The lead and concurring partners are subject to a 5-year time out period. Other audit partners are subject to a 2-year time out period. Question 6. Question : (TCO 3) The concept of materiality would be least important to an auditor when considering the adequacy of disclosure of a client's illegal act. discovery of weaknesses in a client's internal control. effects of a direct financial interest in the client on the CPA's independence. decision whether to use positive or negative confirmations of accounts receivable. Question 7. Question : (TCO 3) An auditor strives to achieve independence in appearance to maintain public confidence in the profession. be in a position to offer other services to the client. comply with the generally accepted accounting principles. maintain a biased mental attitude. Question 8. Question : (TCO 3) Several months after an unqualified audit report was issued, the auditor discovered the financial statements were materially misstated. The client’s CEO agrees that there are misstatements, but refuses to correct them. She claims that confidentiality prevents the CPA from informing anyone. The CEO is correct and the auditor must maintain confidentiality. The CEO is incorrect, but because the audit report has been issued, it is too late. The CEO is correct, but to be ethically correct the auditor should violate the confidentiality rule and disclose the error. Question 9. Question : (TCO 1) Which of the following statements is correct concerning an auditor's responsibilities regarding financial statements? An auditor may not draft an entity's financial statements based on information from management's accounting system. The adoption of sound accounting policies is an implicit part of an auditor's responsibilities. An auditor's responsibilities for audited financial statements are confined to the expression of the auditor's opinion. Question 10. Question : (TCO 1) Which of the following items impairs independence under U.S. ethics standards but does not necessarily impair independence under the IFAC Code of Ethics for Professional Accountants? An immaterial direct financial interest in an audit client Employment at a client of an immediate family member of the engagement partner in a key accounting position The auditor also provides internal audit outsourcing services Contingent fee arrangements for audit engagements ACCT 444 DeVry Week 2 Quiz Latest 1. Question : (TCO 4) If a CPA firm is being sued for common law fraud by a third party based on materially false financial statements, which of the following is the best defense the accountants could assert? A disclaimer contained in the engagement letter Lack of privity Non-negligent performance Contributory negligence on the part of the client
Question 2. Question : (TCO 4) "Absence of reasonable care that can be expected of a person is a set of circumstances" defines pecuniary negligence. gross negligence. extreme negligence. ordinary negligence. Question 3. Question : (TCO 4) A third-party beneficiary is one that 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. Question 4. Question : (TCO 4) Tort actions against CPAs are more common than breach of contract actions because 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. Question 5. Question : (TCO 4) 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 should withdraw from the engagement. should request an increase in audit fees so that more resources can be used to conduct the audit. has the responsibility of notifying financial statement users through the auditor’s report. should notify regulators of the circumstances. Question 6. Question : (TCO 3) Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements? 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. Question 7. Question : (TCO 3) In the fraud triangle, fraudulent financial reporting and misappropriation of assets share little in common. share most of the same risk factors. share the same three conditions. share most of the same conditions. Question 8. Question : (TCO 3) Fraudulent financial reporting may be accomplished through the manipulation of assets. liabilities.