Chapter_04 - Chapter 04 Student 1 A B C D An auditor's duty...

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Chapter 04 Student: ___________________________________________________________________________ 1. An auditor's duty of care to a client would most likely be breached if the auditor failed to: A. meet their reporting deadline. B. detect all of a client's fraudulent activities. C. conduct the audit for the most competitive price. D. comply with all relevant auditing standards. 2. Due professional care does not require: A. critical review at every level of supervision of work done and judgment exercised. B. good faith and integrity. C. appointment of the auditor by the shareholders. D. compliance with the auditing standards. 3. Common law requires that the auditor: A. guarantee their work. B. perform their work with due care. C. discover all fraud. D. check all transactions. 4. When performing an audit, an auditor would most likely be considered negligent if they failed to: 5. Mars Ltd wished to acquire the ordinary shares of Saturn Ltd and engaged Sarah & Co. to audit the financial report of Saturn Ltd. Sarah & Co. failed to discover a significant liability when performing the audit. In a common law action against Sarah & Co., Mars Ltd, at a minimum, must prove:
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6. The court found that Casey, an auditor, had performed a negligent audit of Royal Treatment Ltd, but the plaintiff did not receive damages because the court found insufficient proof of causation. Causation means that: 7. The Pacific Acceptance case established that: A. reasonable care and skill means following the auditing standards. B. auditors have a duty to closely supervise and review the work of inexperienced audit staff. C. auditors are only liable for the proportion of damages attributable to their actions. D. auditors have a duty of care only to the shareholders as a group.
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