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Question 1

Question 1

 

2

out of 2 points

 

A(n)

failure occurs when an auditor issues an erroneous opinion because it

Answer

Selected Answer:

Selected Answer:

Selected Answer:
 

audit

 

Correct Answer:

Correct Answer:
 

audit

Question 2

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:

Selected Answer:

Selected Answer:
 

joint and several liability.

 

Correct Answer:

Correct Answer:
 

joint and several liability.

Question 3

Question 3

0

out of 2 points

Which of the following required an adequate system of internal control for SEC registrants?

Which of the following required an adequate system of internal control for SEC registrants?

Answer

Selected Answer:

Selected Answer: Securities Act of 1934 Correct Answer: Foreign Corrupt Practices Act of 1977 Question 4

Securities Act of 1934

 

Correct Answer:

Correct Answer:
 

Foreign Corrupt Practices Act of 1977

Question 4

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

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Selected Answer:

Selected Answer:
 

a third-party beneficiary.

 

Correct Answer:

Correct Answer:
 

a third-party beneficiary.

Question 5

Question 5

 

2

out of 2 points

 

Audit fraud occurs when:

 

Answer

Selected

Selected
Answer: a misstatement is made and there is both knowledge of its falsity and the intent

Answer:

a misstatement is made and there is both knowledge of its falsity and the intent to deceive.

Correct

Correct

Answer:

 

a misstatement is made and there is both knowledge of its falsity and the intent to deceive.

Question 6

Question 6

2

out of 2 points

Which of the following most accurately describes fraud? Answer

Selected Answer:

Selected Answer:

Selected Answer:

Knowledge and intent to deceive

 

Correct Answer:

Correct Answer:
 

Knowledge and intent to deceive

Question 7

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:

Selected Answer:

Selected Answer:
 

Liability to 3rd parties under common law

 

Correct Answer:

Correct Answer:
 

Liability to 3rd parties under common law

Question 8

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

Answer

Selected Answer:

2 out of 2 points Which of the following most accurately describes fraud? Answer Selected Answer:

the auditor planned the audit in a negligent manner.

 

Correct Answer:

Correct Answer:
 

the auditor planned the audit in a negligent manner.

Question 9

Question 9

0

out of 2 points

 

The preferred defense in third-party suits is:

Answer

Selected Answer:

Selected Answer:

Selected Answer:

lack of duty to perform.

 

Correct Answer:

Correct Answer:
 

non-negligent performance.

Question 10

Question 10

0

out of 2 points

 

Laws that have been passed by the U.S. Congress and other governmental units are:

Answer

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Selected Answer:

Selected Answer:

federal laws.

 

Correct Answer:

Correct Answer:
 

statutory laws.

Question 11

Question 11

2

out of 2 points

In third-party suits, which of the auditor's defenses contends lack of privity of contract?

In third-party suits, which of the auditor's defenses contends lack of privity of contract?

Answer

 

Selected Answer:

Selected Answer:
 

Lack of duty

 

Correct Answer:

Correct Answer:
 

Lack of duty

Question 12

Question 12

 

2

out of 2 points

 

Privity of contract exists between:

Answer

Selected Answer:

Selected Answer:

Selected Answer:

auditor and client.

 

Correct Answer:

Correct Answer:
 

auditor and client.

Question 13

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

Selected

Selected

Answer:

 

the penalties and interest, the tax preparation fee, and the amount of tax that was underpaid.

 

Correct

Correct

Answer:

the penalties and interest the client owes, plus the tax preparation fee

the CPA charged.

Question 14

Question 14

 

2

out of 2 points

 

A third-party beneficiary is one which:

Answer

Selected

Selected
Answer: does not have privity of contract, but is known to the contracting parties and intended

Answer:

does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.

Correct

Correct

Answer:

 

does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.

Question 15

Question 15

2

out of 2 points

 

A CPA is subject to criminal liability if the CPA:

Answer

Selected Answer:

Selected Answer:

Selected Answer:

willfully omits a material fact from a set of financial statements.

 

Correct Answer:

Correct Answer:
 

willfully omits a material fact from a set of financial statements.

Question 16

Question 16

 

2

out of 2 points

The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the:

The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the:

Answer

Selected Answer:

Answer Selected Answer: company management. Correct Answer: company management. Question 17 2 out of 2 points

company management.

 

Correct Answer:

Correct Answer:
 

company management.

Question 17

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

Selected

Answer:

Issue an adverse audit report Issue a qualified audit report

Issue an adverse audit report

Issue a qualified audit report

Yes

Yes

 

Correct Answer:

Correct Answer:
 

Issue an adverse audit report

Issue a qualified audit report

Yes

Yes

Question 18

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

Answer

Selected Answer:

Answer Selected Answer: company management. Correct Answer: company management. Question 17 2 out of 2 points

material to the financial statements

 

Correct Answer:

Correct Answer:
 

material to the financial statements

Question 19

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

Selected
Answer: Discuss the matter with the client's legal counsel.

Answer:

Discuss the matter with the client's legal counsel.

Correct

Correct

Answer:

 

Contact the local law enforcement officials regarding potential criminal wrongdoing.

Question 20

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

Selected

Selected

Answer:

 

Assertions about the quality of source documents used to prepare the financial statements

 

Correct

Correct

Answer:

Assertions about the quality of source documents used to prepare the financial statements

Question 21

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:

Selected Answer:

Selected Answer:
 

in accordance with generally accepted auditing standards.

 

Correct Answer:

Correct Answer:
 

in accordance with generally accepted auditing standards.

Question 22

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

Selected
Answer: has the responsibility of notifying financial statement users through the auditor's report.

Answer:

has the responsibility of notifying financial statement users through the auditor's report.

Correct

Correct

Answer:

 

has the responsibility of notifying financial statement users through the auditor's report.

Question 23

Question 23

2

out of 2 points

Which of the following statements is most correct regarding errors and fraud? Answer

Which of the following statements is most correct regarding errors and fraud? Answer

Selected Answer:

Selected Answer: An error is unintentional, whereas fraud is intentional. Correct Answer: An error is unintentional,

An error is unintentional, whereas fraud is intentional.

Correct Answer:

Selected Answer: An error is unintentional, whereas fraud is intentional. Correct Answer: An error is unintentional,

An error is unintentional, whereas fraud is intentional.

Question 24

Question 24

 

2

out of 2 points

 

Fraudulent financial reporting is most likely to be committed by whom? Answer

Selected Answer:

Selected Answer:

Selected Answer:

company management

 

Correct Answer:

Correct Answer:
 

company management

Question 25

Question 25

2

out of 2 points

 

Which of the following would most likely be deemed a direct-effect illegal act? Answer

Selected Answer:

Selected Answer:

Selected Answer:

violation of federal income tax laws

 

Correct Answer:

Correct Answer:
 

violation of federal income tax laws

Question 26

Question 26

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:

Selected Answer:

Selected Answer:
 

GAAP.

 

Correct Answer:

Correct Answer:
 

the Securities Exchange Act of 1934.

Question 27

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:

Selected Answer:

Selected Answer:
 

classification and understandability assertion.

 

Correct Answer:

Correct Answer:
 

classification and understandability assertion.

Question 28

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:

Selected Answer:

Selected Answer:

accumulate additional evidence.

Correct Answer:

In certifying their annual financial statements, the CEO and CFO of a public company certify that

inquire of management at a level above those likely to be involved.

Question 29

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

Selected

Selected

Answer:

 

auditors should assume that management is neither dishonest nor honest

 

Correct Answer:

Correct Answer:
 

auditors should assume that management is neither dishonest nor honest

Question 30

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

Selected
Answer: Accounting presentations contain complex estimates which involve uncertainty.

Answer:

Accounting presentations contain complex estimates which involve uncertainty.

Correct

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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