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