The factor that distinguishes an error from fraud is a. Materiality. b. Intentc. Whether it is peso amount or a process. d. Whether it is a caused by the auditor or the client.

The factor that distinguishes an error from
fraud is
a. Materiality.
b. Intent.
c. Whether it is peso amount or a process.
d. Whether it is a caused by the auditor or
the client
by

1 Answer

Answer :

Intent
by

Related questions

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Last Answer : Intent.

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Which of the following statements is correct relating to the auditor’s consideration of fraud? a. The auditor’s interest in fraud consideration relates to fraudulent acts that cause a material misstatement of financial statements. b. A primary factor that distinguishes fraud from error is that fraud is always intentional, while errors are generally, but not always, intentional. c. While an auditor should be aware of the possibility of fraud, management, and not the auditor, is responsible for detecting fraud. d. Fraud always involves a pressure or incentive to commit fraud, and a misappropriation of assets

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The concept of materiality would be least important to an auditor when considering the a. Decision whether to use positive or negative confirmations of accounts receivable. b. Adequacy of disclosure of a client's illegal act. c. Discovery of weaknesses in a client's internal control structure. d. Effects of a direct financial interest in the client upon the CPA's independence.

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Last Answer : Effects of a direct financial interest in the client upon the CPA's independence.

Of the following statements, which best distinguishes ordinary negligence from gross negligence? a. The more material the undetected error the greater the likelihood of ordinary negligence. b. Gross negligence is most probable when the auditor fails to detect errors that occurred under conditions of strong internal control. c. Failure to detect material errors, whether internal control is strong or weak, suggests gross negligence. d. Failure to exercise reasonable care denotes ordinary negligence, whereas failure to exercise minimal care indicates gross negligence

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The primary factor that distinguishes errors from fraud is a. Whether the misstatement is perpetrated by an employee or by a member of management b. Whether the underlying cause of misstatement is intentional or unintentional. c. Whether the misstatement is concealed. d. Whether the underlying cause of misstatement relates to misapplication of accounting principles or to clerical processing

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With respect to the concept of materiality, which one of the following statements is correct? a. Materiality is a matter of professional judgment. b. Materiality is determined by reference to AASC's guidelines. c. Materiality depends on the nature of a transaction rather than the peso amount of the transaction. d. Materiality depends only on the peso amount of an item relative to other items in the financial statements

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Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding a. Disagreements the predecessor had with the client concerning auditing procedures and accounting principles. b. The predecessor’s evaluation of matters of continuing accounting significance. c. The degree of cooperation the predecessor received concerning the inquiry of the client’s lawyer. d. The predecessor’s assessments of inherent risk and judgments about materiality

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The auditor considers materiality from: a. AASC perspective b. Client perspective c. Independence perspective d. Reasonable user perspective

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Which of the following statements reflects an auditor's responsibility for detecting fraud and error? a. An auditor is responsible for detecting employee errors and simple fraud, but not for discovering fraud involving employee collusion or management overrideAn auditor should design the auditto provide reasonable assurance ofdetecting errors and fraud that arematerial to the financial statements.c. An auditor should plan the audit to detecterrors and fraud that are caused bydepartures from the applicable FRF.d. An auditor is not responsible fordetecting errors and fraud unless theapplication of PSAs and PAPs would resultin such detection

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Why should the auditor plan more work on individual accounts as lower acceptable levels of both audit risk and materiality are established? a. To find smaller errors b. To find larger errors c. To increase the tolerable error in the accounts d. To decrease the risk of overreliance

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When determining whether independence is impaired because of an ownership interest in client company,' materiality will affect whether ownership is a violation of rule of independence a. In all circumstances. b. Only for direct ownership. c. Only for indirect ownership. d. Under no circumstances.

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When determining whether independence is impaired because of an ownership interest in client company, materiality will affect whether ownership is a violation of rule of independence a. In all circumstances. b. Only for direct ownership. c. Only for indirect ownership. d. Under no circumstances.

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When an independent auditor is approached to perform an audit for the first time, he/she should make inquiries of the predecessor auditor. Inquiries are necessary because the predecessor may be able to provide the successor with information that will assist the successor in determining whether a. A certain amount of audit fee will be acceptable to the client. b. An unqualified opinion may be issued. c. The audit documentation by the predecessor auditor can be utilized. d. The engagement proposal should be accepted

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It is the amount or amounts set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. a. Lower materiality b. Lesser materiality c. Performance materiality d. Materiality

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The auditor's defense of contributory negligence is most likely to prevail when a. Third party injury has been minimal. b. The client is privately held as contrasted with a public company. c. Undetected errors have resulted in materially misleading financial statements. d. The auditor fails to detect fraud resulting from management override of the control structure

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The auditor's defense of contributory negligence is most likely to prevail when a. Third party injury has been minimal. b. The client is privately held as contrasted with a public company. c. Undetected errors have resulted in materially misleading financial statements. d. The auditor fails to detect fraud resulting from management override of the control structure.

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In connection with the examination of financial statements, an independent auditor could be responsible for failure to detect a material fraud if a. Accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier. b. The auditor planned the work in a hasty and inefficient manner. c. Statistical sampling techniques were not used on the audit engagement. d. The fraud was perpetrated by one client employee, who circumvented the existing internal control

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In connection with the examination of financial statements, an independent auditor could be responsible for failure to detect a material fraud if a. Statistical sampling techniques were not used on the audit engagement. b. The fraud was perpetrated by one client employee, who circumvented the existing internal control. c. The auditor planned the work in a hasty and inefficient manner. d. Accountants performing important partsof the work failed to discover a closerelationship between the treasurer andthe cashie

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The auditor is most likely to presume that a high risk of fraud exists if a. The client is a multinational companythat does business in numerous foreigncountries.b. The client does business with severalrelated parties.c. Inadequate segregation of dutiesplaces an employee in a position toperpetrate and conceal thefts.d. Inadequate employee training results inlengthy EDP exception reports eachmonth

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Last Answer : Inadequate segregation of duties places an employee in a position to perpetrate and conceal thefts

The responsibility for the detection and prevention of errors, fraud and noncompliance with laws and regulations rests with: a. Auditor b. Client's legal counsel c. Internal auditor d. Client management

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The essence of the attest function is to a. Detect fraud. b. Examine individual transactions so that the auditor can certify as to their validity. c. Determine whether the client's financial statements are fairly stated. d. Ensure the consistent application of correct accounting procedures.

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Last Answer : Determine whether the client's financial statements are fairly stated.

Which of the following statements about fraud or error is incorrect? a. The responsibility for the prevention and detection of fraud and error rests with management. b. The auditor should plan and perform the audit with an attitude of professional skepticism, recognizing that conditions or events may be found that fraud or error may exist. c. The likelihood of detecting fraud is ordinarily higher than that of detecting error. d. The auditor is not and can not be held responsible for the prevention of fraud and error

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Last Answer : The likelihood of detecting fraud is ordinarily higher than that of detecting error.

The management responsibility to detect and prevent fraud and error is accomplished by a. Having an annual audit of financial statements. b. Implementing adequate quality control system. c. Implementing adequate accounting and internal control system. d. Issuing a representation letter to the auditor.

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Last Answer : Implementing adequate accounting and internal control system

Which of the following concepts is most useful in assessing the scope of an auditor's program relating to various accounts? a. Attribute sampling b. Management fraud c. Materiality d. The reliability of information

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Last Answer : Materiality

A CPA establishes quality control policies and procedures for deciding whether to accept a new client or continue to perform services for a current client. The primary purpose for establishing such policies and procedures is a. To enable the auditor to attest to the integrity or reliability of a client. b. To comply with the quality control standards established by regulatory bodies. c. To minimize the likelihood of association with clients whosemanagement lacks integrity.d. To lessen the exposure to litigationresulting from failure to detectirregularities in client financialstatements

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Last Answer : To minimize the likelihood of association with clients whose management lacks integrity

When the continuing auditor intends to use information about the entity and its environment obtained in prior periods, the auditor shoulda. Assess control risk as "high" for theassertions affected by the prior-periodinformation.b. Seek permission with the client in usingthe prior period information obtained bythe auditor.c. Determine whether changes haveoccurred that may affect therelevance of such information in thecurrent audit.d. Determine whether to equitably reducethe audit fee due to lower audit effortexpended during the engagement

Description : When the continuing auditor intends to use information about the entity and its environment obtained in prior periods, the auditor should a. Assess control risk as "high" for the assertions ... whether to equitably reduce the audit fee due to lower audit effort expended during the engagement

Last Answer : Determine whether changes have occurred that may affect the relevance of such information in the current audit.

A successor auditor is required to communicate with the previous auditor. The primary concern in this communication is a. Information which will help the successor auditor in determining whether the client management has integrity. b. To learn about client by examining predecessor's working papers. c. To enable successor auditor to perform a more efficient audit. d. To save successor auditor time and money in gathering data.

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Last Answer : Information which will help the successor auditor in determining whether the client management has integrity.

In determining independence with respect to any audit engagement, the ultimate decision as to whether or not the auditor is independent must be made by the a. Auditor. b. Client. c. Audit committee. d. Public.

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Which of the following procedures would an auditor be most likely to perform in planning a financial statement audit? a. Reviewing investment transactions of the audit period to determine whether related parties were created. b. Performing analytical procedures to identify areas that may represent specific risks. c. Obtaining a written representation letter from the client to emphasize management's responsibilities. d. Reading the minutes of stockholder and director meetings to discover whether any unusual transactions have occurred.

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Last Answer : Performing analytical procedures to identify areas that may represent specific risks.

Ultimately, the decision as to whether the CPA is independent or not, will be made by the: a. Audit Committee b. Client c. Public d. Auditor

Description : Ultimately, the decision as to whether the CPA is independent or not, will be made by the: a. Audit Committee b. Client c. Public d. Auditor

Last Answer : Auditor

Which of the following is not one of the limitations of an audit? a. The use of testing b. Limitations imposed by client c. Human error d. Nature of evidence that the auditor obtains

Description : Which of the following is not one of the limitations of an audit? a. The use of testing b. Limitations imposed by client c. Human error d. Nature of evidence that the auditor obtains

Last Answer : Limitations imposed by client

Which of the following statements is true with regard to the relationship among audit risk, audit evidence, and materiality? a. The lower the inherent risk and control risk, the lower the aggregate materiality threshold. b. Under conditions of high inherent and control risk, the auditor should place more emphasis on obtaining external evidence and should reduce reliance on internal evidence. c. Where inherent risk is high and control risk is low, the auditor may safely ignore inherent risk. d. Aggregate materiality thresholds should not change under conditions of changing risk levels

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Last Answer : Under conditions of high inherent and control risk, the auditor should place more emphasis on obtaining external evidence and should reduce reliance on internal evidence

Which of the following statements is incorrect about materiality? a. The concept of materiality recognizes that some matters are important for fair presentation of financial statements in conformity with GAAP, while other matters are not important. b. An auditor considers materiality for planning purposes in terms of the largest aggregate level of misstatements that could be material to any one of the financial statements. c. Materiality judgments are made in light of surrounding circumstances and necessarily involve both quantitative and qualitative judgments. d. An auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of a reasonable person who will rely on the financial statements

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Last Answer : An auditor considers materiality for planning purposes in terms of the largest aggregate level of misstatements that could be material to any one of the financial statements

An auditor should consider materiality when I. Determining the nature, timing, and extent of audit procedures. II. Evaluating the effect of misstatements. a. I only b. II only c. Both I and II d. Neither I nor II

Description : An auditor should consider materiality when I. Determining the nature, timing, and extent of audit procedures. II. Evaluating the effect of misstatements. a. I only b. II only c. Both I and II d. Neither I nor II

Last Answer : Both I and II

In planning the audit engagement, the auditor should consider each of the following, except a. Matters relating to the entity's business and the industry in which it operates. b. Materiality level and audit risk. c. The kind of opinion (unmodified, qualified, or adverse) that is likely to be expressed. d. The entity's accounting policies and procedures.

Description : In planning the audit engagement, the auditor should consider each of the following, except a. Matters relating to the entity's business and the industry in which it operates. b. Materiality level and ... or adverse) that is likely to be expressed. d. The entity's accounting policies and procedures.

Last Answer : The kind of opinion (unmodified, qualified, or adverse) that is likely to be expressed

Professional judgment:a. Is not used in making decisions about materiality and audit risk. b. Is necessary in the evaluation of management's judgments in applying the entity's applicable financial reporting framework. c. Should be exercised in planning and performing an audit of financial statements but need not be documented. d. Can be used as the justification for the decisions made by the auditor that are not supported by the facts and circumstances of the engagement

Description : Professional judgment:a. Is not used in making decisions about materiality and audit risk. b. Is necessary in the evaluation of management's judgments in applying the entity's applicable financial ... made by the auditor that are not supported by the facts and circumstances of the engagement

Last Answer : Is necessary in the evaluation of management's judgments in applying the entity's applicable financial reporting framework

.Prior to beginning the field work on a new audit engagement in which a CPA does not possess expertise in the industry in which the client operates, the CPA should a. Reduce audit risk by lowering the preliminary levels of materiality. b. Design special substantive tests to compensate for the lack of industry expertise. c. Engage financial experts familiar with the nature of the industry. d. Obtain a knowledge of matters that relates to the nature of the entity's business

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Last Answer : Obtain a knowledge of matters that relates to the nature of the entity's business

The principal issue to be resolved in cases involving alleged negligence is usually a. The amount of the damages suffered by the users of the financial statements. b. Whether to impose punitive damages on defendant. c. The level of care required to be exercised. d. Whether defendant was involved in fraud.

Description : The principal issue to be resolved in cases involving alleged negligence is usually a. The amount of the damages suffered by the users of the financial statements. b. Whether to impose punitive damages on ... c. The level of care required to be exercised. d. Whether defendant was involved in fraud.

Last Answer : The level of care required to be exercised

The principal issue to be resolved in cases involving alleged negligence is usually a. The amount of the damages suffered by the users of the financial statements. b. Whether to impose punitive damages on defendant. c. The level of care required to be exercised. d. Whether defendant was involved in fraud.

Description : The principal issue to be resolved in cases involving alleged negligence is usually a. The amount of the damages suffered by the users of the financial statements. b. Whether to impose punitive damages on ... c. The level of care required to be exercised. d. Whether defendant was involved in fraud.

Last Answer : The level of care required to be exercised.

If the auditor is convinced that the client has an excellent internal control structure, the amount of audit evidence to be gathered. a. Can be significantly less than where internal control is not adequate. b. Will not be affected since the auditor must arrive at an independently determined opinion. c. Must be increased to support the auditor's belief. d. Is not determinable

Description : If the auditor is convinced that the client has an excellent internal control structure, the amount of audit evidence to be gathered. a. Can be significantly less than where internal control is not ... determined opinion. c. Must be increased to support the auditor's belief. d. Is not determinable

Last Answer : Can be significantly less than where internal control is not adequate.

.In determining audit fees, an auditor may take into account each of the following except a. Volume and intricacy of work involved. b. Number and cost of manhours needed. c. Degree of responsibility assumed. d. Size and amount of capital of client.

Description : .In determining audit fees, an auditor may take into account each of the following except a. Volume and intricacy of work involved. b. Number and cost of manhours needed. c. Degree of responsibility assumed. d. Size and amount of capital of client.

Last Answer : Size and amount of capital of client.

Orange Corp. has a few large accounts receivable that total P2,000,000. Yellow Corp. has a large number of small accounts receivable that also total P2,000,000. The importance of an error in any one account is, therefore, greater for Orange Corp. than for Yellow Corp. This is an example of the auditor's concept of: a. Materiality. b. Reasonable assurance. c. Comparative analysis d. Relative risk

Description : Orange Corp. has a few large accounts receivable that total P2,000,000. Yellow Corp. has a large number of small accounts receivable that also total P2,000,000. The importance of an error in ... auditor's concept of: a. Materiality. b. Reasonable assurance. c. Comparative analysis d. Relative risk

Last Answer : Materiality.

Which of the following best describes the purpose of the engagement letter? a. The engagement letter conveys to management the detailed steps to be applied in the audit process. b. The engagement letter relieves the auditor of some responsibility for the exercise of due care. c. By clearly defining the nature of the engagement, the engagement letter helps avoid and resolve misunderstandings between CPA andclient regarding the precise nature of the work to be performed and the type of report to be issued. d. The engagement letter should be signed by both the client and the CPA and should be used only for independent audits

Description : Which of the following best describes the purpose of the engagement letter? a. The engagement letter conveys to management the detailed steps to be applied in the audit process. b. The engagement letter ... be signed by both the client and the CPA and should be used only for independent audits

Last Answer : By clearly defining the nature of the engagement, the engagement letter helps avoid and resolve misunderstandings between CPA and client regarding the precise nature of the work to be performed and the type of report to be issued

Why does a company choose to have an independent auditor report on its financial statements? a. Independent auditors will always detect management fraud. b. Independent auditors guarantee the accuracy of the financial statements. c. The company preparing the statements may have a vested interest in reporting certain results. d. An independent audit is designed to search for deficiencies in the company's internal control

Description : Why does a company choose to have an independent auditor report on its financial statements? a. Independent auditors will always detect management fraud. b. Independent auditors guarantee the accuracy ... . An independent audit is designed to search for deficiencies in the company's internal control

Last Answer : The company preparing the statements may have a vested interest in reporting certain results.