auditing

Which of the following is NOT a key element of the definition of ethics?

Which of the following defines the imperative principle of ethics?

Which of the following philosophical principles in ethics places emphasis on the consequences of action, rather than on following the rules?

What agency has the ultimate authority in defining independence for public companies?

Which of the following is the responsibility of the Professional Ethics Executive Committee?

Which of the following is NOT one of the AICPA Principles of Professional Conduct?

Dara & Co. Audit Hill Corporation. Ellie is the engagement partner on the audit with an office in Buffalo Grove. Which of the following would NOT be considered a covered member?

Which of the following is NOT included in Rule of Conduct 102, Integrity and Objectivity?

Based on Sarbanes-Oxley, who is ultimately responsible for the independence of the external auditor?

According to Sarbanes-Oxley, the audit committee must pre-approve all audit and non-audit services. This can be done

Which of the following is NOT a restriction placed on audit partners by Sarbanes-Oxley?

Which of the following is true according to Government Independence Standards?

Which of the following is allowed under the Government Independence Standards?

Rule 201, General Standards, requires a member to comply with standards and interpretations. Which of the following is NOT a standard covered by Rule 201?

Maralee has been approached by J. Fox Entertainment to perform an audit of her theatre company. Maralee has never audited a theatre company before. Maralee can

An audit client hires a member of the audit engagement team to be its new controller. Sarbanes-Oxley rules require that

The SEC requires companies to disclose fees paid to independent public accounting firms for audit and consulting services in the belief that

CPA Krogstad is the executive in charge of the Omaha office of the audit firm. He is responsible for the practice in all areas of audit, tax, and consulting, but he does not serve as a field audit partner or a reviewer. CPA Ward is the partner in charge of the Dodger, Inc. audit (an SEC filing). The audit firm's independence is impaired if

Which of the following philosophical theories places emphasis on following rules, rather than on the consequences of the decision?

Julie and Lisa are sisters. Julie is a CPA auditing the company where Lisa works. Julie's independence is impaired if

Which of the following sections is no longer included in the AICPA Rules of Conduct?

The interpretation of Independence Rule 101 allows members to

The AICPA Council has designated the following bodies to pronounce accounting principles under Rule 203, except the

The interpretation of Rule 501, Acts Discreditable to the Profession, would not include

According to Rule 203, Accounting Principles, requires the auditor to adhere to official pronouncements except when

Rule 301 has been interpreted by the AICPA to explicitly allow a CPA to divulge confidential client information to

Perry Pinkney, CPA, is one of the general partners in a partnership, which in turn invested 70% of its assets in the common stock of Pinkney's audit client (Darby Corporation). According to the AICPA Code of Professional Conduct, Pinkney is considered to have

A client has omitted a significant disclosure from the financial statements. The auditor has asked the client to include the information, but the client refuses and claims the information is confidential. The position of the CPA should be that the information

Which of the following philosophical theories places emphasis on the consideration of projecting the consequences of a choice in terms of this question: "What may be the consequences of similar persons making this choice in similar circumstances?"

Which of the following forms of organization would NOT be allowed under Rule 505 of the Professional Code of Conduct?

Red and Green, CPAs are the external auditors for Blue Corporation, a publicly-held company. Blue Corporation has outsourced its internal audit function to Red and Green. Which of the following statements is true?

Violet, CPA, audits Big Bank, a local financial institution. Which of the following would most likely impair Violet's independence with regard to Big Bank?

According to the profession's ethical standards, an auditor would be considered independent in which of the following instances?

Which of the following is required for a CPA firm to designate itself as "Members of the American Institute of Certified Public Accountants" on its letterhead?

In which of the following circumstances would a CPA who audits XZ Corporation lack independence?

According to the ethical standards of the profession, which of the following acts is generally prohibited?

According to the ethical standards of the profession, which of the following acts is generally prohibited?

Which of the following statements include in the advertising of a CPA firm is permissible according to Rule 502, Advertising and Other Forms of Solicitation.

To which group can a CPA provide audit documentation without being subpoenaed and without the client's consent?

Auditors should not be liable to any party if they perform services that met the standards of

A principle that may reduce or eliminates auditors' liability to clients is

Elliot Corp. is interested in purchasing Roger Corp. Prior to the purchase Elliot hired Adam & Co. to audit the financial statements of Roger. During the audit, Adam & Co. failed to discover a fraud that resulted in material misstatements in Roger's financial statements. After the acquisition, the fraud was discovered and Elliot Corp. suffered substantial losses. If Elliot sues Adam & Co., Elliot must prove that Adam & Co

Which of the following statements is true concerning auditors' responsibilities during the audit?

Kerry CPA is the auditor for Sammy Corp. During the audit, Kerry discovers a material misstatement in Sammy's financial statements. Sammy's management tells Kerry that if the misstatement is corrected or if Kerry issues an opinion that indicates there is a material misstatement, Sammy Corp. will likely have to declare bankruptcy and thousands of employees will lose their jobs. Which of the following statements is true if the misstatement is not corrected and Kerry issues an unqualified opinion on Sammy's financial statements?

Mays bought McCovey Corp. common stock in an offering registered under the Securities Act of 1933. Hart & Co., CPAs, gave an unqualified opinion on McCovey's financial statements that were included in the registration statement filed with the Securities and Exchange Commission. Mays sued Hart under the provisions of the 1933 Act that deal with omission of facts required to be in the registration statement. Mays must prove that

To prevail in an action brought under common law, the plaintiff must show all of the following except

Failure to provide any level care in fulfilling a duty owed to another party, including reckless disregard for the truth, is called

Lauren hires Humphrey, a CPA, to audit her financial statements. The engagement letter includes a statement acknowledging that audited financial statements are required to be filed with a regulatory body by October 1. Humphrey does not complete the audit until October 5. Lauren is late filing the financial statements and is fined $100,000 by the regulatory body. Lauren would most likely sue Humphrey claiming

Lauren hires Humphrey, a CPA, to audit her financial statements. The engagement letter includes a statement acknowledging that audited financial statements will be provided to Key Largo Bank for a loan. Humphrey completes the audit and issues an unqualified opinion. Based on the audited financial statements, Key Largo Bank approves the loan to Lauren. Four months later, Lauren files for bankruptcy. Key Largo Bank would most likely sue Humphrey claiming

Lauren hires Humphrey, a CPA, to provide an audit of her financial statements. The engagement letter includes a statement acknowledging that audited financial statements will be provided to financial institutions for a loan, but does not name any financial institutions. Humphrey completes the audit and issues an unqualified opinion. Based on the audited financial statements, Key Largo Bank approves the loan to Lauren. Four months later, Lauren files for bankruptcy. Key Largo Bank would most likely sue Humphrey claiming

Lauren hires Humphrey, a CPA, to audit her financial statements. The engagement letter includes a statement acknowledging that audited financial statements are needed for a filing with a regulatory body. Humphrey completes the audit and issues an unqualified opinion. Based on the audited financial statements, Key Largo Bank approves a loan to Lauren. Four months later, Lauren files for bankruptcy. Key Largo Bank would most likely sue Humphrey claiming

If an audit is performed for the benefit of a specific person or organization, that person or organization is known as a(n)

At the request of James Company's management, E.G. audited James Company's financial statements and was aware that James' management intended to deliver the financial statements to its 25 shareholders for the purpose of repurchasing their shares for $50 per share (the investors had originally purchased the shares for $5 per share). The audit was conducted in accordance with generally accepted auditing standards and the financial statements were prepared in accordance with generally accepted accounting principles. Later, the shareholders sued the auditors, claiming that if they fully realized the significance of disclosures about the market value of the assets, they could have received $75 per share from James Company. The shareholders' lawsuit will probably fail because

Which of the following claims concerning the quality of auditors' work would least likely result in civil liability for damages?

Lancaster & Co. CPAs is auditing the financial statements of Cooper Corporation. During the course of the audit, Cooper Corporation sent the following memo to the engagement partner: We have requested $1 million worth of products from Ladd Corporation with credit terms of net 30 days. Ladd has requested audited financial statements for its credit decision. We notified Ladd that our annual audit was in process and we would provide the audited financial statements to them as soon as they were completed. Which of the following statements is true with regards to this memo?

When bringing suit against auditors under section 10(b) of the Securities Exchange Act of 1934, plaintiffs must allege and prove

Which of the following parties is most likely to recover against auditors for losses resulting from acts of ordinary negligence?

An audit failure occurs when

Third-party plaintiffs bringing action under common law need not prove

Typical defenses for auditors in common law actions include all of the following, except

The Securities Act of 1933

Which of the following would not need to be demonstrated by third parties bringing suit against auditors for losses sustained under the Securities Act of 1933?

The SEC Rule 10b-5 deals with

The first significant case under section 11 of the Securities Act of 1933 charging auditors with not conducting a reasonable investigation was

Foreseeable third parties are best described as

Which of the following statements about the Securities Act of 1933 is not true?

The restatement of torts is a general legal doctrine that extends liability for ordinary negligence to

Which of the following is not part of the definition of proportionate liability adopted by the Private Securities Litigation Reform Act?

Paula performed the audit of the financial statements of Abdul Company (a nonpublic entity currently not subject to filing requirements under the Securities Act of 1933 or Securities Exchange Act of 1934). Abdul Company is currently considering several alternatives for raising capital, including seeking financing from area banks or an initial public offering of its securities. Which of the following parties would have the lowest likelihood of successfully bringing suit for ordinary negligence against Paula?

Which of the following factors would not influence third parties' abilities to bring suit against auditors for ordinary negligence under common law?

According to Sarbanes-Oxley, accountants performing an audit or review must maintain all engagement documentation for a period of

Which of the following statements concerning the Ultramares Corp. v. Touche case is not true?

In a common law action against auditors, lack of privity is a viable defense if the plaintiff

Under the liability provisions of section 11 of the Securities Act of 1933, auditors may be liable to any purchaser of a security for certifying materially misstated financial statements that are included in the registration statement. Under section 11, auditors usually will not be liable to the purchaser

Under the liability provisions of section 11 of the Securities Act of 1933, auditors may be liable to any purchaser of securities for certifying materially misstated financial statements that are included in the registration statement. Under section 11, which of the following must be proven by a purchaser of the security?

Beckler & Associates, CPAs, examined and issued an unqualified opinion on the financial statements of Queen Co. The financial statements contained misstatements that resulted in a material overstatement of Queen's net worth. Queen provided the audited financial statements to Mac Bank in connection with a loan made by Mac to Queen. Beckler knew that the financial statements would be provided to Mac. Queen defaulted on the loan. Mac sued Beckler to recover for its losses associated with Queen's default. Which of the following must Mac prove in order to recover? I. Beckler did not conduct the audit with the appropriate level of professional care. II. Mac relied on the financial statements.

While conducting an audit, Larson Associates, CPAs, failed to detect material misstatements included in its client's financial statements. Larson's unqualified opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client. Larson knew that its opinion and the financial statements would be used for this purpose. Which of the following statements is correct with regard to a suit against Larson and the client by a purchaser of the securities under section 11 of the Securities Act of 1933?

While conducting an audit, Larson Associates, CPAs, failed to detect material misstatements included in its client's financial statements. Larson's unqualified opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client. Larson knew that its opinion and the financial statements would be used for this purpose. In a suit by a purchaser against Larson, Larson's best defense would be that the

While conducting an audit of a public entity, Wallace failed to identify material misstatements in its client's financial statements. Investors then sued Wallace in connection with this audit. Which of the following would not need to be demonstrated in order for the shareholders to successfully bring suit against Wallace?

Sun Corp. approved a merger plan with Cord Corp. One of the determining factors in approving the merger was the financial statements of Cord that were audited by Frank & Co., CPAs. Sun had engaged Frank to audit Cord's financial statements. While performing the audit, Frank failed to discover certain irregularities that later caused Sun to suffer substantial losses. For Frank to be liable under common law liability, Sun at a minimum must prove that Frank

Which of the following elements, if present, would support a finding of constructive fraud on the part of auditors?

To be successful in a civil action under section 11 of the Securities Act of 1933 against auditors for liability for a materially misstated registration statement, the plaintiff must prove

Which of the following is the best defense auditors can assert in a suit for common law fraud based on their unqualified opinion on materially misstated financial statements?

Under the anti-fraud provisions of section 10(b) of the Securities Exchange Act of 1934, auditors may be liable if they acted

How does the Securities Act of 1933, which imposes civil liability on auditors for misrepresentations or omissions of material facts in a registration statement, expand auditors' liability to purchasers of securities beyond that of common law?

Which of the following is not a reason that the Class Action Fairness Act of 2005 will benefit auditors in class action lawsuits?

Under the Securities Act of 1933, which of the following defenses is related to auditors performing a reasonable investigation of the financial statements?

Which of the following is not a valid defense for auditors' liability to third parties for ordinary negligence under common law?