An accounting clerk writes off the balance owed to the company as a favor to a friend. This fraud could be prevented in the future by: (a) Requiring specific authorization to write off accounts. (b) Segregating the cash receipt from the account write off function. (c) Promptly recording all account write offs. d) Maintaining the accounts receivable records in a locked cabinet 24. One ofthe elements necessary to recover damages if there has been a materia misstatement in a registration statement filed under the Securities Act of 1933 is that the: 25. Issuer and plaintiff were in privity of contract with each other Issuer failed to exercise due care in connection with the sale of the securities Plaintiff gave value for the security Plaintiff suffered a loss. (a) (b) (c) (d) 26. In an audit under GAAS (generally accepted auditing standards), the auditor is required to: (a) Perform tests of controls to evaluate the effectiveness of the entity's accounting system. Determine whether control activities are suitably designed to prevent or detect material misstatements. Document the understanding of internal control. Search for significant deficiencies in internal control. (b) (c) (d) 27. Which of the following elements, if present, would support a finding of constructive fraud on the part of a CPA? (a) Ordinary negligence in applying generally accepted auditing (b) (c) (d) standards. Identified third party users of the financial statements. Scienter. Gross negligence in applying generally accepted auditing standards. 28. Internal control can provide only reasonable assurance of achieving entity control objectives. One factor limiting the likelihood of achieving those objectives is that: (a) The auditor's primary responsibility is the detection of fraud. (b) Management monitors internal control. (c) The cost of internal control should not exceed its benefits. (d) The board of directors is active and independent