Question 1

Once public accountants (PAs) retire from a firm, they are no longer required to maintain independence from former clients.

Accepted Answer

A) True 
 B)False  False

Question 2

The codified "Rules of Professional Conduct" derives its authority from the CPA Canada Handbook.

Accepted Answer

A) True 
 B)False  False

Question 3

If a professional accountant is convicted of a criminal offence or fraud, he or she is usually thrown out of the profession.

Accepted Answer

A) True 
 B)False  True

Question 4

A private or civil wrong or injury is known as a ________.

Accepted Answer

A)  breach 
B)  tort 
C)  misconduct 
D)  deceit 
A)  breach 
B)  tort 
C)  misconduct 
D)  deceit

Question 5

If a party is found to be partially liable and thus only responsible for paying part of the damages relative to their share of the blame, this is known as ________.

Accepted Answer

A)  due care 
B)  breaking even 
C)  proportionate liability 
D)  a tort 
A)  due care 
B)  breaking even 
C)  proportionate liability 
D)  a tort

Question 6

The auditor has a duty of care to a company that hires the auditor and has a contract with him or her under privity of contract.

Accepted Answer

A) True 
 B)False

Question 7

Legal liabilities of professional accountants arise only from lawsuits brought on the basis of the law of contracts.

Accepted Answer

A) True 
 B)False

Question 8

Consequentialism says that the right choice is the one that results in the greatest good for the greatest number of people.

Accepted Answer

A) True 
 B)False

Question 9

Identify five threats to the independence of a professional accountant.

Accepted Answer

1. Self-review-providing assurance on hi

Question 10

According to the profession's rules of conduct, an auditor would be considered independent in which of the following instances?

Accepted Answer

A)  The auditor is the officially appointed stock transfer agent of a client. 
B)  The auditor has a personal chequing account in a branch of a client bank. 
C)  The client has not paid its audit fees for the past three years. 
D)  The client is the only tenant in a commercial building owned by the auditor. 
A)  The auditor is the officially appointed stock transfer agent of a client. 
B)  The auditor has a personal chequing account in a branch of a client bank. 
C)  The client has not paid its audit fees for the past three years. 
D)  The client is the only tenant in a commercial building owned by the auditor.

Question 11

Rules of professional conduct provide some direct solutions to specific, profession-related problems that may not be easily derived from general theories of ethics.

Accepted Answer

A) True 
 B)False

Question 12

That a legal duty arises when there is a contractual agreement with the client is called ________.

Accepted Answer

A)  standard of care 
B)  privity of contract 
C)  professionalism 
D)  independence 
A)  standard of care 
B)  privity of contract 
C)  professionalism 
D)  independence

Question 13

What is a key characteristic of critical thinking?

Accepted Answer

A)  It is a means of eliminating alternatives to arrive at one right answer. 
B)  It requires making the right assumptions to support an argument. 
C)  It requires a questioning mind. 
D)  It is a means of picking out things wrong with another person's argument. 
A)  It is a means of eliminating alternatives to arrive at one right answer. 
B)  It requires making the right assumptions to support an argument. 
C)  It requires a questioning mind. 
D)  It is a means of picking out things wrong with another person's argument.

Question 14

Auditors need not be concerned about statutory law liability.

Accepted Answer

A) True 
 B)False

Question 15

What is meant by "privity?"

Accepted Answer

The relationship of direct involvement b

Question 16

When a professional accountant is sued, what is the lawsuit typically based on?

Accepted Answer

Legal liabilities of PAs arise from laws

Question 17

What is the meaning of the rule of professional conduct that requires an auditor to be objective?

Accepted Answer

A)  The auditor may have a material, indirect financial interest in a client's business as long as it does not affect his or her judgment. 
B)  The auditor has an obligation to CPA Canada to not use his or her training for personal advantage. 
C)  The auditor has an obligation to serve the needs of the audit client. 
D)  The auditor must have an attitude of professional skepticism toward an auditee's management. 
A)  The auditor may have a material, indirect financial interest in a client's business as long as it does not affect his or her judgment. 
B)  The auditor has an obligation to CPA Canada to not use his or her training for personal advantage. 
C)  The auditor has an obligation to serve the needs of the audit client. 
D)  The auditor must have an attitude of professional skepticism toward an auditee's management.

Question 18

What is professional skepticism?

Accepted Answer

The auditor's tendency not to believe ma

Question 19

Historically, auditors' liability in Canada has been based on common law liability.

Accepted Answer

A) True 
 B)False

Question 20

The familiarity threat refers to ________.

Accepted Answer

A)  becoming too sympathetic to a client's interests 
B)  providing assurance on one's own work 
C)  promoting a client's position or opinion 
D)  benefiting from a financial interest in a client 
A)  becoming too sympathetic to a client's interests 
B)  providing assurance on one's own work 
C)  promoting a client's position or opinion 
D)  benefiting from a financial interest in a client

Exam 3: Auditors Ethical and Legal Responsibilities

Once public accountants (PAs) retire from a firm, they are no longer required to maintain independence from former clients.

The codified "Rules of Professional Conduct" derives its authority from the CPA Canada Handbook.

If a professional accountant is convicted of a criminal offence or fraud, he or she is usually thrown out of the profession.

A private or civil wrong or injury is known as a ________.

If a party is found to be partially liable and thus only responsible for paying part of the damages relative to their share of the blame, this is known as ________.

The auditor has a duty of care to a company that hires the auditor and has a contract with him or her under privity of contract.

Legal liabilities of professional accountants arise only from lawsuits brought on the basis of the law of contracts.

Consequentialism says that the right choice is the one that results in the greatest good for the greatest number of people.

Identify five threats to the independence of a professional accountant.

According to the profession's rules of conduct, an auditor would be considered independent in which of the following instances?

Rules of professional conduct provide some direct solutions to specific, profession-related problems that may not be easily derived from general theories of ethics.

That a legal duty arises when there is a contractual agreement with the client is called ________.

What is a key characteristic of critical thinking?

Auditors need not be concerned about statutory law liability.

What is meant by "privity?"

When a professional accountant is sued, what is the lawsuit typically based on?

What is the meaning of the rule of professional conduct that requires an auditor to be objective?

What is professional skepticism?

Historically, auditors' liability in Canada has been based on common law liability.

The familiarity threat refers to ________.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud

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