ACCT 444 Week 2 Quiz

ACCT 444 Week 2 Quiz

1. (TCO 4) In connection with the audit 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 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) the fraud was perpetrated by one employee who circumvented the existing internal controls.

2. (TCO 4) "Absence of reasonable care that can be expected of a person is a set of circumstances" defines

A) pecuniary negligence.

B) gross negligence.

C) extreme negligence.

D) ordinary negligence.

3. (TCO 4) While performing services for their clients, professionals have a duty to provide a level of care that is

a. free from judgment errors.

b. superior.

c. greater than average.

d. reasonable.

4. (TCO 4) The objective of the ordinary audit of financial statements is the expression of an opinion on

a. the fairness of the financial statements.

b. the accuracy of the financial statements.

c. the accuracy of the annual report.

d. the balance sheet and income statement.

5. (TCO 4) The auditor's best defense when material misstatements are not uncovered is to have conducted the audit

a. in accordance with auditing standards.

b. as effectively as reasonably possible.

c. in a timely manner.

d. only after an adequate investigation of the management team.

6. (TCO 3) Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements?

a. The auditor commonly examines a sample, rather than the entire population of transactions.

b. Accounting presentations contain complex estimates which involve uncertainty.

c. Fraudulently prepared financial statements are often difficult to detect.

d. Auditors believe that reasonable assurance is sufficient in the vast majority of cases.

7. (TCO 3) In the fraud triangle, fraudulent financial reporting and misappropriation of assets

a. share little in common.

b. share most of the same risk factors.

c. share the same three conditions.

d. share most of the same conditions.

8. (TCO 3) After fraud risks are identified and documented, the auditor should evaluate factors that _____ fraud risk, before developing an appropriate response to the risk of fraud.

a. enhance

b. reduce

c. increase

d. increase or decrease

9. (TCO 3) Which of the following statements describes circumstances that underlie employee incentives to misappropriate assets?

a. Dissatisfied employees may steal from a sense of entitlement.

b. Weak internal controls encourage employees to take chances.

c. If management cheats customers and gets away with it, then employees believe they can do the same to the company.

d. Employees have a vested interest in making the company’s financial statements erroneous.

10. (TCO 4) If a CPA firm is being sued for common law fraud by a third party based on materially false financial statements, which of the following is the best defense the accountants could assert?

A. Lack of privity.

B. A disclaimer contained in the engagement letter.

C. Non negligent performance.

D. Contributory negligence on the part of the client.

11.(TCO 4) "Absence of reasonable care that can be expected of a person is a set of circumstances" defines

A) pecuniary negligence. B) gross negligence. C) extreme negligence. D) ordinary negligence.

12. (TCO 4) A third-party beneficiary is one that

does not have privity of contract, but is known to the contracting parties and intended to benefit under the contract.

13. (TCO 4) In 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.

14. (TCO 4) The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the

a. board of directors.

b. company management.

c. financial statement auditor.

d. company’s internal audit department.

15. (TCO 3) The element that distinguishes an error from fraud is

A) whether it is a dollar amount or a process.

B) intent.

C) materiality.

D) whether it is a caused by the auditor or the client.

16. (TCO 3) Which of the following is not one of the factors of the fraud triangle?

a. Situational environment

b. Perceived non-sharable financial need

c. Perceived opportunity

d. Rationalization

17. (TCO 3) After fraud risks are identified and documented, the auditor should evaluate factors that _____ fraud risk, before developing an appropriate response to the risk of fraud.

a.         enhance

b.         reduce

c.         increase

d.         increase or decrease

18. (TCO 3) Which of the following statements describes circumstances that underlie employee incentives to misappropriate assets?

a. Dissatisfied employees may steal from a sense of entitlement.

b. Weak internal controls encourage employees to take chances.

c. If management cheats customers and gets away with it, then employees believe they can   do the same to the company.

d. Employees have a vested interest in making the company’s financial statements erroneous.

19. (TCO 3) Which of the following characteristics is most likely to heighten an auditor's concern about the risk of material misstatements, due to fraud in an entity's financial statements?

A. The entity's industry is experiencing declining customer demand.
B. Employees who handle cash receipts are not bonded.
C. Bank reconciliations usually include in-transit deposits.
D. Equipment is often sold at a loss before being fully depreciated

File name: ACCT 444 Week 2 Quiz.docx  File type: .docx     PRICE:$15