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Test Bank for Auditing An International Approach 7 edition
c3
Student: ___________________________________________________________________________
1. | Which of the following philosophical principles in ethics places emphasis on the importance of following rules rather than on weighing the consequences of actions?
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2. | Which of the following philosophical principles of ethics places emphasis on the consequences of action, rather than on following the rules?
|
3. | What is a key characteristic of critical thinking?
|
4. | The goal of the critical-thinking framework reflects ________.
|
5. | What is the meaning of the rule of professional conduct that requires an auditor to be objective?
|
6. | The CPA Ontario Rules of Professional Conduct contain both general ethical principles that are idealistic in character and also a ________.
|
7. | Which of the following items is the most important principle in the fundamental statements of accepted conduct?
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8. | A complaint has been made against a member for an audit failure. If this complaint is found to have merit, under which CPA Ontario Rule of Professional Conduct is the member likely to be charged?
|
9. | A succinct, but comprehensive definition of independence is that an auditor ________.
|
10. | The familiarity threat refers to ________.
|
11. | In the course of performing an audit, an auditor begins dating the CFO of the auditee. What kind of threat to independence might arise?
|
12. | A clients management claims that they have to restrict an auditors access to a research laboratory to protect the safety of the auditor. This could be an example of a lack of ________.
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13. | According to the professions rules of conduct, an auditor would be considered independent in which of the following instances?
|
14. | How can competence and due care best be described?
|
15. | Regarding honorary positions in non-profit organizations, which of the following statements is FALSE?
|
16. | Which of the following statements regarding independence with respect to accounting and other services is FALSE?
|
17. | In a study of law cases of accountants and auditors legal troubles, the greatest percentage arose from ________.
|
18. | A private or civil wrong or injury is known as a ________.
|
19. | In common law actions, the burden of proof lies with the ________.
|
20. | The failure to perform a duty with the requisite standard of care is known as _______.
|
21. | That a legal duty arises when there is a contractual agreement with the client is called ________.
|
22. | In addition to liabilities imposed by common law, auditors need also be concerned about what other type of liability?
|
23. | If a party is found to be partially liable and thus only responsible for paying part of the damages relative to their share of the blame, this is known as ________.
|
24. | A letter where accountants sign that they have been notified that a particular recipient of the financial statements and audit report intends to rely upon them for particular purposes is known as a(n) ________.
|
25. | Historically, auditors liability in Canada has been based on common law liability.
True False |
26. | An ethical dilemma is one in which the choice of alternative actions affects the well-being of other persons.
True False |
27. | Let your conscience be your guide is an ethical principle that fits all situations.
True False |
28. | Consequentialism says that the right choice is the one that results in the greatest good for the greatest number of people.
True False |
29. | Rules of professional conduct provide some direct solutions to specific, profession-related problems that may not be easily derived from general theories of ethics.
True False |
30. | The Rules of Professional Conduct, state the set of very specific rules that flow from the general principles and are considered to be minimum standards.
True False |
31. | The Rules of Professional Conduct for professional accountants apply to services performed by members in both public and private practice.
True False |
32. | The fundamental principles of accepted conduct are only general guidelines; therefore, they are not as important as the specific rules.
True False |
33. | If a professional accountant is convicted of a criminal offence or fraud, he or she is usually thrown out of the profession.
True False |
34. | The codified Rules of Professional Conduct derives its authority from the CPA Canada Handbook.
True False |
35. | If a public accountant (PA) performs the bookkeeping and makes accounting decisions for a company and the management does not know enough about the financial statements to take primary responsibility for them, the PA cannot be considered independent for assurance services.
True False |
36. | Once public accountants (PAs) retire from a firm, they are no longer required to maintain independence from former clients.
True False |
37. | Many users of audit reports expect auditors to detect fraud, theft, and illegal acts, and to report them publicly.
True False |
38. | Legal liabilities of professional accountants arise only from lawsuits brought on the basis of the law of contracts.
True False |
39. | The auditor has a duty of care to a company that hires the auditor and has a contract with him or her under privity of contract.
True False |
40. | Auditors need not be concerned about statutory law liability.
True False |
41. | Ethical theories can be divided into two types: monistic and pluralistic. Explain each.
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42. | What is professional skepticism?
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43. | It is sometimes said that there is a strong link between codes of conduct and GAAS. Explain.
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44. | Explain how CPA Ontario enforces the fundamental statements of accepted conduct and the Rules of Professional Conduct.
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45. | Summarize the professional competence and due care rules of the various codes of conduct.
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46. | Explain the difference among integrity, independence, and objectivity.
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47. | Identify five threats to the independence of a professional accountant.
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48. | Discuss how a public accountant (PA) can preserve independence while accepting an honorary position in non-profit organizations.
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49. | Discuss the rules relating to the provision of accounting and other services by a public accountant (PA).
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50. | When a professional accountant is sued, what is the lawsuit typically based on?
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51. | What is meant by privity?
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52. | What must a plaintiff prove regarding an action brought under common law against a PA?
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53. | What is joint and several liability?
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c3 Key
1. | Which of the following philosophical principles in ethics places emphasis on the importance of following rules rather than on weighing the consequences of actions?
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Moderate Learning Objective: 03-02 Explain the importance of the study of ethics in helping define auditor responsibilities. Smieliauskas Chapter 03 #1 Topic: 03-06 Philosophical Principles in Ethics |
2. | Which of the following philosophical principles of ethics places emphasis on the consequences of action, rather than on following the rules?
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-02 Explain the importance of the study of ethics in helping define auditor responsibilities. Smieliauskas Chapter 03 #2 Topic: 03-06 Philosophical Principles in Ethics |
3. | What is a key characteristic of critical thinking?
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Moderate Learning Objective: 03-03 Outline the characteristics of critical thinking. Smieliauskas Chapter 03 #3 Topic: 03-07 More on Critical Thinking |
4. | The goal of the critical-thinking framework reflects ________.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Moderate Learning Objective: 03-03 Outline the characteristics of critical thinking. Smieliauskas Chapter 03 #4 Topic: 03-07 More on Critical Thinking |
5. | What is the meaning of the rule of professional conduct that requires an auditor to be objective?
|
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Moderate Learning Objective: 03-03 Outline the characteristics of critical thinking. Smieliauskas Chapter 03 #5 Topic: 03-07 More on Critical Thinking |
6. | The CPA Ontario Rules of Professional Conduct contain both general ethical principles that are idealistic in character and also a ________.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #6 Topic: 03-08 Codes of Professional Ethics |
7. | Which of the following items is the most important principle in the fundamental statements of accepted conduct?
|
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Moderate Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #7 Topic: 03-10 Serving the Public Interest |
8. | A complaint has been made against a member for an audit failure. If this complaint is found to have merit, under which CPA Ontario Rule of Professional Conduct is the member likely to be charged?
|
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Moderate Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #8 Topic: 03-08 Codes of Professional Ethics |
9. | A succinct, but comprehensive definition of independence is that an auditor ________.
|
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Easy Learning Objective: 03-05 Explain the importance of an independence framework for auditors. Smieliauskas Chapter 03 #9 Topic: 03-12 Independence and Objectivity |
10. | The familiarity threat refers to ________.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-05 Explain the importance of an independence framework for auditors. Smieliauskas Chapter 03 #10 Topic: 03-12 Independence and Objectivity |
11. | In the course of performing an audit, an auditor begins dating the CFO of the auditee. What kind of threat to independence might arise?
|
Accessibility: Keyboard Navigation Blooms: Application Difficulty: Easy Learning Objective: 03-05 Explain the importance of an independence framework for auditors. Smieliauskas Chapter 03 #11 Topic: 03-12 Independence and Objectivity |
12. | A clients management claims that they have to restrict an auditors access to a research laboratory to protect the safety of the auditor. This could be an example of a lack of ________.
|
Accessibility: Keyboard Navigation Blooms: Application Difficulty: Moderate Learning Objective: 03-05 Explain the importance of an independence framework for auditors. Smieliauskas Chapter 03 #12 Topic: 03-12 Independence and Objectivity |
13. | According to the professions rules of conduct, an auditor would be considered independent in which of the following instances?
|
Accessibility: Keyboard Navigation Blooms: Application Difficulty: Moderate Learning Objective: 03-05 Explain the importance of an independence framework for auditors. Smieliauskas Chapter 03 #13 Topic: 03-13 Detailed Independence Rules Topic: 03-14 Permitted Loans |
14. | How can competence and due care best be described?
|
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Easy Learning Objective: 03-05 Explain the importance of an independence framework for auditors. Smieliauskas Chapter 03 #14 Topic: 03-16 Professional Competence and Due Care |
15. | Regarding honorary positions in non-profit organizations, which of the following statements is FALSE?
|
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Moderate Learning Objective: 03-05 Explain the importance of an independence framework for auditors. Smieliauskas Chapter 03 #15 Topic: 03-15 Other Issues Related to the Independence Principle |
16. | Which of the following statements regarding independence with respect to accounting and other services is FALSE?
|
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Moderate Learning Objective: 03-05 Explain the importance of an independence framework for auditors. Smieliauskas Chapter 03 #16 Topic: 03-15 Other Issues Related to the Independence Principle |
17. | In a study of law cases of accountants and auditors legal troubles, the greatest percentage arose from ________.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-06 Outline auditor legal responsibilities. Smieliauskas Chapter 03 #17 Topic: 03-20 Lawsuit Causes and Frequency |
18. | A private or civil wrong or injury is known as a ________.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-06 Outline auditor legal responsibilities. Smieliauskas Chapter 03 #18 Topic: 03-19 The Legal Environment and Auditor Legal Responsibilities |
19. | In common law actions, the burden of proof lies with the ________.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-07 Outline the various types of common law liability for public accountants; citing specific case precedents. Smieliauskas Chapter 03 #19 Topic: 03-23 Characteristics of Common Law Actions |
20. | The failure to perform a duty with the requisite standard of care is known as _______.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-07 Outline the various types of common law liability for public accountants; citing specific case precedents. Smieliauskas Chapter 03 #20 Topic: 03-24 Four Elements of Negligence |
21. | That a legal duty arises when there is a contractual agreement with the client is called ________.
|
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Moderate Learning Objective: 03-07 Outline the various types of common law liability for public accountants; citing specific case precedents. Smieliauskas Chapter 03 #21 Topic: 03-24 Four Elements of Negligence |
22. | In addition to liabilities imposed by common law, auditors need also be concerned about what other type of liability?
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-07 Outline the various types of common law liability for public accountants; citing specific case precedents. Smieliauskas Chapter 03 #22 Topic: 03-25 Limited Liability Partnerships |
23. | If a party is found to be partially liable and thus only responsible for paying part of the damages relative to their share of the blame, this is known as ________.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Moderate Learning Objective: 03-07 Outline the various types of common law liability for public accountants; citing specific case precedents. Smieliauskas Chapter 03 #23 Topic: 03-25 Limited Liability Partnerships |
24. | A letter where accountants sign that they have been notified that a particular recipient of the financial statements and audit report intends to rely upon them for particular purposes is known as a(n) ________.
|
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-07 Outline the various types of common law liability for public accountants; citing specific case precedents. Smieliauskas Chapter 03 #24 Topic: 03-24 Four Elements of Negligence |
25. | Historically, auditors liability in Canada has been based on common law liability.
TRUE |
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-01 Outline the concept of auditor responsibilities. Smieliauskas Chapter 03 #25 Topic: 03-01 Introduction |
26. | An ethical dilemma is one in which the choice of alternative actions affects the well-being of other persons.
TRUE |
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-02 Explain the importance of the study of ethics in helping define auditor responsibilities. Smieliauskas Chapter 03 #26 Topic: 03-03 Overview Topic: 03-06 Philosophical Principles in Ethics |
27. | Let your conscience be your guide is an ethical principle that fits all situations.
FALSE |
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-02 Explain the importance of the study of ethics in helping define auditor responsibilities. Smieliauskas Chapter 03 #27 Topic: 03-06 Philosophical Principles in Ethics |
28. | Consequentialism says that the right choice is the one that results in the greatest good for the greatest number of people.
FALSE |
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-02 Explain the importance of the study of ethics in helping define auditor responsibilities. Smieliauskas Chapter 03 #28 Topic: 03-06 Philosophical Principles in Ethics |
29. | Rules of professional conduct provide some direct solutions to specific, profession-related problems that may not be easily derived from general theories of ethics.
TRUE |
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Easy Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #29 Topic: 03-08 Codes of Professional Ethics |
30. | The Rules of Professional Conduct, state the set of very specific rules that flow from the general principles and are considered to be minimum standards.
TRUE |
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #30 Topic: 03-09 Rules of Professional Conduct |
31. | The Rules of Professional Conduct for professional accountants apply to services performed by members in both public and private practice.
FALSE |
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #31 Topic: 03-09 Rules of Professional Conduct |
32. | The fundamental principles of accepted conduct are only general guidelines; therefore, they are not as important as the specific rules.
FALSE |
Accessibility: Keyboard Navigation Blooms: Knowledge Difficulty: Easy Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #32 Topic: 03-08 Codes of Professional Ethics |
33. | If a professional accountant is convicted of a criminal offence or fraud, he or she is usually thrown out of the profession.
TRUE |
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Easy Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #33 Topic: 03-10 Serving the Public Interest |
34. | The codified Rules of Professional Conduct derives its authority from the CPA Canada Handbook.
FALSE |
Accessibility: Keyboard Navigation Blooms: Comprehension Difficulty: Easy Learning Objective: 03-04 Describe the purpose and contents of the codes of professional ethics established by the various professional accounting associations. Smieliauskas Chapter 03 #34 Topic: 03-08 Codes of Professional Ethics |
35. | If a public accountant (PA) performs the bookkeeping and makes accounting decisions for a company and the management does not know enough about the financial statements to take primary responsibility for them, the PA cannot be considered independent for assurance services.
TRUE |
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