Auditing and Assurance Services Module C Multiple-Choice Questions AND
xx xx xx xx xx xx xx xx
ANSWERS WELL ILLUSTRATED
xx xx xx
Study
Auditing and Assurance Services Module C
xx xx xx xx xx
Multiple-Choice Questions
xx xx
Games and activities
xx xx
Match
Classic Live
Blast
New
Checkpoint
In-class review xx
• Flashcards
• Learn
• Test
D. xx- xxC.29 xxA xxlack xxof xxreasonable xxcare xxthat xxmay xxbe xxcharacterized xxby xxthe xxfailure xxof
xxauditors xxto xxfollow xxGAAS xxin xxthe xxconduct xxof xxthe xxaudit xxis xxknown xxas
a. Constructive xxfraud.
b. Fraud.
c. Gross xxnegligence.
d. Ordinary xxnegligence.
D. xx- xxC.30 xxFrom xxthe xxauditors' xxpoint xxof xxview, xxwhich xxof xxthe xxfollowing xxis xxa xxpreferable
xxprovision xxfor xximposition xxof xxcivil xxliability xxin xxa xxlawsuit xxfor xxfinancial xxdamages?
a. Joint xxand xxseveral xxliability.
b. Reasonably xxforeseeable xxusers' xxapproach xxto xxprivity.
c. Foreseen xxthird xxparties' xxapproach xxto xxprivity.
d. Proportionate xx liability.
D. xx- xxC.31 xxUsers xxof xxfinancial xxstatements xxhave xxa xxdifferent xxperception xxconcerning xxthe
xxnature xxof xxauditors'
services xxthan xxthe xxactual xxobjectives xxof xxan xxaudit. xxThis xxdifference xxis xxknown xxas
a. Diverse xxliability xxperception.
, b. Reasonable xxforeseeable xxthird xxparties.
c. Insurance xxhypothesis.
d. Expectations xx gap.
B. xx- xxC.32 xxIndividuals xxwho xxbelieve xxthey xxrelied xxon xxmisstated xxfinancial xxstatements xxto
xxmake xxa xxdecision xxand xxhave xxsuffered xxlosses xxas xxa xxresult xxwill xxissue xxan xxaction
xxknown xxas xxa
a. Breach xxof xxcontract.
b. Tort.
c. Securities xxlitigation.
d. Constructive xxfraud.
C. xx- xxC.33 xxAssume xxthat xxauditors xxlost xxa xxcivil xxlawsuit xxfor xxdamages xxand xxthe xxcourt
xxfound xxtotal xxlosses xxof xx$5 xxmillion. xxIf xxthe xxauditors xxwere xxdetermined xxto xxbe xx30 xxpercent
xxat xxfault xxand xxwere xxthe xxonly xxsolvent xxdefendants, xxwhat xxis xxthe xxauditors' xxlikely
xxobligation xxunder xxproportionate xxliability?
a. $5,000,000.
b. Zero.
c. $2,250,000.
d. $1,500,000.
A. - xxC.34 xxSuppose xxthat xxthe xxauditors xxin xxthe xxpreceding xxquestion xxparticipated
xxknowingly xxin xxcommission xxof xxviolations xxof xxsecurities xxlaws xx(with xxmanagers xxand
xxdirectors xxof xxthe xxaudit xxclient). xxWhat xxis xxthe xxauditors' xxlikely xxobligation?
a. $5,000,000.
b. Zero.
c. $2,250,000.
d. $1,500,000.
B. - xxC.35 xxWhen xxa xxclient xxsues xxan xxaccountant xxfor xxfailure xxto xxperform xxconsulting
xxwork xxproperly, xxthe xxaccountants' xxbest xxdefense xxis xxprobably xxbased xxon xxthe
xxdoctrine xxof
a. Lack xxof xxprivity xxof xxcontract.
b. Contributory xxnegligence xxon xxthe xxpart xxof xxthe xxclient.
c. Lack xxof xxany xxmeasurable xxdollar xxamount xxof xxdamages.
d. No xxnegligence xxon xxthe xxpart xxof xxthe xxconsultant.
A. - xxC.36 xxWhen xxcreditors xxwho xxrelied xxon xxan xxentity's xxaudited xxfinancial xxstatements
xxsuffer xxmonetary xxlosses xxafter xxa xxcustomer xx(the xxauditors' xxclient) xxgoes xxbankrupt,
xxwhat xxmust xxthe xxplaintiff xxcreditors xxin xxa xxlawsuit xxfor xxdamages xxshow xxin xxa xxcourt
xxthat xxfollows xxthe xxdoctrine xxin xxCredit xxAlliance?
a. The xxauditors xxknew xxand xxspecifically xxacknowledged xxidentification xxof xxthe xxcreditors.
b. The xxauditors xxcould xxreasonably xxforesee xxthem xxas xxbeneficiaries xxof xxthe xxaudit
xxbecause xxentities xxsuch xxas xxthis xxclient xxuse xxfinancial xxstatements xxto xxobtain
xxcredit xxfrom xxvendors.
c. The xxplaintiffs xxwere xxforeseen xxusers xxof xxthe xxaudited xxfinancial xxstatements xxbecause
xxthey xxwere xxvendors xxof xxlong xxstanding.
d. All xxof xxthe xxabove.
xx xx xx xx xx xx xx xx
ANSWERS WELL ILLUSTRATED
xx xx xx
Study
Auditing and Assurance Services Module C
xx xx xx xx xx
Multiple-Choice Questions
xx xx
Games and activities
xx xx
Match
Classic Live
Blast
New
Checkpoint
In-class review xx
• Flashcards
• Learn
• Test
D. xx- xxC.29 xxA xxlack xxof xxreasonable xxcare xxthat xxmay xxbe xxcharacterized xxby xxthe xxfailure xxof
xxauditors xxto xxfollow xxGAAS xxin xxthe xxconduct xxof xxthe xxaudit xxis xxknown xxas
a. Constructive xxfraud.
b. Fraud.
c. Gross xxnegligence.
d. Ordinary xxnegligence.
D. xx- xxC.30 xxFrom xxthe xxauditors' xxpoint xxof xxview, xxwhich xxof xxthe xxfollowing xxis xxa xxpreferable
xxprovision xxfor xximposition xxof xxcivil xxliability xxin xxa xxlawsuit xxfor xxfinancial xxdamages?
a. Joint xxand xxseveral xxliability.
b. Reasonably xxforeseeable xxusers' xxapproach xxto xxprivity.
c. Foreseen xxthird xxparties' xxapproach xxto xxprivity.
d. Proportionate xx liability.
D. xx- xxC.31 xxUsers xxof xxfinancial xxstatements xxhave xxa xxdifferent xxperception xxconcerning xxthe
xxnature xxof xxauditors'
services xxthan xxthe xxactual xxobjectives xxof xxan xxaudit. xxThis xxdifference xxis xxknown xxas
a. Diverse xxliability xxperception.
, b. Reasonable xxforeseeable xxthird xxparties.
c. Insurance xxhypothesis.
d. Expectations xx gap.
B. xx- xxC.32 xxIndividuals xxwho xxbelieve xxthey xxrelied xxon xxmisstated xxfinancial xxstatements xxto
xxmake xxa xxdecision xxand xxhave xxsuffered xxlosses xxas xxa xxresult xxwill xxissue xxan xxaction
xxknown xxas xxa
a. Breach xxof xxcontract.
b. Tort.
c. Securities xxlitigation.
d. Constructive xxfraud.
C. xx- xxC.33 xxAssume xxthat xxauditors xxlost xxa xxcivil xxlawsuit xxfor xxdamages xxand xxthe xxcourt
xxfound xxtotal xxlosses xxof xx$5 xxmillion. xxIf xxthe xxauditors xxwere xxdetermined xxto xxbe xx30 xxpercent
xxat xxfault xxand xxwere xxthe xxonly xxsolvent xxdefendants, xxwhat xxis xxthe xxauditors' xxlikely
xxobligation xxunder xxproportionate xxliability?
a. $5,000,000.
b. Zero.
c. $2,250,000.
d. $1,500,000.
A. - xxC.34 xxSuppose xxthat xxthe xxauditors xxin xxthe xxpreceding xxquestion xxparticipated
xxknowingly xxin xxcommission xxof xxviolations xxof xxsecurities xxlaws xx(with xxmanagers xxand
xxdirectors xxof xxthe xxaudit xxclient). xxWhat xxis xxthe xxauditors' xxlikely xxobligation?
a. $5,000,000.
b. Zero.
c. $2,250,000.
d. $1,500,000.
B. - xxC.35 xxWhen xxa xxclient xxsues xxan xxaccountant xxfor xxfailure xxto xxperform xxconsulting
xxwork xxproperly, xxthe xxaccountants' xxbest xxdefense xxis xxprobably xxbased xxon xxthe
xxdoctrine xxof
a. Lack xxof xxprivity xxof xxcontract.
b. Contributory xxnegligence xxon xxthe xxpart xxof xxthe xxclient.
c. Lack xxof xxany xxmeasurable xxdollar xxamount xxof xxdamages.
d. No xxnegligence xxon xxthe xxpart xxof xxthe xxconsultant.
A. - xxC.36 xxWhen xxcreditors xxwho xxrelied xxon xxan xxentity's xxaudited xxfinancial xxstatements
xxsuffer xxmonetary xxlosses xxafter xxa xxcustomer xx(the xxauditors' xxclient) xxgoes xxbankrupt,
xxwhat xxmust xxthe xxplaintiff xxcreditors xxin xxa xxlawsuit xxfor xxdamages xxshow xxin xxa xxcourt
xxthat xxfollows xxthe xxdoctrine xxin xxCredit xxAlliance?
a. The xxauditors xxknew xxand xxspecifically xxacknowledged xxidentification xxof xxthe xxcreditors.
b. The xxauditors xxcould xxreasonably xxforesee xxthem xxas xxbeneficiaries xxof xxthe xxaudit
xxbecause xxentities xxsuch xxas xxthis xxclient xxuse xxfinancial xxstatements xxto xxobtain
xxcredit xxfrom xxvendors.
c. The xxplaintiffs xxwere xxforeseen xxusers xxof xxthe xxaudited xxfinancial xxstatements xxbecause
xxthey xxwere xxvendors xxof xxlong xxstanding.
d. All xxof xxthe xxabove.
