Exam 51: Accountants' Liability

The Private Securities Litigation Reform Act of 1994 expanded a defendant's liability regardless of an accountant's degree of fault.

Section 11(a)of the Securities Act of 1933 imposes civil liability on accountants for:

Accountants are considered experts under the Securities Act of 1933 with respect to the financial statements that are included in a registration statement.

Generally,privity of contract is required for a party to recover from an accountant for matters relating to fraud.

An audit may be defined as a verification of a company's financial books and records.

The Private Securities Reform Act of 1995 made what change affecting the liability of professionals in connection with securities?

Knowledge of the rule presented in Section 32(a)of the Securities and Exchange Act of 1934 has no impact on whether or not an individual becomes imprisoned.

Diana,a Certified Public Accountant,was hired to audit the financial statements of a large Internet retailer that was planning a new issuance of stock.The client had made several public offerings of stock in recent years and was required to meet the reporting requirements of the Securities Exchange Act of 1934.In performing her audit,Diana discovered that large portions of accounts receivable resulted from fictitious sales.The client told Diana that the company would go bankrupt and that she would then be unable to collect her fee if the fictitious accounts receivable were eliminated or were mentioned in the auditor's report.Diana did not adjust or mention the problems with the accounts receivable.The audited financial statements were included in the registration statement for the new public offering and in the reports filed under the Securities Act of 1934.Diana faces statutory liability under:

Section 18(a)of the Securities Exchange Act of 1934 imposes liability on accountants making a false or misleading statement in any document filed with the Securities and Exchange Commission.

The drawback to being a partner in a limited liability partnership is that the partners are personally liable for the debts and obligations of the limited liability partnership.

If an auditor is unable to gather enough information to express an opinion about the financial statements,the auditor would issue a(n):

The guidelines that accountants must follow in preparing financial statements are the:

When an accountant has followed generally accepted auditing standards and generally accepted accounting principles,which of the following is true?

Accountants may be named as defendants in lawsuits that claim violations of the RICO Act.

Section 18(a)of the Securities Exchange Act of 1934 imposes civil liability on any person who makes false or misleading statements in any application,report,or document filed with the SEC.

Breach of contract is a common basis for third parties to recover from accountants.

Under the Securities Act of 1933,accountants are criminally liable only for willful misstatements in the financial statements.

The due diligence defense is applicable to actions filed under:

An accountant's actions are his or her own and therefore are judged on a subjective basis.

If an auditor is unable to draw a conclusion as to the accuracy of the company's financial records,the auditor may issue a disclaimer of opinion.