When an Auditor Acts So Carelessly in the Application of Professional

question 2

Multiple Choice

When an auditor acts so carelessly in the application of professional standards that it implies a reckless disregard for the standards of due care is referred to as:

• A) Scienter
• B) Fraud
• C) Constructive fraud
• D) Negligence

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Definitions:

Current Ratio

A liquidity ratio calculated as current assets divided by current liabilities, indicating the ability of a company to pay short-term obligations.

Current Liabilities

Debts or obligations that a company expects to pay off within one fiscal year, including accounts payable, short-term loans, and accrued expenses.

Current Assets

Assets that a company expects to convert into cash, sell, or use up within one year or within its operating cycle if longer than a year.

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries made at the end of the previous period.