CHAPTER 3: THE PUBLIC ACCOUNTING PROFESSION ENVIRONMENT

Multiple Choice Questions

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

c. conclusive evidence of negligence.
2. The prudent person concept establishes in law that
a. 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
b. 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
a. prudent person concept.
5. The existence of extreme or unusual negligence, even though there was no intent to deceive or do harm, is
b. constructive fraud
6. Most lawsuits against CPAs are filed by
a. client
7. The Commission on Audit (COA):
b. Responsibilities include conducting operational audits to ensure spending meets Congress's
requirements.
8. The risk associated with survivability and profitability is referred to as
d. Business risk.
9. Which of the following attributes is more essential for an auditor than of management?
c. Independence.
10. Attestation risk is limited to a low level in which of the following engagement(s)?
b. Examinations, but not reviews.