When Performing an Audit, a CPA

question 60

Multiple Choice

When performing an audit, a CPA:

• A)must exercise the level of care, skill, and judgment expected of a reasonably prudent CPA under the circumstances.
• B)must strictly adhere to generally accepted accounting principles.
• C)is strictly liable for failing to discover client fraud.
• D)is not liable under any legal standard unless the CPA commits gross negligence or intentionally disregards generally accepted auditing standards.

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Definitions:

Deferred Revenue

Money received by a company for goods or services yet to be delivered or performed; classified as a liability on the balance sheet until the transaction is completed.

Product Costs

All costs incurred to acquire or produce a product that is intended for sale, including materials, labor, and overhead.

Sales

The activities involved in selling goods or services to customers for money.

Administrative Expenses

Expenses related to the general operations of a business, such as salaries of executive personnel, accounting, and human resources.