AUDITING THEORY ANSWER KEY

Chapter 3

1. In the auditing environment, failure to meet auditing standards is often

- conclusive evidence of negligence

2. The prudent person concept establishes in law that

- the CPA firm is not expected to be infallible

3. To succeed in an action against the auditor, the client must be able to show that

- there is a close causal connection between the auditor's breach of the

standard of due care and the damages suffered by the client

4. The standard of due care to which the auditor is expected to be held is referred
to as

- the prudent person concept

5. The existence of extreme or unusual negligence, even though there was no

intent to deceive or do harm, is

- constructive fraud

6. Most lawsuits against CPAs are filed by

- Client

7. The Commission on Audit (COA):

- Responsibilities include conducting operational audits to ensure spending

meets Congress's requirements.

8. The risk associated with survivability and profitability is referred to as

- Business risk

9. Which of the following attributes is more essential for an auditor than of

management?

- Independence
10. Attestation risk is limited to a low level in which of the following engagement(s)?

- Examinations, but not reviews