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A+ ACC 491 WEEK 2 Ethics, Legal Liability, Audit Responsibilities Quiz – hwsoloutions.com

ACC 491 WEEK 2 Ethics, Legal Liability, Audit Responsibilities Quiz

 

 

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ACC 491 WEEK 2 Ethics, Legal Liability, Audit Responsibilities Quiz

ACC 491 WEEK 2 Ethics, Legal Liability, Audit Responsibilities Quiz

ACC 491 WEEK 2 Ethics, Legal Liability, Audit Responsibilities Quiz

Because of the risk of material misstatement, an audit should be planned and performed with an attitude of

  • independent integrity.
  • impartial conservatism.
  • objective judgment.
  • professional skepticism.

Auditors accumulate evidence to:

  • reach a conclusion about the fairness of the financial statements.
  • satisfy the requirements of the Securities Acts of 1933 and 1934.
  • determine if the financial statements are correct.
  • defend themselves in the event of a lawsuit.

In the performance of an audit, a CPA:

  • must strictly follow GAAP for privately held clients.
  • must exercise due professional care in the performance of their audit responsibilities.
  • must exercise constructive professional care in the performance of their audit responsibilities.
  • is legally liable for detecting an immaterial client fraud.

Distinguish between “fraud” and “constructive fraud.”

  • The difference between fraud and constructive fraud is that in fraud there is no intent to deceive or do harm; however, in constructive fraud a misstatement is made where there is knowledge of its falsity.
  • The difference between fraud and constructive fraud is that fraud is the absence of reasonable care that can be expected of a person in a set of circumstances; however constructive fraud is a lack of even the slightest care that can be expected of a person.
  • The difference between fraud and constructive fraud is that fraud can occur when there is a misstatement due to recklessness of the auditor whereas in constructive fraud the intent to deceive will cause extensive harm damaging the company.
  • The difference between fraud and constructive fraud is that in fraud the wrongdoer intends to deceive another party whereas in constructive fraud there is a lack of intent to deceive or defraud.

Recklessness in the case of an audit is present if the auditor knew an adequate audit was not done but still issued an opinion, even though there was no intent to deceive financial statement users. This description is the legal term for:

  • gross negligence.
  • fraud.
  • ordinary negligence.
  • constructive fraud.

The major reason an independent auditor gathers audit evidence is to

  • evaluate management.
  • form an opinion on the financial statements.
  • assess control risk.
  • detect fraud.

One of the main reasons people act unethically is that they choose to act selfishly.

  • True
  • False

What is an ethical dilemma?

  • An ethical dilemma in accounting occurs when an error in the financial statement has been discovered.
  • An ethical dilemma is a synonym for a legal dilemma.
  • An ethical dilemma is a situation that a person faces in which a decision must be made about the appropriate behavior.
  • None of the above

________ means that a person acts according to conscience, regardless of the situation.

  • Integrity
  • Caring
  • Fairness
  • Respect

If an auditor fails to fulfill a certain requirement in the contract, they may be guilty of:

  • constructive fraud.
  • criminal neglect.
  • contract fraud.
  • breach of contract.

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 notify regulators of the circumstances.
  • has the responsibility of notifying financial statement users through the auditor’s report.
  • should request an increase in audit fees so that more resources can be used to conduct the audit.
  • should withdraw from the engagement.

Which of the following best describes the reason why an independent auditor reports on financial statements?

  • A misstatement of account balances may exist and is generally corrected as the result of the independent auditor’s work.
  • A misappropriation of assets may exist, and it is more likely to be detected by independent auditors.
  • Poorly designed internal controls may be in existence.
  • Different interests may exist between the company preparing the statements and the persons using the statements.

What are the six core ethical values described by the Josephson Institute?

  • (1) Respect, (2) Loyalty, (3) Fairness, (4) Unbiased, (5) Compassion, and (6) Caring
  • (1) Caring, (2) Compassion, (3) Friendliness, (4) Respect, (5) Trustworthiness, and (6) Morality
  • (1) Compassion, (2) Respect, (3) Loyalty, (4) Fairness, (5) Unbiased, and (6) Trustworthiness
  • (1) Trustworthiness, (2) Respect, (3) Responsibility, (4) Fairness, (5) Caring, and (6) Citizenship

  The objective of an audit of the financial statements is an expression of an opinion on:

  • the accuracy of the balance sheet and income statement.
  • the accuracy of the annual report.
  • the accuracy of the financial statements.
  • the fairness of the financial statements in all material respects.

Which of the following best describes the reason why an independent auditor reports on financial statements?

  • A misstatement of account balances may exist and is generally corrected as the result of the independent auditor’s work.
  • A misappropriation of assets may exist, and it is more likely to be detected by independent auditors.
  • Different interests may exist between the company preparing the statements and the persons using the statements.

Ethics are:

  • needed in the professions, but is not needed for society in general.
  • a set of moral principles or values.
  • always incorporated in laws.
  • not formed by life experiences.

How does the prudent person concept affect the liability of the auditor?

  • The prudent person concept states that auditors are responsible for the accuracy of the financial statements that are prepared, but only based on his or her good faith. Therefore, the auditor must keep up with accounting standards to ensure compliance.
  • The prudent person concept states that third parties can confidently rely on the independence of the auditors in their work. However there is liability to the auditors if they hide their lack of independence or they mislead the third parties.
  • The prudent person concept states that a person is responsible for conducting a job in good faith and with integrity, but is not infallible. Therefore, the auditor is expected to conduct an audit using due care, but does not claim to be a guarantor or insurer of financial statements.
  • The prudent person concept states that a person is responsible for conducting a job in good faith, integrity, and with qualifications and attention that prevents errors. Therefore, the auditor is expected to conduct an audit using such due care that they can guarantee the accuracy of the financial statements.

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ACC 491 WEEK 2 Ethics, Legal Liability, Audit Responsibilities Quiz

 

 

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