Question 1

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

Accepted Answer

A) abatement 
B) arraignment 
C) easement 
D) engagement 
A) abatement 
B) arraignment 
C) easement 
D) engagement D

Question 2

Which of the following provides the broadest standard for holding accountants liable to third parties for negligence?

Accepted Answer

A) due diligence defense 
B) the foreseeability standard 
C) the Ultramares doctrine 
D) nolo contendere 
A) due diligence defense 
B) the foreseeability standard 
C) the Ultramares doctrine 
D) nolo contendere B

Question 3

What is the accountant-client privilege?

Accepted Answer

Sometimes clients of accountants are sued in court.About 20 states have enacted statues that create an accountant-client privilege.In these states, an accountant cannot be called as a witness against a client in a court action.The majority of the states follow the common law, which provides that an accountant may be called at court to testify against his or her client.The U.S.Supreme Court has held that there is no accountant-client privilege under federal law.Thus, an accountant could be called as a witness in cases involving federal securities laws, federal mail or wire fraud, federal RICO, or other federal criminal statutes.

Question 4

Which one of the following is the most favorable opinion an auditor can give a company following an audit?

Accepted Answer

A) an unqualified opinion 
B) a disclaimer of opinion 
C) an adverse opinion 
D) a qualified opinion 
A) an unqualified opinion 
B) a disclaimer of opinion 
C) an adverse opinion 
D) a qualified opinion

Question 5

Under the Sarbanes-Oxley Act, in order to audit a public company, ________.

Accepted Answer

A) only public accountants must constitute the audit committee 
B) a public accounting firm must register with the PCAOB 
C) all public accounting firms must assign an accountant who works closely with one client over a long duration of time 
D) the law of accountant-client privilege must be accepted by the state legislative mechanism 
A) only public accountants must constitute the audit committee 
B) a public accounting firm must register with the PCAOB 
C) all public accounting firms must assign an accountant who works closely with one client over a long duration of time 
D) the law of accountant-client privilege must be accepted by the state legislative mechanism

Question 6

________ specify the methods and procedures that are to be used by public accountants when conducting external audits of company financial statements

Accepted Answer

A) Generally accepted accounting principles 
B) Generally accepted auditing standards 
C) Auditor's expert opinions 
D) General engagements and agreements 
A) Generally accepted accounting principles 
B) Generally accepted auditing standards 
C) Auditor's expert opinions 
D) General engagements and agreements

Question 7

A(n)________ is an auditor's opinion that states that the 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) unqualified opinion 
B) qualified opinion 
C) adverse opinion 
D) disclaimer of opinion 
A) unqualified opinion 
B) qualified opinion 
C) adverse opinion 
D) disclaimer of opinion

Question 8

________ is a rule that limits a defendant's accountability to his or her equivalent degree of fault.

Accepted Answer

A) Privity of contract 
B) Due diligence defense 
C) Proportionate liability 
D) Ultramares doctrine 
A) Privity of contract 
B) Due diligence defense 
C) Proportionate liability 
D) Ultramares doctrine

Question 9

A formal entrance into a contract between a client and an accountant is called abatement.

Accepted Answer

A) True 
 B)False

Question 10

Third parties cannot sue accountants for breach of contract.

Accepted Answer

A) True 
 B)False

Question 11

The Financial Accounting Standards Board (FASB)issues new GAAP rules and amends existing ones.

Accepted Answer

A) True 
 B)False

Question 12

Under the foreseeability standard, an accountant is liable even if he or she had no knowledge of the intended user of the audited financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Accountants can be held liable for negligence in preparing unaudited financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Standards for the preparation and presentation of financial statements are known as ________.

Accepted Answer

A) engagements and agreements 
B) auditor's opinions 
C) generally accepted accounting principles 
D) generally accepted auditing standards 
A) engagements and agreements 
B) auditor's opinions 
C) generally accepted accounting principles 
D) generally accepted auditing standards

Question 15

If a state has passed the accountant-client privilege law, it implies that only an accountant can serve as a witness in a case against the client.

Accepted Answer

A) True 
 B)False

Question 16

The Generally Accepted Auditing Standards (GAASs)are established by the American Institute of Certified Public Accountants.

Accepted Answer

A) True 
 B)False

Question 17

The ________ is a rule that says that an accountant is liable only for negligence to third parties who are in privity of contract or in a privity-like relationship with the accountant.

Accepted Answer

A) foreseeability standard 
B) Ultramares doctrine 
C) due diligence defense 
D) disclaimer of opinion 
A) foreseeability standard 
B) Ultramares doctrine 
C) due diligence defense 
D) disclaimer of opinion

Question 18

A person who practices as an accountant, but is not certified, is referred to as a public accountant.

Accepted Answer

A) True 
 B)False

Question 19

A probate can be defined as a verification of a company's books and records by a certified accountant.

Accepted Answer

A) True 
 B)False

Question 20

The SEC has the power to file criminal charges and award punishment for violations that come under Section 32(a)of the Securities Exchange Act of 1934.

Accepted Answer

A) True 
 B)False

Exam 51: Accountants' Duties and Liability

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

Which of the following provides the broadest standard for holding accountants liable to third parties for negligence?

What is the accountant-client privilege?

Which one of the following is the most favorable opinion an auditor can give a company following an audit?

Under the Sarbanes-Oxley Act, in order to audit a public company, ________.

________ specify the methods and procedures that are to be used by public accountants when conducting external audits of company financial statements

A(n)________ is an auditor's opinion that states that the financial statements are fairly represented except for, or subject to, a departure from GAAPs, a change in accounting principles, or a material uncertainty.

________ is a rule that limits a defendant's accountability to his or her equivalent degree of fault.

A formal entrance into a contract between a client and an accountant is called abatement.

Third parties cannot sue accountants for breach of contract.

The Financial Accounting Standards Board (FASB)issues new GAAP rules and amends existing ones.

Under the foreseeability standard, an accountant is liable even if he or she had no knowledge of the intended user of the audited financial statements.

Accountants can be held liable for negligence in preparing unaudited financial statements.

Standards for the preparation and presentation of financial statements are known as ________.

If a state has passed the accountant-client privilege law, it implies that only an accountant can serve as a witness in a case against the client.

The Generally Accepted Auditing Standards (GAASs)are established by the American Institute of Certified Public Accountants.

The ________ is a rule that says that an accountant is liable only for negligence to third parties who are in privity of contract or in a privity-like relationship with the accountant.

A person who practices as an accountant, but is not certified, is referred to as a public accountant.

A probate can be defined as a verification of a company's books and records by a certified accountant.

The SEC has the power to file criminal charges and award punishment for violations that come under Section 32(a)of the Securities Exchange Act of 1934.

Legal Heritage and the Digital Age

Courts and Jurisdiction

Judicial,Alternative,and E-Dispute Resolution

Constitutional Law for Business and E-Commerce

Intentional Torts and Negligence

Product and Strict Liability

Intellectual Property and Cyber Piracy

Criminal Law and Cyber Crimes

Nature of Traditional and E-Contracts

Agreement

Consideration and Promissory Estoppel

Capacity and Legality

Genuineness of Assent and Undue Influence

Statute of Frauds and Equitable Exceptions

Third-Party Rights and Discharge

Remedies for Breach of Traditional and E-Contracts

E-Commerce and Digital Law

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Warranties

Creation of Negotiable Instruments

Holder in Due Course and Transferability

Liability, Defenses, and Discharge

Banks, E-Money, and Financial Reform

Credit,Mortgages,and Debtor's Rights

Secured Transactions and E-Filing

Bankruptcy and Reorganization

Agency Formation and Termination

Liability of Principals, Agents, and Independent Contractors

Employment, Worker Protection, and Immigration Law

Labor Law and Collective Bargaining

Equal Opportunity in Employment

Small Business, Entrepreneurship, and General Partnerships

Limited Partnerships and Special Partnerships

Corporate Formation and Financing

Corporate Governance and the Sarbanes-Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Franchises and Special Forms of Businesses

Investor Protection, E-Securities, and Wall Street Reform

Ethics and Social Responsibility of Business

Administrative Law and Regulatory Agencies

Consumer Protection and Product Safety

Environmental Protection

Antitrust Law and Unfair Trade Practices

Personal Property and Bailment

Real Property

Landlord-Tenant Law and Land Use Regulation

Insurance

Wills Trusts and Estates

Family Law

International and World Trade Law

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