In connection with the audit of financial statements, an independent auditor could be responsible for failure to detect a material fraud if
statistical sampling techniques were not used on the audit engagement.
the auditor planned the audit in a negligent manner.
accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier.
the fraud was perpetrated by one employee who circumvented the existing internal controls.
Question 2
3 / 3 pts
(TCO 4) “Absence of reasonable care that can be expected of a person is a set of circumstances” defines
pecuniary negligence.
gross negligence.
extreme negligence.
ordinary negligence.
Question 3
3 / 3 pts
(TCO 4) The prudent person concept establishes that
the CPA firm is not expected to make only perfect judgments.
an audit in accordance with GAAS is subject to limitations and cannot be relied upon for complete assurance that all errors and irregularities will be found.
the courts do not require that the auditor become the insurer or guarantor of the accuracy of the statements.
all three of the above are true.
Question 4
3 / 3 pts
(TCO 4) Tort actions against CPAs are more common than breach of contract actions because
there are more torts than contracts.
the burden of proof is on the auditor rather than on the person suing.
the person suing need prove only negligence.
the amounts recoverable are normally larger.
Question 5
3 / 3 pts
(TCO 4) If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor
should withdraw from the engagement.
should request an increase in audit fees so that more resources can be used to conduct the audit.
has the responsibility of notifying financial statement users through the auditor’s report.
should notify regulators of the circumstances.
Question 6
3 / 3 pts
(TCO 3) Which of the following statements is most correct regarding errors and fraud?
An error is unintentional, whereas fraud is intentional.
Frauds occur more often than errors in financial statements.
Errors are always fraud and frauds are always errors.
Auditors have more responsibility for finding fraud than errors.
Question 7
3 / 3 pts
(TCO 3) In the fraud triangle, fraudulent financial reporting and misappropriation of assets
share little in common.
share most of the same risk factors.
share the same three conditions.
share most of the same conditions.
Question 8
3 / 3 pts
(TCO 3) Because of the risk of material misstatements due to fraud, an audit of financial statements in accordance with generally accepted auditing standards should be performed with an attitude of
objective judgment.
impartial conservatism.
independent integrity.
professional skepticism.
Question 9
3 / 3 pts
(TCO 3) Which of the following statements describes circumstances that underlie employee incentives to misappropriate assets?
Dissatisfied employees may steal from a sense of entitlement.
Weak internal controls encourage employees to take chances.
If management cheats customers and gets away with it, then employees believe they can do the same to the company.
Each of the above describes circumstances underlying employee incentives to misappropriate assets.
Question 10
3 / 3 pts
(TCO 3) Auditors may identify conclusions during fieldwork that change or support a judgment about the initial assessment of fraud risk. Which of the following conditions should alert an auditor about the initial assessment?
Missing or conflicting evidence
Discrepancies in the accounting records
Unusual relationships between the auditor and management
