chpt 4 & 5multiple choice

Which of the following is not a function of audit working papers

Assist management in illustrating that the financial statements are in accordance with generally accepted accounting principles.

And using the work of a specialist, the orders referred to the specialist findings and their report this would be an appropriate reporting practice if the

Auditors, as a result of the specialist findings, give a qualified opinion on the financial statements

Which of the following statements best describes why auditors investigate related party transaction's A. Related party transaction is generally are illegal acts B. The substance of related party transaction this may differ from their form C. All related party transactions must be eliminated as a step in preparing consolidated financial statements D. Related party transaction is a form of management fraud

B. The substance of related party transaction's may differ from their form

Which of the following is not a primary approach to auditing an accounting estimate

Confirm the amounts

Of the following, which is least reliable type of audit evidence

Copies of sales invoices inspected by the auditors

A difference of opinion concerning accounting and auditing matters relative to a particular phase of the audit arises between an assistant order in the auditor responsible for the engagement. After appropriate consultation, the assistant ordered her ass to be disassociated from the resolution of the matter. The working papers would probably

Document assistant orders position and have a difference of opinion was resolved

And what section of the audit working papers with a long-term lease agreement be filed

Permanent working paper file

The primary purpose of audit working papers is to

Support the auditors' opinions

Analytical procedures are most likely to detect

Unusual transactions.

under common law, the cpas who were negligent may mitigate some damages to a client by providing a. contributory negligence b. the cpas fee was not material c. the cpas were not competent to accept the engagement d. the cpas negligence was caused by the fact that they had too much work

a. contributory negligence

If the CPAs provided negligent tax advice to a public company, the client would bring suit under a. the securities act of 1933 b. the securities exchange act of 1934 c. the federal income tax law d. common law

d. common law

the most significant result of the continental vending case was that a. created a more general awareness of possibility of auditor criminal prosecution b. extended the auditor's responsibility for unaudited financial statements c. defined the cpas responsibilities for unaudited financial statements d. established a precedent for auditors being held liable to third parties under common law for ordinary negligence

a. created a more general awareness of possibility of auditor criminal prosecution

which of the following cases reaffirmed the principles in the ultra mares case a. credit alliance corp vs Arthur andersen co b. rosenblum v adler c. ernst & ernst v hochfelder d. escott v barchris construction corporation

a. credit alliance corp vs Arthur andersen

as part of their audit, auditors obtain a representation letter form their client. which of the following is not a valid reason for such a letter a. to increase the efficiency of the audit by eliminating the need for other audit procedures b. to remind the client's management of its primary responsibility for the financial statements c. to document in the audit working papers the client's responses to certain verbal inquiries made by the auditors during the engagement d. to provide evidence in those areas dependent upon managements future intentions

a. to increase the efficiency of the audit by eliminating the need for other audit procedures

In cases of breach of contract, plaintiffs generally have to prove all of the following, except a. the cpa had a duty b. the cpas made a false statement c. the client incurred losses related to the CPA's performance d. the CPA's breached their duty

b. the CPA's made a false statement

which of the following approaches to auditors' liability is least desirable from the CPA's perspective a. the ultramares approach b. the rosenblum approach c. the restatement of torts approach d. the foreseen user approach

b. the rosenblum approach

the 1136 tenants' case was important because of its emphasis upon the legal liability of the cpa when associated with a. a review of annual statements b. unaudited financial statements c. an audit resulting in a disclaimer of opinion d. letters for underwriters

b. unaudited financial statements

under the securities and exchange act of 1934, auditors and other defendants are generally face with: a. joint liability b. joint and several liability c. proportionate liability d. limited liability

c. proportionate liability

which statement best expresses the factors that purchasers of securities registered under the securities exchange act of 1933 need to prove to recover losses from the auditors a. the purchasers of securities must prove ordinary negligence by the auditors and reliance on the audited financial statements b. the purchasers of securities must prove that the financial statements were misleading and that they relied on them to purchase the securities c. the purchasers of securities must prove that the financial statements were misleading then, the burden of proof is shifted to the auditors to show that the audit performed with "due diligence" d. the purchasers of securities must prove that the financial statements were misleading and the auditors were negligent

c. the purchasers of securities must prove that the financial statements were misleading then, the burden of proof is shifted to the auditors to show that the audit performed with "due diligence"

which of the following business characteristics is not indicative of high inherent risk a. operating results that are highly sensitive to economic factors b. large likely misstatements detected in prior audits c. substantial turnover of management d. a large amount of assets

d. a large amount of assets

which of the following is not a financial statement assertion made by management a. existence fo recorded assets and liabilities b. completeness of recorded assets and liabilities c. valuation of assets and liabilities d. effectiveness of internal control

d. effectiveness of internal control

A CPA issued an unqualified opinion on the financial statements of a company that sold common stock in a public offering subject to the Securities Act of 1933. Based on a misstatement in the financial statements, the CPA is being sued by an investor who purchased shares of this public offering. Which of the following represents a viable defense? a. the investor has not proved fraud or negligence by the cpa b. the investor did not actually rely upon the false statement c. the cpa detected the false statement after the audit date d. the false statement is immaterial in the overall context of the financial statements

d. the false statement is immaterial in the overall context of the financial statements