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ACCT 444 Week 2 Quiz
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Question 1. 1. (TCO 4) To
succeed in an action against the auditor, the client must be able to show
that (Points : 3)
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the auditor was fraudulent.
the auditor was grossly negligent.
there was a written contract.
there is a close causal connection between the auditor’s behavior and the
damages suffered by the client.
Chapter 5, 6 & 7
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1. (TCO 4) In connection with
the audit of financial statements, an independent auditor could be
responsible for failure to detect a material fraud if (Points : 3)
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statistical sampling techniques
were not used on the audit engagement.
the auditor planned the audit in a negligent manner.
accountants performing important parts of the work failed to discover a
close relationship between the treasurer and the cashier.
the fraud was perpetrated by one employee who circumvented the existing
internal controls.
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Question 2. 2. (TCO 4) The
principal issue to be resolved in cases involving alleged negligence is
usually (Points : 3)
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the amount of the damages
suffered by plaintiff.
whether to impose punitive damages on the defendant.
the level of care exercised by the CPA.
whether defendant was involved in fraud.
Chapter 5, 6 & 7
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2. (TCO 4) The principal issue
to be resolved in cases involving alleged negligence is usually (Points :
3)
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the amount of the damages
suffered by plaintiff.
whether to impose punitive damages on the defendant.
the level of care exercised by the CPA.
whether defendant was involved in fraud.
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Question 3. 3. (TCO 4) While
performing services for their clients, professionals have a duty to
provide a level of care that is (Points : 3)
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free from judgment errors.
superior.
greater than average.
reasonable.
Chapter 5
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3. (TCO 4) A third-party
beneficiary is one that (Points : 3)
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has failed to establish legal
standing before the court.
does not have privity of contract and is unknown to the contracting parties.
does not have privity of contract, but is known to the contracting parties
and intended to benefit under the contract.
may establish legal standing before the court after a contract has been
consummated.
Chapter 5
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Question 4. 4. (TCO 4) Tort
actions against CPAs are more common than breach of contract actions
because (Points : 3)
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there are more torts than
contracts.
the burden of proof is on the auditor rather than on the person suing.
the person suing need prove only negligence.
the amounts recoverable are normally larger.
Chapter 5
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Question 5. 5. (TCO 4) The
responsibility for adopting sound accounting policies and maintaining
adequate internal control rests with the (Points : 3)
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board of directors.
company management.
financial statement auditor.
company’s internal audit department.
Chapter 6
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Question 6. 6. (TCO 3) Which
of the following is not one of the reasons that auditors provide only reasonable
assurance on the financial statements? (Points : 3)
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The auditor commonly examines a
sample, rather than the entire population of transactions.
Accounting presentations contain complex estimates, which involve
uncertainty.
Fraudulently prepared financial statements are often difficult to detect.
Auditors believe that reasonable assurance is sufficient in the vast
majority of cases.
Chapter 6
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6. (TCO 3) Which of the
following statements is most correct regarding errors and fraud? (Points :
3)
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An error is unintentional, whereas
fraud is intentional.
Frauds occur more often than errors in financial statements.
Errors are always fraud and frauds are always errors.
Auditors have more responsibility for finding fraud than errors.
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Question 7. 7. (TCO 3) Which
of the following is not one of the factors of the fraud triangle? (Points
: 3)
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Incentives/pressures
Attitudes/rationalization
Opportunities
Psychological make-up
Chapter 5 or 11
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7. (TCO 3) In the fraud
triangle, fraudulent financial reporting and misappropriation of assets
(Points : 3)
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share little in common.
share most of the same risk factors.
share the same three conditions.
share most of the same conditions.
Chapter 11
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Question 8. 8. (TCO 3)
Fraudulent financial reporting may be accomplished through the
manipulation of (Points : 3)
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assets.
liabilities.
revenues.
all of the above.
Chapter 11
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8. (TCO 3) Because of the risk
of material misstatements due to fraud, an audit of financial statements in
accordance with generally accepted auditing standards should be performed
with an attitude of (Points : 3)
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objective judgment.
impartial conservatism.
independent integrity.
professional skepticism.
Chapter 11
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Question 9. 9. (TCO 3) Which
of the following is a factor that relates to attitudes or rationalization
to commit fraudulent financial reporting? (Points : 3)
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Significant accounting estimates
involving subjective judgments
Excessive pressure for management to meet debt repayment requirements
Management’s practice of making overly aggressive forecasts
High turnover of accounting, internal audit and information technology
staff
Chapter 11
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Question 10. 10. (TCO 3)
Auditor responses to fraud risks include which of the following? (Points
: 3)
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Change the overall conduct of
the audit to respond to identified fraud risks.
Design and perform audit procedures to address identified risks.
Perform procedures to address the risk of management override of controls.
All of the above.
Chapter 11
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10. (TCO 3) Which of the following
characteristics is most likely to heighten an auditor’s concern about the
risk of material misstatements, due to fraud in an entity’s financial
statements? (Points : 3)
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Employees who handle cash receipts
are not bonded.
The entity’s industry is experiencing declining customer demand.
Internal auditors have direct access to the board of directors and the entity’s
management.
The board of directors is active in overseeing the entity’s financial reporting
policies.
Chapter 11
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