ACCT 444 Week 2 Quiz

ACCT 444 Week 2 Quiz
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ACCT 444 Week 2 Quiz
Question
1. 1.
(TCO 4)
To
succeed
in an
action
against
the
auditor,
the
client
must be
able to
show
that
(Points :
3)
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
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)
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.
Question
2. 2. (TCO
4) The
principal
issue to be
resolved
in cases
involving
alleged
negligence
is usually
(Points :
3)
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
2. (TCO

4) The
principal
issue to be
resolved
in cases
involving
alleged
negligence
is usually
(Points :
3)
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.
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)
free from judgment errors.
superior.
greater than average.
reasonable.
Chapter 5
3. (TCO 4)
A thirdparty
beneficiary

is one that
(Points : 3)
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
Question
4. 4.
(TCO 4)
Tort
actions
against
CPAs
are more
common
than
breach
of
contract
actions
because
(Points :
3)
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
Question 5.
5. (TCO 4)
The
responsibility
for adopting
sound
accounting

policies and
maintaining
adequate
internal
control rests
with the
(Points : 3)
board of directors.
company management.
financial statement auditor.
company’s internal audit department.
Chapter 6
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)
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
6. (TCO
3) Which
of the

following
statements
is most
correct
regarding
errors and
fraud?
(Points :
3)
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.
Question
7. 7.
(TCO 3)
Which of
the
following
is not one
of the
factors of
the fraud
triangle?
(Points :
3)
Incentives/pressures
Attitudes/rationalization
Opportunities
Psychological make-up
Chapter 5 or 11
7. (TCO 3) In
the fraud
triangle,
fraudulent
financial
reporting and
misappropriation

of assets (Points
: 3)
share little in common.
share most of the same risk factors.
share the same three conditions.
share most of the same conditions.
Chapter 11
Question 8.
8. (TCO 3)
Fraudulent
financial
reporting
may be
accomplished
through the
manipulation
of (Points : 3)
assets.
liabilities.
revenues.
all of the above.
Chapter 11
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)
objective judgment.
impartial conservatism.
independent integrity.
professional skepticism.
Chapter 11
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)
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
Question
10. 10.
(TCO 3)
Auditor
responses
to fraud
risks
include
which of
the
following?

(Points :
3)
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
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)
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