Description : 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 ... statements. d. The auditor fails to detect fraud resulting from management override of the control structure
Last Answer : The auditor fails to detect fraud resulting from management override of the control structure
Description : 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. ... . d. The auditor fails to detect fraud resulting from management override of the control structure.
Last Answer : The auditor fails to detect fraud resulting from management override of the control structure.
Description : CPAs should not be liable to any party if they perform their services with: a. Ordinary negligence. b. Regulatory providence. c. Due professional care. d. Good faith
Last Answer : Due professional care
Description : Warning signs that cause the auditor to question management integrity must be taken seriously and pursued vigorously. Which of the following may lead the auditor to suspect management ... with the controller for the purpose of discussing accounting practices that will maximize reported profits
Last Answer : The president and chief executive officer of the client corporation has held numerous meetings with the controller for the purpose of discussing accounting practices that will maximize reported profits
Description : 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. ... care denotes ordinary negligence, whereas failure to exercise minimal care indicates gross negligence
Last Answer : Failure to exercise reasonable care denotes ordinary negligence, whereas failure to exercise minimal care indicates gross negligence
Description : Which of the following conditions suggests auditor negligence? a. Failure to detect collusive fraud perpetrated by members of middle management. b. Failure to detect collusive fraud perpetrated by ... control structure. d. Failure to detect material errors under conditions of weak internal control
Last Answer : Failure to detect material errors under conditions of weak internal control
Description : The auditor should not assume that management is dishonest, but the possibility of dishonesty must be considered." This is an example of a. Expectation gap. b. An attitude of professional skepticism. c. Due diligence. d. An ethical requirement
Last Answer : An attitude of professional skepticism.
Description : If a CPA recklessly abandons standards of due care and diligence while performing an audit, he or she may be held liable to unknown third parties for: a. Gross negligence. b. Fraudulent misconduct. c. Gross misconduct. d. Contributory negligence.
Last Answer : Gross negligence
Description : Information risk refers to the risk that a. The client may not be able to remain in business. b. Errors and frauds would not be detected by the auditor's procedures. c. ... financial statements that arematerial misstated. d. The client's financial statements may be materially false and misleading
Last Answer : The client's financial statements may be materially false and misleading
Description : 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
Last Answer : Client management
Description : The auditor's responsibility for failure to detect fraud arises a. Whenever the amounts involved are material. b. When such failure clearly results from noncompliance to generally accepted auditing ... part of the auditor. d. Only when the examination was specifically designed to detect fraud
Last Answer : When such failure clearly results from noncompliance to generally accepted auditing standards.
Description : The exercise of due professional care requires that an auditor a. Uses error-free judgment. b. Considers internal control, including tests of controls. c. Examines all corroborating evidence available. d. Be responsible for fulfilling his or her duties diligently and carefull
Last Answer : Be responsible for fulfilling his or her duties diligently and carefull
Description : The exercise of due professional care requires that an auditor a. Uses error-free judgment. b. Considers internal control, including tests of controls. c. Be responsible for fulfilling his or her duties diligently and carefully. d. Examines all corroborating evidence available.
Last Answer : Be responsible for fulfilling his or her duties diligently and carefully.
Description : The auditor's best defense when material misstatements in the financial statements are not uncovered in the audit is that a. The financial statements are client's responsibility. b. ... contributory negligence. d. The audit was conducted in accordance with generally accepted accounting principles.
Last Answer : The audit was conducted in accordance with PSAs
Description : The principle professional competence and due care imposes which of the following obligations on professional accountants? a. To maintain professional knowledge and skill at the level required to ensure that a ... , conflict of interest or undue influence of others. d. To be fair and truthful.
Last Answer : To maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service.
Description : Which of the following statements does not properly describe a limitation of an audit? a. Many audit conclusions are made on the basis of examining a sample of evidence. b. The ... weaknesses can cause auditors to overlook pertinent evidence. d. Many financial statement assertions cannot be audited
Last Answer : Fatigue and human weaknesses can cause auditors to overlook pertinent evidence
Description : Which of the following statements does not properly describe a limitation of an audit? a. Many financial statement assertions cannot be audited. b. Many audit conclusions are made on the ... permeated by judgment. d. Fatigue and human weaknesses can cause auditors to overlook pertinent evidence
Description : The exercise of due professional care requires that an auditor a. Use error-free judgment. b. Consider internal control, including tests of controls. c. Critically review the work done at every level of supervision. d. Examine all corroborating evidence available.
Last Answer : Critically review the work done at every level of supervision
Description : The exercise of due professional care requires that an auditor a. Critically review the judgment exercised at every level of supervision. b. Attain the proper balance of professional experience ... education. c. Reduce control risk below the maximum. d. Examine all available corroborating evidence
Last Answer : Critically review the judgment exercised at every level of supervision.
Description : Whenever a CPA professional is engaged to perform an audit of financial statements according to Philippine Standards on Auditing, he required to comply with those standards in order to a. Eliminate audit risk ... of audit performance. d. To reduce the audit program to be prepared by the auditor.
Last Answer : Have a measure of the quality of audit performance.
Description : Which statement is incorrect regarding procedures and evidence obtained in a review engagement? a. The auditor should apply judgment in determining the specific nature, timing and extent of review procedures. ... the needs of those relying on that information, not to the level of assurance provided
Last Answer : There is a greater risk that misstatements will not be detected in an audit than in a review.
Description : Which of the following statements is correct? a. The fair presentation of audited financial statements in accordance with applicable financial reporting framework is an implicit part of the auditor's ... those who provide audit and tax services, also provide consulting services to their clients.
Last Answer : Most CPAs, including those who provide audit and tax services, also provide consulting services to their clients.
Description : Given that an audit in accordance with generally accepted auditing standards is influenced by the possibility of materiaerrors and fraud, the auditor should conduct the audit with an ... . Professional responsiveness. b. Conservative advocacy. c. Professional skepticism. d. Objective judgment
Last Answer : Professional skepticism.
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
Description : A CPA is criminally liable if he a. Refuses to turn over the schedules or working papers prepared by the client staff to the client. b. Performs an audit in a negligent manner. c. Intentionally ... be stated in a financial statement. d. Was not able to submit the audited financial statements on time
Last Answer : Intentionally allows an omission of a material fact required to be stated in a financial statement
Last Answer : Intentionally allows an omission of a material fact required to be stated in a financial statement.
Description : The Philippine Accountancy Act of 2004 provides that all Working papers made during an audit shall be the property of the auditor. These working papers shall include the following, except: a. Working ... of documents furnished to the auditor. d. Any report submitted by the auditor to his client.
Last Answer : Any report submitted by the auditor to his client.
Description : Ethically, the auditor could: a. Advertise only as to his expertise in preparing income tax returns. b. Base his audit fee on a percentage of the proceeds of his client's stock issue. c. Perform ... at less than his customary fees. d. Own preferred stock in a corporation which is an audit client.
Last Answer : Perform an examination for a financially distressed client at less than his customary fees.
Description : The audit should not assume that management is dishonest, but the possibility of dishonesty must be considered." This is an example of a. Due diligence. b. Unprofessional behavior. c. An attitude of professional skepticism. d. An ethical requirement
Description : When planning the audit, if the auditor has no reason to believe that illegal acts exist, the auditor should a. Include audit procedures which have a strong probability of detecting illegal ... c. Still include some audit procedures designed specifically to uncover illegalities. d. Ignore the topic
Last Answer : Make inquiries of management regarding their policies and regarding their knowledge of violations, and then rely on normal audit procedures to detect errors, irregularities, and illegalities
Description : Which of the following statements best describes the auditor's responsibility regarding the detection of material errors and frauds? a. The auditor is responsible for the failure to detect material ... unrecorded transactions even if there is no evidence that material errors and frauds may exist
Last Answer : The audit should be designed to provide reasonable assurance that material errors and frauds are detected
Description : Which of the following statements is true? a. It is usually easier for the auditor to uncover irregularities than errors. b. It is usually easier for the auditor to uncover errors than ... the auditor to uncover errors or irregularities. d. Usually, none of the given statements is true
Last Answer : It is usually easier for the auditor to uncover errors than irregularities
Description : Upon completion of a typical audit, the auditor has a. No assurance that all material errors and fraud have been found. b. A low level of assurance that all material errors and fraud have been ... errors and fraud have been found. d. Total assurance that al material errors and fraud have been found
Last Answer : High level of assurance that all material errors and fraud have been found.
Description : Which of the following statements is true? a. It is usually equally difficult for the auditor to uncover errors or irregularities. b. It is usually easier for the auditor to uncover irregularities ... auditor to uncover errors than irregularities. d. Usually, none of the above statements is true.
Last Answer : It is usually easier for the auditor to uncover errors than irregularities.
Description : When planning the audit, if the auditor has no reason to believe that illegal acts exist, the auditor should a. Make inquiries of management regarding their policies and their knowledge of ... Ignore the topic. d. Include audit procedures which have a strong probability of detecting illegal acts
Last Answer : Make inquiries of management regarding their policies and their knowledge of violations, and then rely on normal audit procedures to detect errors, irregularities, and illegalities
Description : 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
Last Answer : To find smaller errors
Description : After studying and evaluating a client's existing internal control, an auditor has concluded that the policies and procedures are well-designed and functioning as intended. Under these circumstances, the ... risk at a lower level than would be set under conditions of weak internal control.
Last Answer : Set detection risk at a higher level than would be set under conditions of weak internal control.
Description : Auditor responsibility for identifying "direct effect" illegal acts differs from their responsibility for detecting a. Errors. b. Indirect-effect illegal acts. c. Fraud. d. Management fraud
Last Answer : Indirect-effect illegal acts.
Description : With respect to errors and fraud, the auditor should plan to a. Search for errors or fraud that would have a material effect on the financial statements. b. Discover errors or fraud ... material effect and for errors that would have either material or immaterial effects on the financial statements.
Last Answer : Discover errors or fraud that would have a material effect on the financial statements
Description : An auditor is required to obtain a basic understanding of the client's internal control to plan the audit. The auditor may then decide to perform tests of controls on all internal control ... to be strengths for which the auditor desires further reduction in the assessed level of control risk.
Last Answer : Considered to be strengths for which the auditor desires further reduction in the assessed level of control risk.
Description : Which of the following statements reflects an auditor's responsibility for detecting misstatements due to errors and fraud? a. An auditor is responsible for detecting employee errors and simple fraud, ... due to errors and fraud unless the application of GAAS would result in such detection.
Last Answer : An auditor should design the audit to provide reasonable assurance of detecting misstatements due to errors and fraud that are material to the financial statements.
Description : 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 ... d. Fraud always involves a pressure or incentive to commit fraud, and a misappropriation of assets
Last Answer : The auditor’s interest in fraud consideration relates to fraudulent acts that cause a material misstatement of financial statements.
Description : The following statements relate to the auditor's responsibility for the detection of errors and fraud. Which of the statement is correct? I. Due to the inherent limitations of the audit, there is a possibility that ... . a. I only b. II only c. Both statements are true d. Both statements are false
Last Answer : Both statements are true
Description : Which of the following statements best describes the auditor's responsibility to detect material errors and fraud? a. The auditor is responsible for the failure to detect material errors and ... detect unrecorded transactions even if there is no evidence that material errors and frauds may exis
Last Answer : The audit should be designed to provide reasonable assurance that material errors and fraud are detected.
Description : 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 ... detecting errors and fraud unless the application of PSAs and PAPs would result in such detection
Last Answer : An auditor should design the audit to provide reasonable assurance of detecting errors and fraud that are material to the financial statements.
Description : Which of the following is not one of the grounds for proceedings against a CPA? a. Insanity. b. Immoral or dishonorable conduct. c. Gross negligence or incompetence in the practice of his profession. d. Engaging in public practice while being employed in a private enterprise
Last Answer : Engaging in public practice while being employed in a private enterprise
Description : 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 ... resulting from failure to detect irregularities in client financial statements association with clients whose
Last Answer : To minimize the likelihood of association with clients whose management lacks integrity
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
Description : The understanding between the client and the auditor as to the degree of responsibilities to be assumed by each is normally set forth in a(an) a. Management letter. b. Representation letter. c. Engagement letter. d. Comfort letter
Last Answer : Engagement letter
Description : Which of the following will an auditor least likely discuss with the former auditors of a potential client prior to acceptance? a. Disagreements with management regarding accounting principles b. Integrity of management c. Fees charged for services d. Reasons for changing audit firms
Last Answer : Fees charged for services