correct Answer:
auditor and client.
Question 13
0 out of 2 points
If the CPA negligently failed to properly prepare and file a client's tax return, the CPA may be liable for:
Answer
Selected Answer:
the penalties and interest, the tax preparation fee, and the amount of tax that was underpaid.
Correct Answer:
the penalties and interest the client owes, plus the tax preparation fee the CPA charged.
Question 14
2 out of 2 points
A third-party beneficiary is one which:
Answer
Selected Answer:
does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.
Correct Answer:
does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.
Question 15
2 out of 2 points
A CPA is subject to criminal liability if the CPA:
Answer
Selected Answer:
willfully omits a material fact from a set of financial statements.
Correct Answer:
willfully omits a material fact from a set of financial statements.
Question 16
2 out of 2 points
The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the:
Answer
Selected Answer:
company management.
Correct Answer:
company management.
Question 17
2 out of 2 points
If the auditor insists on financial statement disclosures that the management finds unacceptable, the auditor can:
Answer
Selected Answer:
Issue an adverse audit report Issue a qualified audit report
Yes Yes
Correct Answer:
Issue an adverse audit report Issue a qualified audit report
Yes Yes
Question 18
2 out of 2 points
The auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not ________ are detected.
Answer
Selected Answer:
material to the financial statements
Correct Answer:
material to the financial statements
Question 19
0 out of 2 points
Which of the following is the auditor least likely to do when aware of an illegal act?
Answer
Selected Answer:
Discuss the matter with the client's legal counsel.
Correct Answer:
Contact the local law enforcement officials regarding potential criminal wrongdoing.
Question 20
2 out of 2 points
International auditing standards and U.S. GAAP classify assertions into three categories. Which of the following is not a category of assertions that management makes about the accounting information in financial statements?
Answer
Selected Answer:
Assertions about the quality of source documents used to prepare the financial statements
Correct Answer:
Assertions about the quality of source documents used to prepare the financial statements
Question 21
2 out of 2 points
The auditor's best defense when material misstatements are not uncovered is to have conducted the audit:
Answer
Selected Answer:
in accordance with generally accepted auditing standards.
Correct Answer:
in accordance with generally accepted auditing standards.
Question 22
2 out of 2 points
If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor:
Answer
Selected Answer:
has the responsibility of notifying financial statement users through the auditor's report.
Correct Answer:
has the responsibility of notifying financial statement users through the auditor's report.
Question 23
2 out of 2 points
Which of the following statements is most correct regarding errors and fraud?
Answer
Selected Answer:
An error is unintentional, whereas fraud is intentional.
Correct Answer:
An error is unintentional, whereas fraud is intentional.
Question 24
2 out of 2 points
Fraudulent financial reporting is most likely to be committed by whom?
Answer
Selected Answer:
company management
Correct Answer:
company management
Question 25
2 out of 2 points
Which of the following would most likely be deemed a direct-effect illegal act?
Answer
Selected Answer:
violation of federal income tax laws
Correct Answer:
violation of federal income tax laws
Question 26
0 out of 2 points
In certifying their annual financial statements, the CEO and CFO of a public company certify that the financial statements comply with the requirements of:
Answer
Selected Answer:
GAAP.
Correct Answer:
the Securities Exchange Act of 1934.
Question 27
2 out of 2 points
If a short-term note payable is included in the accounts payable balance on the financial statement, there is a violation of the:
Answer
Selected Answer:
classification and understandability assertion.
Correct Answer:
classification and understandability assertion.
Question 28
0 out of 2 points
When an auditor believes that an illegal act may have occurred, the auditor should first:
Answer
Selected Answer:
accumulate additional evidence.
Correct Answer:
inquire of management at a level above those likely to be involved.
Question 29
2 out of 2 points
In order to provide reasonable assurance the audit must be performed with an attitude of professional skepticism. Which of the following is most correct regarding the "attitude" of professional skepticism?
Answer
Selected Answer:
auditors should assume that management is neither dishonest nor honest
Correct Answer:
auditors should assume that management is neither dishonest nor honest
Question 30
0 out of 2 points
Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements?
Answer
Selected Answer:
Accounting presentations contain complex estimates which involve uncertainty.
Correct Answer:
Auditors believe that reasonable assurance is sufficient in the vast majority of cases.
Sunday, November 4, 2012 10:59:06 AM EST
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