Question

7) Which of the following statements is true of insurance?

A) It has to be paid after the risk has been encountered.

B) It can be obtained even if one has no insurable interest in the property being insured.

C) It is a means of transferring and distributing the risk of loss.

D) It cannot be modified once issued.

8) The ________ is a duty of the insurer to protect the insured against lawsuits or legal proceedings that involve a claim within the coverage of the insurance policy.

A) duty of strict liability

B) duty to pay

C) duty of reasonable care

D) duty to defend

9) Which of the following is an insurer's duty?

A) to pay back the insured's money on demand

B) to pay back the premiums paid by the insured upon an endorsement of insurance

C) to pay legitimate claims up to the insurance policy limits

D) to pay interest for the premiums paid by insured on a monthly or yearly basis

10) A(n) ________ is a clause in an insurance policy that provides that insurance proceeds are payable only after the insured has paid a specified amount toward the damage or loss.

A) incontestability clause

B) coinsurance clause

C) exclusions from coverage clause

D) deductible clause

11) Which of the following opinions would an auditor make for a company that, he or she feels, has materially misstated certain items on its financial statements?

A) an unqualified opinion

B) an adverse opinion

C) a qualified opinion

D) a disclaimer of opinion

12) If an auditor makes a disclaimer of opinion, this means that the auditor is ________.

A) favorable to the company's financial statement matching its performance but notes a few departures from Generally Accepted Accounting Principles (GAAPs)

B) unfavorable about the financial statement representing the company's position

C) unable to draw a conclusion about the accuracy of the company's financial records owing to lack of information

D) favorable of the company's financial statements representing its performance

13) Which of the following opinions is necessary for a company to avoid unfavorable repercussions on the company?

A) an adverse opinion

B) a qualified opinion

C) a disclaimer of opinion

D) an unqualified opinion

14) A formal entrance into a contract between a client and an accountant is known as an ________.

A) abatement

B) arraignment

C) easement

D) engagement

Answer 1

7.

C

Using insurance, the risk is transferred after paying the premium.

8.

D

It is called as a duty to defend by the insurer.

9.

C

Under the insurance policy, legitimate claims are honoured by the insurer.

10.

D

It is the deductible clause that makes insured to pay the specified amount towards the loss.

11.

B

It is the adverse opinion when there is a wrong or manipulation of data on the F/S.

12.

C

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