Question 1

Rules of professional conduct provide some direct solutions to specific, profession-related problems that may not be easily derived from general theories of ethics.

Accepted Answer

Rules of professional conduct are specifically designed to address professional ethical issues and provide guidance on how professionals should behave in certain situations. These rules may be unique to each profession and may not necessarily be derived from general ethical principles.

Question 2

The auditor has a duty of care to a company that hires the auditor and has a contract with him or her under privity of contract.

Accepted Answer

When an auditor is hired by a company and enters into a contract with them, the auditor assumes a duty of care towards that company under privity of contract. This means that the auditor is obligated to provide professional services with reasonable care and skill and can be held liable for any damages that result from negligence or breach of contract.

Question 3

The "Rules of Professional Conduct" for professional accountants apply to services performed by members in both public and private practice.

Accepted Answer

The answer of The "Rules of Professional Conduct" for professional...

Question 4

If a public accountant (PA) performs the bookkeeping and makes accounting decisions for a company and the management does not know enough about the financial statements to take primary responsibility for them, the PA cannot be considered independent for assurance services.

Accepted Answer

According to the AICPA Code of Professional Conduct, independence requires that an accountant not assume management responsibilities such as bookkeeping or making accounting decisions. If the accountant is performing these tasks and management relies on them, the accountant is not independent and cannot provide assurance services.

Question 5

The fundamental principles of accepted conduct are only general guidelines; therefore, they are not as important as the specific rules.

Accepted Answer

This statement is false. While specific rules may provide more detailed guidance, they are all based on the fundamental principles of accepted conduct. These principles form the foundation of ethical behavior and are essential to maintain a culture of integrity and professionalism.

Question 6

In addition to liabilities imposed by common law, auditors need also be concerned about what other type of liability?

Accepted Answer

Auditors must also be concerned with statutory law, which includes laws and regulations enacted by legislative bodies that can impose additional liabilities.

Question 7

A letter where accountants sign that they have been notified that a particular recipient of the financial statements and audit report intends to rely upon them for particular purposes is known as a(n) ________.

Accepted Answer

A reliance letter is a document signed by accountants to confirm that they have been notified that a specific recipient of financial statements and audit reports intends to rely on them for particular purposes. The letter serves as a form of assurance that the information contained in the financial statements and audit reports is reliable and accurate.

Question 8

"Let your conscience be your guide" is an ethical principle that fits all situations.

Accepted Answer

While it is important to rely on one's own conscience and ethical principles, there may be situations where one's personal values conflict with societal norms or laws. In such cases, it is important to consider the potential consequences of one's actions and seek guidance from trusted sources such as ethical codes, legal advice, or trusted mentors. Additionally, individual biases, blind spots, or emotions may cloud one's judgment, making it important to seek diverse perspectives and engage in self-reflection to ensure ethical decision-making.

Question 9

Legal liabilities of professional accountants arise only from lawsuits brought on the basis of the law of contracts.

Accepted Answer

Legal liabilities of professional accountants can arise from a variety of sources, including lawsuits brought on the basis of the law of torts, securities law, or other regulatory legislation, in addition to lawsuits based on contracts.

Question 10

Consequentialism says that the right choice is the one that results in the greatest good for the greatest number of people.

Accepted Answer

The answer of Consequentialism says that the right choice is...

Question 11

An ethical dilemma is one in which the choice of alternative actions affects the well-being of other persons.

Accepted Answer

An ethical dilemma involves making a decision that impacts the well-being of others, making it a true statement.

Question 12

That a legal duty arises when there is a contractual agreement with the client is called ________.

Accepted Answer

Privity of contract is the legal concept that establishes a contractual relationship between parties and creates legal obligations and duties between them. When a professional enters into a contractual agreement with a client, they have a legal duty to fulfill their obligations under the contract. This duty arises due to the privity of contract between the parties.

Question 13

If a professional accountant is convicted of a criminal offence or fraud, he or she is usually thrown out of the profession.

Accepted Answer

This is generally true. Professional accountant bodies have ethical codes that require their members to maintain high levels of honesty and integrity. If a member is convicted of a criminal offence or fraud, they may face disciplinary action and can be expelled from the profession. However, the exact consequences can vary depending on the specific circumstances and jurisdiction.

Question 14

The codified "Rules of Professional Conduct" derives its authority from the CPA Canada Handbook.

Accepted Answer

The "Rules of Professional Conduct" derive their authority from individual provincial and territorial CPA bodies in Canada, not directly from the CPA Canada Handbook.

Question 15

Historically, auditors' liability in Canada has been based on common law liability.

Accepted Answer

This is because in Canada, auditors' liability is primarily governed by common law and not by statute or regulation. Common law liability refers to the legal principles and precedents established by court decisions rather than by written law. As such, auditors can be held liable for breach of duty, negligence, and fraud under the common law framework.

Question 16

If a party is found to be partially liable and thus only responsible for paying part of the damages relative to their share of the blame, this is known as ________.

Accepted Answer

Proportionate liability means that each party is responsible for paying damages in proportion to their share of the blame. This concept is used in many areas of law, including tort law. The other options, due care and tort, do not specifically relate to the situation where a party is only partially liable, and breaking even is not a legal term.

Question 17

Once public accountants (PAs) retire from a firm, they are no longer required to maintain independence from former clients.

Accepted Answer

Even after retirement, public accountants may have continuing financial interests or relationships that could impair their independence with respect to services performed while they were active in the firm, thus they are still required to maintain independence from former clients to uphold the integrity of their previous work.

Question 18

Many users of audit reports expect auditors to detect fraud, theft, and illegal acts, and to report them publicly.

Accepted Answer

Many users of audit reports have the expectation that auditors will be able to detect and uncover instances of fraud, theft and illegal activity, and to report these publicly in their audit reports.

Question 19

The "Rules of Professional Conduct, " state the set of very specific rules that flow from the general principles and are considered to be minimum standards.

Accepted Answer

The "Rules of Professional Conduct" provide specific guidelines for conduct and behavior that lawyers are expected to adhere to. These rules are considered to be minimum standards that all lawyers must meet in order to maintain their license to practice law.

Question 20

Auditors need not be concerned about statutory law liability.

Accepted Answer

Auditors can potentially face statutory law liability, such as being held liable for violating securities laws or other regulations. As such, auditors should take measures to ensure their compliance with applicable laws and regulations to minimize their risks of liability.

Quiz 3: Auditors Ethical and Legal Responsibilities