80 Chapter 6 (Auditing)Questions With correct Answers|34 Pages
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Course
Auditing
Institution
Auditing
Which of the following services may a CPA perform in carrying out a consulting service engagement for a client?
Review of the client-prepared business plan
Preparation of information for obtaining financing
I only
II only
Both I and II
Neither I nor II - ️️Both I and II
Whi...
80 Chapter 6 (Auditing)Questions
Which of the following services may a CPA perform in carrying out a consulting service engagement for a
client?
Review of the client-prepared business plan
Preparation of information for obtaining financing
I only
II only
Both I and II
Neither I nor II - ✔ ✔ Both I and II
Which of the following services would constitute a management function under Government Auditing
Standards and result in the impairment of a CPA's independence if performed by the CPA?
Developing entity program policies
Providing methodologies, such as practice guides
Providing accounting opinions to a legislative body
Recommending internal control procedures - ✔ ✔ Developing entity program policies
,Which of the following situations would not impair objectivity, integrity, or independence with respect
to an audit client?
An auditor takes the client's audit committee to Las Vegas for the weekend.
An out-of-town client takes the audit engagement team out to dinner at a renowned local restaurant.
An auditor provides client management with box seats for the season at a major league baseball
franchise.
A client takes the audit engagement team on a two-day ski trip after the audit team worked for two
consecutive weekends. - ✔ ✔ An out-of-town client takes the audit engagement team out to dinner
at a renowned local restaurant.
Which of the following statements is correct regarding the liability of a CPA for services performed?
A CPA's work is not guaranteed to be accurate even though the CPA acted in a reasonably competent
and professional manner.
A CPA is negligent for exercising only that degree of care a reasonably competent CPA would exercise
under the circumstances.
A CPA's liability for negligence extends only to the client and no further.
A CPA's liability for fraud extends only to the client and no further - ✔ ✔ A CPA's work is not
guaranteed to be accurate even though the CPA acted in a reasonably competent and professional
manner.
A government internal audit function is presumed to be free from organizational independence
impairments for reporting internally when the head of the organization:
,is not accountable to those charged with governance.
performs auditing procedures that are consistent with generally accepted accounting principles.
is a line manager of the unit under audit.
is removed from political pressures to conduct audits objectively, without fear of political reprisal. - ✔
✔ is removed from political pressures to conduct audits objectively, without fear of political reprisal.
A member of a group engagement team will not be subject to discipline if a foreign component auditor
departed from the ethics requirement as long as:
the member of a state CPA society is in compliance with the IESBA's Code of Ethics for Professional
Accountants.
the foreign component accountant is in accord with the ethics and independence requirements set forth
in the AICPA's Code of Professional Conduct.
the member is in compliance with the AICPA's Code of Professional Conduct.
the foreign component auditor is in accord with the ethics and independence requirements set forth in
the IESBA's Code of Ethics for Professional Accountants. - ✔ ✔ the foreign component auditor is in
accord with the ethics and independence requirements set forth in the IESBA's Code of Ethics for
Professional Accountants
A pervasive characteristic of a CPA's role in a consulting services engagement is that of being:
an objective advisor.
, an independent practitioner.
a computer specialist.
a confidential reviewer. - ✔ ✔ an objective advisor.
Able, CPA, was engaged by Wedge Corp. to audit Wedge's financial statements. Wedge intended to use
the audit report to obtain a $10 million loan from Care Bank. Able and Wedge's president agreed that
Able would give an unmodified opinion on Wedge's financial statements in the audit report even though
there were material misstatements in the financial statements. Care refused to make the loan. Wedge
then gave the audit report to Ranch to encourage Ranch to purchase $10 million worth of Wedge
common stock. Ranch reviewed the audit report and relied on it to purchase the stock. After the
purchase, Able's agreement with Wedge's president was revealed. As a result, Wedge stock lost half its
value and Ranch sued Able for fraud. What will be the result of Ranch's suit?
Ranch will win because Able intentionally gave an unmodified opinion on Wedge's materially misstated
financial statements.
Ranch will win because Able is s - ✔ ✔ Ranch will win because Able intentionally gave an unmodified
opinion on Wedge's materially misstated financial statements.
According to the AICPA Code of Professional Conduct, in which of the following circumstances may a
CPA serve on a company's board of directors?
The CPA audits a bank to which the company has applied for financing, and board approval is required
for said financing to occur.
The CPA is asked by the company to test the internal controls of the company and offers compensation
to the CPA for said services.
The CPA does not audit the company and has no other business connection with the company.
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