Question 1

An accountant is liable to any foreseeable user of the client's financial statements under the plausibility standard.

Accepted Answer

A) True 
 B)False  False

Question 2

Pursuant to federal securities laws,state laws,and stock exchange rules,an audit must be performed by a public accountant.

Accepted Answer

A) True 
 B)False  False

Question 3

Section ________ of the Uniform Securities Act makes it a criminal offense for accountants and others to willfully falsify financial statements and other reports.

Accepted Answer

A)  101 
B)  202 
C)  303 
D)  404 
E)  505 
A)  101 
B)  202 
C)  303 
D)  404 
E)  505 A

Question 4

Which of the three major rules of liability that a third party may use to hold an accountant liable for negligence is determined by specific language contained in the engagement agreement entered into between the accountant and his or her client.

Accepted Answer

A) True 
 B)False

Question 5

A disclaimer of opinion expresses the auditor's inability to draw a conclusion about the accuracy of the company's financial records.

Accepted Answer

A) True 
 B)False

Question 6

In a limited liability partnership,a limited partner whose negligent or intentional conduct causes injury is not personally liable for his or her own conduct.

Accepted Answer

A) True 
 B)False

Question 7

What are the major goals the United States Congress intends to accomplish through its passage of the Sarbanes-Oxley Act?

Accepted Answer

After many well-publicized accounting fr

Question 8

If an audit turns up a suspicious transaction or entry,the accountant is under a duty to investigate it and to inform the client of the results of the investigation.

Accepted Answer

A) True 
 B)False

Question 9

Section 11(a)of the Securities Act of 1933 imposes civil liability on accountants for making misstatements or omissions of material facts in a registration statement,or for failing to find such misstatements or omissions.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following acts replaced joint and several liability with proportionate liability?

Accepted Answer

A)  the Securities Exchange Act of 1933 
B)  the Securities Exchange Act of 1934 
C)  the Private Securities Litigation Reform Act of 1995 
D)  the Tax Reform Act of 1976 
E)  the Sarbanes Oxley Act of 2002 
A)  the Securities Exchange Act of 1933 
B)  the Securities Exchange Act of 1934 
C)  the Private Securities Litigation Reform Act of 1995 
D)  the Tax Reform Act of 1976 
E)  the Sarbanes Oxley Act of 2002

Question 11

Under the foreseeability standard,an accountant's liability does not depend on his or her knowledge of the identity of either the user or the intended class of users.

Accepted Answer

A) True 
 B)False

Question 12

Generally accepted auditing standards are standards for the preparation and presentation of financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Securities fraud falls under the definition of racketeering for the purposes of the Racketeer Influenced and Corrupt Organizations Act.

Accepted Answer

A) True 
 B)False

Question 14

Most public accounting firms are organized and operated as ________.

Accepted Answer

A)  sole proprietorships 
B)  general partnerships 
C)  limited partnerships 
D)  "S" corporations 
E)  limited liability partnerships 
A)  sole proprietorships 
B)  general partnerships 
C)  limited partnerships 
D)  "S" corporations 
E)  limited liability partnerships

Question 15

In the case of Greenstein,Logan & Company v.Burgess Marketing,Inc.,the court evaluated Greenstein,Logan & Company's liability for inaccurate audits and said:

Accepted Answer

A)  because Burgess's controller had under-accrued and underpaid the company's federal excise taxes, Burgess was responsible for the losses suffered. 
B)  because Greenstein, Logan had failed to comply with generally accepted accounting principles, they were deemed negligent and therefore liable for the losses. 
C)  because Greenstein, Logan had failed to comply with generally accepted auditing services, they were deemed negligent and therefore liable for the losses. 
D)  because Burgess's controller had erred and Greenstein, Logan had failed to discover the error, both were ordered to share liability for the losses. 
E)  only practicing certified public accountants may testify as expert witnesses against other certified public accountants, so the university professors who testified were not persuasive expert witnesses. 
A)  because Burgess's controller had under-accrued and underpaid the company's federal excise taxes, Burgess was responsible for the losses suffered. 
B)  because Greenstein, Logan had failed to comply with generally accepted accounting principles, they were deemed negligent and therefore liable for the losses. 
C)  because Greenstein, Logan had failed to comply with generally accepted auditing services, they were deemed negligent and therefore liable for the losses. 
D)  because Burgess's controller had erred and Greenstein, Logan had failed to discover the error, both were ordered to share liability for the losses. 
E)  only practicing certified public accountants may testify as expert witnesses against other certified public accountants, so the university professors who testified were not persuasive expert witnesses.

Question 16

There are three (3)major rule of liability that a state can adopt in determining whether an accountant is liable in negligence to third parties: (1)the Supramares doctrine; (2)Section 552 of the Restatement (Second)of Torts; and (3)the reasonableness standard.

Accepted Answer

A) True 
 B)False

Question 17

Securities laws are exclusively under federal jurisdiction,so states do not have the authority to legislate in this area of the law.

Accepted Answer

A) True 
 B)False

Question 18

The term "GAAPs" stands for:

Accepted Answer

A)  generally accepted auditing principles. 
B)  generally approved auditing principles. 
C)  generally acknowledged appraisal principles. 
D)  generally accepted accounting principles. 
E)  generally accredited assessment principles. 
A)  generally accepted auditing principles. 
B)  generally approved auditing principles. 
C)  generally acknowledged appraisal principles. 
D)  generally accepted accounting principles. 
E)  generally accredited assessment principles.

Question 19

A qualified opinion states that the company's financial statements are fairly represented except for,or subject to,a departure from GAAPs,a change in accounting principles,or a material uncertainty.

Accepted Answer

A) True 
 B)False

Question 20

An audit is defined as a verification of a company's books and records.

Accepted Answer

A) True 
 B)False

Exam 40: Accountants' Liability

An accountant is liable to any foreseeable user of the client's financial statements under the plausibility standard.

Pursuant to federal securities laws,state laws,and stock exchange rules,an audit must be performed by a public accountant.

Section ________ of the Uniform Securities Act makes it a criminal offense for accountants and others to willfully falsify financial statements and other reports.

Which of the three major rules of liability that a third party may use to hold an accountant liable for negligence is determined by specific language contained in the engagement agreement entered into between the accountant and his or her client.

A disclaimer of opinion expresses the auditor's inability to draw a conclusion about the accuracy of the company's financial records.

In a limited liability partnership,a limited partner whose negligent or intentional conduct causes injury is not personally liable for his or her own conduct.

What are the major goals the United States Congress intends to accomplish through its passage of the Sarbanes-Oxley Act?

If an audit turns up a suspicious transaction or entry,the accountant is under a duty to investigate it and to inform the client of the results of the investigation.

Section 11(a)of the Securities Act of 1933 imposes civil liability on accountants for making misstatements or omissions of material facts in a registration statement,or for failing to find such misstatements or omissions.

Which of the following acts replaced joint and several liability with proportionate liability?

Under the foreseeability standard,an accountant's liability does not depend on his or her knowledge of the identity of either the user or the intended class of users.

Generally accepted auditing standards are standards for the preparation and presentation of financial statements.

Securities fraud falls under the definition of racketeering for the purposes of the Racketeer Influenced and Corrupt Organizations Act.

Most public accounting firms are organized and operated as ________.

In the case of Greenstein,Logan & Company v.Burgess Marketing,Inc.,the court evaluated Greenstein,Logan & Company's liability for inaccurate audits and said:

There are three (3)major rule of liability that a state can adopt in determining whether an accountant is liable in negligence to third parties: (1)the Supramares doctrine; (2)Section 552 of the Restatement (Second)of Torts; and (3)the reasonableness standard.

Securities laws are exclusively under federal jurisdiction,so states do not have the authority to legislate in this area of the law.

The term "GAAPs" stands for:

A qualified opinion states that the company's financial statements are fairly represented except for,or subject to,a departure from GAAPs,a change in accounting principles,or a material uncertainty.

An audit is defined as a verification of a company's books and records.

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