Question 1

List and explain the three facets of an auditor's responsibility towards society.

Accepted Answer

An auditor's responsibility towards society can be broken down into three components: moral,professional,and legal responsibility.The moral aspect deals with "doing the right thing",which is largely determined by society.It encompasses the rules and principles conforming to broad social norms of behavior.Professional responsibilities refer to the formal ethical responsibilities of auditors.They are the rules and principles for the proper conduct of an auditor in his or her work.The audit profession establishes formal rules of conduct in order to: gain the respect and confidence of the public,distinguish the professional from the general public,achieve order within the profession,and provide a means of self-policing the profession.Legal responsibilities are the risks the auditor accepts in a court of law while practicing public accounting.Legal and professional responsibilities are highly intertwined.

Question 2

A complaint has been made against a member for an audit failure.If this complaint is found to have merit,under which CPA Ontario Rule of Professional Conduct is the member likely to be charged?

Accepted Answer

A) 202 Integrity and due care. 
B) 204 Independence. 
C) 210 Conflict of interest. 
D) 215 Contingent fees. 
A) 202 Integrity and due care. 
B) 204 Independence. 
C) 210 Conflict of interest. 
D) 215 Contingent fees. A

Question 3

Utilitarianism says that the right choice is the one that maximizes utility.

Accepted Answer

A) True 
 B)False  False

Question 4

The legal liability regime that states that a plaintiff can recover all damages from any defendant that's named part of the lawsuit,regardless of individual responsibility,is known as ______.

Accepted Answer

A) Joint Liability Partnership 
B) Unlimited liability 
C) Privity of contract 
D) Joint and several liability 
A) Joint Liability Partnership 
B) Unlimited liability 
C) Privity of contract 
D) Joint and several liability

Question 5

Under tort law,the claimant must prove both that a loss was suffered and that the auditor caused that loss,before a claim against the auditor can be successful.

Accepted Answer

A) True 
 B)False

Question 6

Ethical theories can be divided into two types: monistic and pluralistic.Explain each.

Accepted Answer

Monistic theories assume that universal

Question 7

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

Accepted Answer

Legal liabilities of PAs arise from laws

Question 8

Discuss how a public accountant (PA)can preserve independence while accepting an honorary position in non-profit organizations.

Accepted Answer

Ordinarily,independence is impaired if a

Question 9

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 10

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 11

The fundamental principles of accepted conduct are only general guidelines;therefore,they are not as important as the specific rules.

Accepted Answer

A) True 
 B)False

Question 12

Summarize the professional competence and due care rules of the various codes of conduct.

Accepted Answer

Professional competence: Undertake only

Question 13

The auditor only 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 14

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 15

If a public accountant (PA)performs the bookkeeping and makes accounting decisions for a company and the management does not know enough about the financial statements to take primary responsibility for them,the PA cannot be considered independent for assurance services.

Accepted Answer

A) True 
 B)False

Question 16

What is meant by "privity?"

Accepted Answer

The relationship of direct involvement b

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

Discuss the rules relating to the provision of accounting and other services by a public accountant (PA).

Accepted Answer

If a PA performs the bookkeeping and mak

Question 20

"Let your conscience be your guide" is an ethical principle that fits all situations.

Accepted Answer

A) True 
 B)False

Exam 3: Auditors Ethical and Legal Responsibilities

List and explain the three facets of an auditor's responsibility towards society.

A complaint has been made against a member for an audit failure.If this complaint is found to have merit,under which CPA Ontario Rule of Professional Conduct is the member likely to be charged?

Utilitarianism says that the right choice is the one that maximizes utility.

The legal liability regime that states that a plaintiff can recover all damages from any defendant that's named part of the lawsuit,regardless of individual responsibility,is known as ______.

Under tort law,the claimant must prove both that a loss was suffered and that the auditor caused that loss,before a claim against the auditor can be successful.

Ethical theories can be divided into two types: monistic and pluralistic.Explain each.

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

Discuss how a public accountant (PA)can preserve independence while accepting an honorary position in non-profit organizations.

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

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

The fundamental principles of accepted conduct are only general guidelines;therefore,they are not as important as the specific rules.

Summarize the professional competence and due care rules of the various codes of conduct.

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

What is a key characteristic of critical thinking?

If a public accountant (PA)performs the bookkeeping and makes accounting decisions for a company and the management does not know enough about the financial statements to take primary responsibility for them,the PA cannot be considered independent for assurance services.

What is meant by "privity?"

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

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

Discuss the rules relating to the provision of accounting and other services by a public accountant (PA).

"Let your conscience be your guide" is an ethical principle that fits all situations.

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 the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

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