ACC 491 Week 2 Ethics, Legal Liability, Audit Responsibilities Quiz (Score 100%)

ACC 491 Week 2 Ethics, Legal Liability, Audit Responsibilities Quiz (Score 100%)

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Attachments: ACC 491 N Week 2 Ethics, Legal Liability, Audit Responsibilities Quiz.docx [ Preview Here ]

    Question  1
 
    One of the main reasons people act unethically is that they choose to act selfishly.
        True
        False
    
 
Question 2
 
    Which of the following best describes the reason why an independent auditor reports on financial statements?
 
 
        Poorly designed internal controls may be in existence.
        A misstatement of account balances may exist and is generally corrected as the result of the independent auditor's work.
        Different interests may exist between the company preparing the statements and the persons using the statements.
        A misappropriation of assets may exist, and it is more likely to be detected by independent auditors.
    
 
Question 3
 
    Because of the risk of material misstatement, an audit should be planned and performed with an attitude of
 
 
        independent integrity.
        professional skepticism.
        impartial conservatism.
        objective judgment.
 
    Question 4
 
    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:
 
 
    fraud.
    constructive fraud.
        gross negligence.
        ordinary negligence.
 
 
    Question 5
 
    In the performance of an audit, a CPA:
 
        must exercise constructive professional care in the performance of their audit responsibilities.
        is legally liable for detecting an immaterial client fraud.
        must strictly follow GAAP for privately held clients.
        must exercise due professional care in the performance of their audit responsibilities.
    Question 6
 
    The major reason an independent auditor gathers audit evidence is to
 
 
        assess control risk.
        form an opinion on the financial statements.
        detect fraud.
        evaluate management.
 
 
    Question 7
 
    Ethics are:
        a set of moral principles or values.
        not formed by life experiences.
        always incorporated in laws.
        needed in the professions, but is not needed for society in general.
 
 
    Question 8
 
    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.
        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 9
 
    The objective of an audit of the financial statements is an expression of an opinion on:
 
    the fairness of the financial statements in all material respects.
        the accuracy of the financial statements.
        the accuracy of the annual report.
        the fairness of the financial statements in all material respects.
        the accuracy of the balance sheet and income statement.
 
    Question 10
 
    ________ means that a person acts according to conscience, regardless of the situation.
 
 
        Respect
        Fairness
        Integrity
        Caring
 
    Question 11
 
    How does the prudent person concept affect the liability of the auditor?
 
 
        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.
 
        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 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.
 
    Question 12
 
    What is an ethical dilemma?
 
 
        An ethical dilemma is a situation that a person faces in which a decision must be made about the appropriate behavior.
 
        An ethical dilemma is a synonym for a legal dilemma.
        None of the above
        An ethical dilemma in accounting occurs when an error in the financial statement has been discovered.
 
 
    Question 13
 
    What are the six core ethical values described by the Josephson Institute?
 
 
        (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
        (1) Caring, (2) Compassion, (3) Friendliness, (4) Respect, (5) Trustworthiness, and (6) Morality
        (1) Respect, (2) Loyalty, (3) Fairness, (4) Unbiased, (5) Compassion, and (6) Caring
 
    Question 14
 
    Distinguish between "fraud" and "constructive fraud."
 
 
    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
 
        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 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.
    Question 15
 
    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.
        reach a conclusion about the fairness of the financial statements.
 
    Question 16
 
    Which of the following best describes the reason why an independent auditor reports on financial statements?
 
 
    Poorly designed internal controls may be in existence.       
 
 
        Different interests may exist between the company preparing the statements and the persons using the 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.
    
Question 17
 
    If an auditor fails to fulfill a certain requirement in the contract, they may be guilty of:
 
        constructive fraud.
        breach of contract.
        criminal neglect.
        contract fraud.
 

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