Mylab Accounting With Pearson Etext -- Access Card -- For Auditing And Assurance Services (17th Edition)
17th Edition
ISBN: 9780135176115
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Chapter 4, Problem 19.1MCQ
To determine
Identify the meaning of the rule that requires auditor to be independent.
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Which action is not considered an act discreditable to the accounting profession? a) Being finally determined by a court of competent jurisdiction to have violated any of the federal antidiscrimination laws. b) Having a bank collect notes received from a client in payment of fees. c) Failing to follow standards and procedures established by governmental agencies in audits of grants by those agencies. d) Negligently permitting another to sign a document containing materially false and misleading information.
When a CPA knows that a tax client has skimmed cash receipts and not reported the incomein the federal income tax return but signs the return as a CPA who prepared the return, theCPA has violated which of the following AICPA rules of conduct?a. The Confidential Client Information Rule.b. The Integrity and Objectivity Rule.c. The Independence Rule.d. The Accounting Principles Rule
What does a third-party user of financial statements have to prove under common law in a suit against an auditor for the auditor's negligence? Explain each item with an example
Chapter 4 Solutions
Mylab Accounting With Pearson Etext -- Access Card -- For Auditing And Assurance Services (17th Edition)
Ch. 4 - Prob. 1RQCh. 4 - Describe an ethical dilemma. How does a person...Ch. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQ
Ch. 4 - Prob. 11RQCh. 4 - Prob. 12RQCh. 4 - Prob. 13RQCh. 4 - Prob. 14RQCh. 4 - Prob. 15RQCh. 4 - Prob. 16RQCh. 4 - Prob. 17RQCh. 4 - Prob. 18.1MCQCh. 4 - Prob. 18.2MCQCh. 4 - Prob. 18.3MCQCh. 4 - Prob. 19.1MCQCh. 4 - Prob. 19.2MCQCh. 4 - Prob. 19.3MCQCh. 4 - Prob. 20.1MCQCh. 4 - Prob. 20.2MCQCh. 4 - Prob. 20.3MCQCh. 4 - Prob. 21DQPCh. 4 - Prob. 22DQPCh. 4 - Prob. 23DQPCh. 4 - Prob. 24DQPCh. 4 - Prob. 25DQPCh. 4 - Prob. 26DQPCh. 4 - Prob. 27DQPCh. 4 - Prob. 28DQPCh. 4 - Prob. 30CCh. 4 - Prob. 31CCh. 4 - Prob. 32C
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- According to the Code of Professional Conduct of the AICPA, for which type of service may a CPA receive a contingent fee? O Performing an audit of a financial statement. O Performing a review of a financial statement. O Performing an examination of a prospective financial statement. O Seeking a private letter ruling.arrow_forwardWhich of the following acts by a CPA would be most likely to be a violation of the AICPA Code of Professional Conduct? Select one: A “covered member” owns an immaterial amount of stock in an audit client. Accepting a fee in a tax matter that is contingent upon the result of an administrative proceeding. Assisting a client in preparing a financial forecast. Forming a professional corporation to practice as a CPA.arrow_forwardWhich statement about the SEC independence rules on bookkeeping services is not accurate? a) Bookkeeping services are prohibited even if the client approves the books and records as the services are performed. b) Bookkeeping services are permitted if the individuals performing these services perform no other services. c) Bookkeeping services are prohibited in most circumstances under the SEC's independence rules. d) Bookkeeping services are prohibited even if the fees from these services are less than the audit fee.arrow_forward
- Smith CPAs have requested that an audit client add a note disclosure to the financial statements related to their ability to operate as a going concern. The client has refused to do so; citing differences in opinion on some key loans that they believe will be refinanced. What should the auditors do at this point? The auditors should request a meeting with the client's board of directors, and discuss the issue with them. The auditors should consider modifying the opinion for a material departure. The auditors should consider disclaiming an opinion on the financial statements to preserve the reputation of the firm. The auditors should consider issuing a scope limitation, on the basis that management is not willing to make the necessary amendment.arrow_forwardWhat kind of actions might customers pursue against auditors under the common law doctrine of restitution? In each situation, what evidence do clients need to provide before filing a lawsuit?arrow_forwardAn auditor knew that the purpose of her audit was to render reasonable assurance on financial statements that were to be used for the application for a loan; the auditor did not know the identity of the bank that would eventually give the loan. Under the Restatement of Torts approach to liability, the auditor is generally liable to the bank which subsequently grants the loan for:arrow_forward
- When creditors who relied on an entity’s audited financial statements suffer monetary lossesafter a customer (the auditors’ client) goes bankrupt, what must the plaintiff creditors in alawsuit for damages show in a court that follows the doctrine in Credit Alliance?a. The auditors knew and specifically acknowledged identification of the creditors.b. The auditors could reasonably foresee them as beneficiaries of the audit because entitiessuch as this client use financial statements to obtain credit from vendors.c. The plaintiffs were foreseen users of the audited financial statements because they werevendors of long standing.d. All of the abovearrow_forwardIn which of the following situations is there a violation of client confidentiality under the AICPA Code of professional conduct? 1. A member discloses confidential client informationto a court in connectionwith arbitration proceedings related to the client. 2.A member disclosesconfidential client informationto a professional liability insurance carrier after learning of a potential claim against the member. 3.A member whose practice is primarily bankruptcy discloses a client's name. 4.A member uses a record retention agency to store clients' records that contain confidential client information.arrow_forwardAuditors may be held liable to both their clients and third parties under common law. a. What must a client prove to recover its losses from the auditors under common law? b. In a court that adheres to the precedent set by the Ultramares v. Touche case, what must an ordinary third party prove to recover losses from the auditors under common lawarrow_forward
- 4) Explain if, and why an accountant will be held liable to: its client, to 3rd party intended users of the financial statements and audits it prepares for its client, and to reasonably foreseeable users of the work, it prepared for its client. ∙ Be sure to identify who reasonably foreseeable users would be and why the accountant is responsible to them in the absence of privity.arrow_forwardWhat is the auditor's role when a client fails to follow the law?arrow_forwardAssume that an auditor makes an agreement with a client that the audit fee will be contingent upon the number of days required to complete the engagement. Is this a violation of the AICPA Code of Professional Conduct? What is the essence of the rule of professional conduct dealing with contingent fees, and what are the reasons for the rule?arrow_forward
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