EBK AUDITING AND ASSURANCE SERVICES
16th Edition
ISBN: 9780134067117
Author: Hogan
Publisher: VST
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Question
Chapter 5, Problem 14.2MCQ
To determine
Identify the correct option to the statement given.
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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.
V2. If a lawyer refuses to furnish corroborating information regarding litigation, claims, and assessments. the auditor should:
disclose this fact in a footnote to the financial statements.
seek to obtain the corroborating information from management.
C) consider the refusal to be a scope limitation.
D) honor the confidentiality of the client-lawyer relationship.
In comparison to the burden of proof required of plaintiffs in civil lawsuits against independent auditors under common law, section 10(b) of the Securities Exchange Act of 1934a. Is the same regarding plaintiffs’ need to prove damages or losses.b. Is the same regarding plaintiffs’ need to establish privity or a beneficiary relationshipwith auditors.c. Does not require that plaintiffs prove their reliance on materially misstated financialstatements.d. Does not require that plaintiffs prove that relying on the materially misstated financialstatements caused their losses.
Chapter 5 Solutions
EBK AUDITING AND ASSURANCE SERVICES
Ch. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - Prob. 8RQCh. 5 - Prob. 9RQCh. 5 - Prob. 10RQ
Ch. 5 - What potential sanctions does the SEC have against...Ch. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14.1MCQCh. 5 - Prob. 14.2MCQCh. 5 - Prob. 14.3MCQCh. 5 - Prob. 15.1MCQCh. 5 - Prob. 15.2MCQCh. 5 - Prob. 15.3MCQCh. 5 - Prob. 16.1MCQCh. 5 - Prob. 16.2MCQCh. 5 - Prob. 16.3MCQCh. 5 - Prob. 17DQPCh. 5 - Prob. 18DQPCh. 5 - Prob. 19DQPCh. 5 - Prob. 20DQPCh. 5 - Prob. 21DQPCh. 5 - Prob. 22DQPCh. 5 - Prob. 23DQPCh. 5 - Under Section 11 of the Securities Act of 1933 and...Ch. 5 - Prob. 25DQPCh. 5 - Prob. 26DQPCh. 5 - Prob. 27C
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- 27. If the auditors disagree with management regarding an accounting principle used in the financial statements, the auditors should express their views in the notes to the financial statements." Select one:TrueFalsearrow_forwardUnder what circumstances auditor may express an unqualified opinion? 1. The view presented by the financial information as a whole is consistent with the auditor's knowledge of the business of the entity. 2. The view presented by the financial information as a whole is inconsistent with the auditor's knowledge of the business of the entity. 3. The auditor concludes that the possible effects on the financial statements of undetected misstatements are both material and pervasive. 1, 2, and 3 1 only 2 and 3 only 1 and 4 only Auditing and Cont..pd 10:3 ENarrow_forwardThe concept of materiality is less important for public accountants in determining:a. The scope of the audit of certain accountsb. Certain transactions that have to be checkedc. Influence and exceptions to his opiniond. The influence of the public accountant's financial interests in the client company on its freedom.arrow_forward
- S1: The representation letter must be addressed to the board of directors or stockholders of the client company. S2: The client's refusal to furnish the auditor with representations may constitute a limitation in the scope of the examination which may preclude the auditor to express an unqualified opinion. a. BOTH STATEMENTS ARE TRUE b. BOTH STATEMENTS ARE FALSE c. ONLY S1 IS TRUE d. ONLY S2 IS TRUEarrow_forwardWhen a client’s financial statements contain a material departure from an FASB Statementon Accounting Standards and the public accounting firm believes the departure is necessaryto ensure that the statements are not misleading,a. The public accounting firm must qualify the auditors’ report for a departure from GAAP.b. The public accounting firm can explain why the departure is necessary and then give anunmodified opinion paragraph in the auditors’ report.c. The public accounting firm must give an adverse auditors’ report.d. The public accounting firm can give the standard unmodified auditors’ report with anunmodified opinion paragrapharrow_forwardA misstatement in the financial statements can be considered material if knowledge of themisstatement will affect a decision of A. an accountant. B. the PCAOB. C. the SEC. D. a reasonable user of the financial statementsarrow_forward
- s1: The auditor's report shall include a section with a heading "Responsibilities of Management for the Financial Statements." The auditors report shall use the term that is appropriate in the context of the legal framework in the particular jurisdiction and need not refer specifically to "management". s2: A disclaimer of opinion states that the auditor does not express an opinion on the financial statements. O S1 is True, S2 is False O S1 is False, S2 is True O Both statements are True O Both statements are Falsearrow_forwardWhich of the following statements is most likely to be included in an attorney letter?a. “Certain representations in this letter are described as being limited to matters that arematerial.”b. “If any unasserted claims or assessments are omitted from this disclosure, please provide this information directly to our auditors.”c. “Our work enabled us to notice some actions that could enhance the profitability of theCompany.”d. “Please furnish to our auditors such explanation, if any, that you consider necessary tosupplement the foregoing information.”arrow_forwardUnder common law, which of the following statements most accurately reflects the liability of a CPA who fraudulently gives an opinion on an audit of a client's financial statements? A. The CPA is liable only to third parties in privity of contract with the CPA B. The CPA is liable only to known users of the financial statements C. The CPA probably is liable to any person who suffered a loss as a result of the fraud D. The CPA probably is liable to the client even if the client was aware of the fraud and did not rely on the opinionarrow_forward
- 16. What is the purpose of information presented in notes to financial statements? a. To present management's responses to auditor comments b. To correct improper presentation in the financial statements c. To provide disclosures required by generally accepted accounting principles d. To provide recognition of amounts not included in the total of the financial statements 17. Proper application of accounting principles is most dependent upon a. Existence of specific guidelines b. Oversight of regulatory bodies c. External audit function d. Professional judgment of the accountant 18. Which of the following is not a correct variation of the basic accounting equation? a. Asset = Liabilities +Equity b. Asset - Liabilities = Equity c. Asset - Equity = Liabilities d. Asset + Liabilities = Equity 19. Entity A's total liabilities are P50M, while its total equity is P10. Entity A's total assets are a. P60M b. P50M c. P40M d. Any of these 20. What is the effect on an entity's financial…arrow_forwardThe following pertains to auditor legal liability standards under the PSLRA:a. The Reform Act requires that, in any private securities fraud action in which the plaintiff is alleging a misleading statement or omission on the part of the defendant, “the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.”90Do you believe this standard better protects auditors from legal liability than the standards which existed before the PSLRA? Explain.b. Do you believe the change in standards for auditors’ liability under the PSLRA from joint-and-several to proportional liability was a good thing? Explain.arrow_forward
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