第13版SolutionARENSAuditing13eChapter 5.docx

1、第13版SolutionARENSAuditing13eChapter 5Chapter 5Multiple-Choice Questions 1.easydWhile performing services for their clients, professionals have a duty to provide a level of care which is:a. free from judgment errors.b. superior.c. greater than average.d. reasonable.2.easybAuditors who fail to exercis

2、e due care in their performance of professional services may be liable for:a. punitive liability.b. breach of contract.c. excess liability.d. criminal charges.3.easybWhich of the following may give rise to a business failure?a. An erroneous audit opinion is issued.b. Management may make ill-advised

3、business decisions.c. Auditors may fail to uncover employee fraud.d. Poorly trained auditors may perform a companys audit.4.easybA(n) _ failure occurs when an auditor issues an erroneous opinion as the result of an underlying failure to comply with auditing standards.a. businessb. auditc. ethicsd. p

4、rocess5.easyaThe standard of due care to which the auditor is expected to adhere is referred to as the:a. prudent person concept.b. common law doctrine.c. due care concept.d. vigilant person concept.6.Auditors may be liable to their clients for:easyPunitive damagesCompensatory damagesaa.YesYesb.NoNo

5、c.YesNod.NoYes7.easybUnder the laws of agency, partners of a CPA firm may be liable for the work of others on whom they rely. This would not include:a. employees of the CPA firm.b. employees of the audit client.c. other CPA firms engaged to do part of the audit work.d. specialists employed by the CP

6、A firm to provide technical advice on the audit.8.easyd“Absence of reasonable care that can be expected of a person in a set of circumstances” defines:a. pecuniary negligence.b. gross negligence.c. extreme negligence.d. ordinary negligence.9.easycAn example of a breach of contract would likely inclu

7、de:a. an auditors refusal to return the clients general ledger book until the client paid last years audit fees.b. a banks claim that an auditor had a duty to uncover material errors in financial statements that had been relied on in making a loan.c. a CPA firms failure to complete an audit on the a

8、greed-upon date because the firm had a backlog of other work which was more lucrative.d. an auditors claim that the client staff is unqualified.10.easycPrivity of contract exists between:a. auditor and the federal government.b. auditor and third parties.c. auditor and client.d. auditor and client at

9、torney.11.easybAudit contracts (engagement letters):a. may be either oral or written.b. must be written.c. must be written and notarized.d. must be written if the client is regulated by the Securities and Exchange Commission.12.easydAn individual who is not party to the contract between a CPA and th

10、e client, but who is known by both and is intended to receive certain benefits from the contract is known as: a. a third party.b. a common law inheritor.c. a tort.d. a third-party beneficiary.13.easydLaws that have been developed through court decisions rather than by passage through legislative bod

11、ies are:a. statutory laws.b. judicial laws.c. federal laws.d. common laws.14.easyaLaws that have been passed through state legislatures are:a. statutory laws.b. judicial laws.c. federal laws.d. common laws.15.easydThe assessment against a defendant of the full loss suffered by a plaintiff regardless

12、 of other parties liability in the wrongdoing is called:a. separate and proportionate liability.b. shared liability.c. unitary liability.d. joint and several liability.16.easyc_ risk represents the possibility that the auditor concludes after conducting an adequate audit that the financial statement

13、s were fairly stated when they were actually misstated.a. Businessb. Processc. Auditd. Failure17.easyaThe assessment against a defendant of that portion of the damage caused by the defendants negligence is called:a. separate and proportionate liability.b. joint and several liability.c. shared liabil

14、ity.d. unitary liability.18.easyaIn third-party suits, which of the auditors defenses contends lack of privity of contract?a. Lack of duty.b. Non-negligent performance.c. Contributory negligence.d. Absence of causal connections.19.easycWhich of the following auditors defenses usually means non-relia

15、nce on the financial statements by the user?a. Lack of duty.b. Non-negligent performance.c. Lack of causal connections.d. Contributory negligence.20.easyaThere are a number of things that the AICPA, representing the profession as a whole, can do to reduce the CPAs exposure to lawsuits. One of them i

16、s to:a. sanction members for improper conduct and performance.b. deal only with clients possessing integrity.c. hire qualified auditors and train and supervise them.d. perform quality audits.21.easybIn connection with the audit of financial statements, an independent auditor could be responsible for

17、 failure to detect a material fraud if:a. statistical sampling techniques were not used on the audit engagement.b. the auditor planned the audit in a negligent manner.c. accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier.d

18、. the fraud was perpetrated by one employee who circumvented the existing internal controls.22.mediumbWhich of the following most accurately describes constructive fraud?a. Absence of reasonable care.b. Lack of slight care.c. Knowledge and intent to deceive.d. Extreme or unusual negligence without t

19、he intent to deceive.23.mediumcWhich of the following most accurately describes fraud?a. Absence of reasonable care.b. Lack of slight care.c. Knowledge and intent to deceive.d. Extreme or unusual negligence without the intent to deceive.24.mediumaWhich of the following is an illustration of liabilit

20、y to clients under common law?a. Client sues auditor for not discovering a theft of assets by an employee.b. Bank sues auditor for not discovering that borrowers financial statements are misstated.c. Combined group of stockholders sue auditor for not discovering materially misstated financial statem

21、ents.d. Federal government prosecutes auditor for knowingly issuing an incorrect audit report.25.mediumcWhich of the following is an illustration of liability under the federal securities acts?a. Client sues auditor for not discovering a theft of assets by an employee.b. Bank sues auditor for not di

22、scovering that borrowers financial statements are misstated.c. Combined group of stockholders sue auditor for not discovering materially misstated financial statements.d. auditor sues client for not cooperating during engagement.26.mediumcA third-party beneficiary is one which: a. has failed to esta

23、blish legal standing before the court.b. does not have privity of contract and is unknown to the contracting parties.c. does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.d. may establish legal standing before the court after a contr

24、act has been consummated.27.mediumcIf the CPA negligently failed to properly prepare and file a clients tax return, the CPA may be liable for:a. the penalties the client owes the IRS.b. the penalties and interest the client owes.c. the penalties and interest the client owes, plus the tax preparation

25、 fee the CPA charged.d. the penalties and interest, the tax preparation fee, and the amount of tax that was underpaid.28.mediumdHistorically, most major lawsuits against CPA firms have dealt with:a. disputes over income tax preparation services.b. disputes arising in the performance of MAS contracts

26、.c. disputes over the accuracy of bookkeeping services.d. audited and unaudited financial statements.29.mediumc“Privileged communication” between client and auditor is:a. available in all federal courts.b. not available in any court.c. available in several states.d. available for matters involving i

27、ncome taxes only.30.mediumWhich of the following statements is true?aGross negligence may constitute constructive fraudFraud requires the intent to deceiveAll fraud should be detected during audita.YesYesNob.NoYesYesc.YesNoYesd.NoNoNo31.mediumbFailure of a party to meet its obligations, thereby caus

28、ing injury to another party to whom a duty was owed, is:a. breach of contract.b. tort action for negligence.c. constructive fraud.d. fraud.32.mediumdTort actions against CPAs are more common than breach of contract actions because:a. there are more torts than contracts.b. the burden of proof is on t

29、he auditor rather than on the person suing.c. the person suing need prove only negligence.d. the amounts recoverable are normally larger.33.mediumcThe principal issue to be resolved in cases involving alleged negligence is usually:a. the amount of the damages suffered by plaintiff.b. whether to impo

30、se punitive damages on defendant.c. the level of care exercised by the CPA.d. whether defendant was involved in fraud.34.mediumcIn the auditing environment, failure to meet auditing standards is often:a. an accepted practice.b. a suggestion of negligence.c. conclusive evidence of negligence.d. tantamount to criminal behavior.35.mediumbA common way for a CPA firm to demonstrate its lack of duty to perform is by use of a(n):a. expert witness testimony.b. audit contract, or engagement letter.c. management representation letter.d. confirmation lett