Question 1

A CPA who fraudulently performs an audit of a corporation's financial statements will

Accepted Answer

A)  Probably be liable to any person who suffered a loss as a result of the fraud. 
B)  Be liable only to the corporation and to third parties who are members of a class of intended users of the financial statements. 
C)  Probably be liable to the corporation even though its management was aware of the fraud and did not rely on the financial statements. 
D)  Be liable only to third parties in privity of contract with the CPA. 
A)  Probably be liable to any person who suffered a loss as a result of the fraud. 
B)  Be liable only to the corporation and to third parties who are members of a class of intended users of the financial statements. 
C)  Probably be liable to the corporation even though its management was aware of the fraud and did not rely on the financial statements. 
D)  Be liable only to third parties in privity of contract with the CPA.

Question 2

The Foreign Corrupt Practices Act requires that

Accepted Answer

A)  Auditors engaged to examine the financial statements of public companies report all illegal payments to the SEC. 
B)  Public companies establish independent audit committees to monitor the effectiveness of their system of internal control. 
C)  U.S. firms doing business abroad report sizable payments to non-U.S. citizens to the Justice Department. 
D)  Public companies devise and maintain an adequate system of internal control. 
A)  Auditors engaged to examine the financial statements of public companies report all illegal payments to the SEC. 
B)  Public companies establish independent audit committees to monitor the effectiveness of their system of internal control. 
C)  U.S. firms doing business abroad report sizable payments to non-U.S. citizens to the Justice Department. 
D)  Public companies devise and maintain an adequate system of internal control.

Question 3

Common law requires the auditor perform professional services with due care.

Accepted Answer

A) True 
 B)False

Question 4

To prevail in a suit alleging negligence, a third party must prove that the auditor had a duty to the auditor's client to exercise due care.

Accepted Answer

A) True 
 B)False

Question 5

A CPA will most likely be negligent when the CPA fails to

Accepted Answer

A)  Correct errors discovered in the CPA's previously issued audit reports. 
B)  Detect all of a client's fraudulent activities. 
C)  Include a negligence disclaimer in the CPA's engagement letter. 
D)  Warn a client's customers of embezzlement by the client's employees. 
A)  Correct errors discovered in the CPA's previously issued audit reports. 
B)  Detect all of a client's fraudulent activities. 
C)  Include a negligence disclaimer in the CPA's engagement letter. 
D)  Warn a client's customers of embezzlement by the client's employees.

A CPA who fraudulently performs an audit of a corporation's financial statements will

The Foreign Corrupt Practices Act requires that

Common law requires the auditor perform professional services with due care.

To prevail in a suit alleging negligence, a third party must prove that the auditor had a duty to the auditor's client to exercise due care.

A CPA will most likely be negligent when the CPA fails to

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Assurance, Attestation, and Internal Auditing Services

Filters

Exam 20: Legal Liability

A CPA who fraudulently performs an audit of a corporation's financial statements will

The Foreign Corrupt Practices Act requires that

Common law requires the auditor perform professional services with due care.

To prevail in a suit alleging negligence, a third party must prove that the auditor had a duty to the auditor's client to exercise due care.

A CPA will most likely be negligent when the CPA fails to

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Assurance, Attestation, and Internal Auditing Services

Filters