Question 1

In the performance of an audit, a CPA

Accepted Answer

A)  is legally liable for detecting an immaterial client fraud. 
B)  must strictly follow GAAP for privately held clients. 
C)  must exercise constructive professional care in the performance of their audit responsibilities. 
D)  must exercise due professional care in the performance of their audit responsibilities. 
A)  is legally liable for detecting an immaterial client fraud. 
B)  must strictly follow GAAP for privately held clients. 
C)  must exercise constructive professional care in the performance of their audit responsibilities. 
D)  must exercise due professional care in the performance of their audit responsibilities.

Question 2

The Sarbanes-Oxley Act requires the CEO and CFO of a public company to certify the annual and quarterly financial statements filed with the PCAOB.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following factors does not contribute to the number of lawsuits against auditors?

Accepted Answer

A)  large civil court judgments against CPA firms awarded in a few cases 
B)  growing awareness of the responsibilities of public accountants by users of financial statements 
C)  the simplicity of auditing and accounting functions 
D)  an increased consciousness by the SEC for its responsibility for protecting investors' interests 
A)  large civil court judgments against CPA firms awarded in a few cases 
B)  growing awareness of the responsibilities of public accountants by users of financial statements 
C)  the simplicity of auditing and accounting functions 
D)  an increased consciousness by the SEC for its responsibility for protecting investors' interests

Question 4

Which of the auditor's defenses is ordinarily not available when lawsuits are filed by a third party?

Accepted Answer

A)  absence of causal connections 
B)  contributory negligence 
C)  nonnegligent performance 
D)  lack of duty 
A)  absence of causal connections 
B)  contributory negligence 
C)  nonnegligent performance 
D)  lack of duty

Question 5

When an auditor has failed to conduct an adequate audit, liability may depend on the level of negligence.

Accepted Answer

A) True 
 B)False

Question 6

Critical lessons learned after analyzing major criminal cases against auditors include the fact that

Accepted Answer

A)  the partner, but not the audit staff, must be independent. 
B)  transactions with related parties are an indication of fraud. 
C)  an investigation of the integrity of management is an important part of deciding whether to accept a new client. 
D)  accounting principles can be relied on exclusively in deciding if the financial statements are fairly presented. 
A)  the partner, but not the audit staff, must be independent. 
B)  transactions with related parties are an indication of fraud. 
C)  an investigation of the integrity of management is an important part of deciding whether to accept a new client. 
D)  accounting principles can be relied on exclusively in deciding if the financial statements are fairly presented.

Question 7

Discuss at least 3 steps the AICPA and the accounting profession as a whole can and are taking to reduce the practitioner's exposure to lawsuits.

Accepted Answer

Steps the profession is taking to reduce

Question 8

The broadest interpretation of the right of third-party beneficiaries is the primary user concept.

Accepted Answer

A) True 
 B)False

Question 9

Although there is confusion caused by the differing views of liability to third parties under common law, the movement is clearly away from the foreseeable user approach.

Accepted Answer

A) True 
 B)False

In the performance of an audit, a CPA

The Sarbanes-Oxley Act requires the CEO and CFO of a public company to certify the annual and quarterly financial statements filed with the PCAOB.

Which of the following factors does not contribute to the number of lawsuits against auditors?

Which of the auditor's defenses is ordinarily not available when lawsuits are filed by a third party?

When an auditor has failed to conduct an adequate audit, liability may depend on the level of negligence.

Critical lessons learned after analyzing major criminal cases against auditors include the fact that

Discuss at least 3 steps the AICPA and the accounting profession as a whole can and are taking to reduce the practitioner's exposure to lawsuits.

The broadest interpretation of the right of third-party beneficiaries is the primary user concept.

Although there is confusion caused by the differing views of liability to third parties under common law, the movement is clearly away from the foreseeable user approach.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters

Exam 5: Legal Liability

In the performance of an audit, a CPA

The Sarbanes-Oxley Act requires the CEO and CFO of a public company to certify the annual and quarterly financial statements filed with the PCAOB.

Which of the following factors does not contribute to the number of lawsuits against auditors?

Which of the auditor's defenses is ordinarily not available when lawsuits are filed by a third party?

When an auditor has failed to conduct an adequate audit, liability may depend on the level of negligence.

Critical lessons learned after analyzing major criminal cases against auditors include the fact that

Discuss at least 3 steps the AICPA and the accounting profession as a whole can and are taking to reduce the practitioner's exposure to lawsuits.

The broadest interpretation of the right of third-party beneficiaries is the primary user concept.

Although there is confusion caused by the differing views of liability to third parties under common law, the movement is clearly away from the foreseeable user approach.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters