Exam 51: Accountants' Liability

Smiley,a CPA,was performing the audit at a client when he noticed that the client did not properly account for certain miscellaneous revenues.These revenues were a small portion of overall revenues,but were nonetheless material to the overall financial statements.What type of opinion should Smiley render on the financial statements?

An accountant's failure to follow generally accepted auditing standards in conducting an audit generally amounts to:

In order to be a certified public accountant,an accountant must have attained a minimum number of years of auditing experience.

Ray hires Robert,an accountant,to prepare financial statements to be presented to prospective investors.In the future,will Robert potentially be liable if one of the investors brings a claim against him for negligently preparing the documents?

If an auditor determines that the financial statements do not fairly present the financial results and position of the client,the auditor would issue a(n):

Generally,only the client of an accountant can bring a negligence claim against the accountant.

Under the Securities Exchange Act of 1934,fraud or reckless conduct must be shown in order to impose liability on the accountant under either Section 10(b)or Section 18(a).

Under the Ultramares doctrine,an accountant is liable to which third parties?

Which of the following is correct about the process for investigating violations of the securities laws?

In a few jurisdictions,an accountant may not be called as a witness against a client in a court action.

There is no accountant-client privilege under federal law.

Anne,a Certified Public Accountant,was hired by a retail hardware store to perform an audit on the store's financial statements.The agreement for this engagement stated that the audited financial statements would be used "to obtain further inventory financing from Second National Bank or another local bank." Anne completed the audit and issued an unqualified opinion.The client then used the audited financial statements to encourage Henry to invest in the hardware store as a new partner.Unfortunately,Anne had been negligent in conducting the audit,and the inventory had been greatly overstated.As a result,the hardware store soon went bankrupt.Under which of the rules for accountant liability to third parties could Henry recover from Anne?

Under the rules of Section 10A of the Securities Exchange Act of 1994,if an auditor detects an illegal act having a material effect on the financial accounts,to whom must the accountant first report the finding?

An accountant is liable for unintentional negligent misstatements in financial statements under which of the following?

Actual fraud happens when the accountant acts with "reckless disregard" for the truth or the consequence of his or her actions.

If an auditor determines that the financial statements fairly present the financial results and position of the client,the auditor would issue a(n):

The state law rule of liability of accountants for negligence to third parties that is least favorable to the accountant is:

Accountant malpractice is based on an accountant's failure to meet uniform accounting standards.

Ted is a CPA in a large city who audited the financial statements of a firm that sold specialized computer equipment around the world.This was a complex audit,and Ted prepared numerous working papers in connection with the audit.Ted also had numerous conversations with client personnel in his efforts to understand the complex transactions and accounts.Ted's client has recently become the subject of an investigation for numerous violations of law.Charges will soon be filed at both the state and federal level.Can Fred be called to testify,and can Fred's work papers be subject to a subpoena?

For certified public accountants,audits must be conducted according to generally accepted auditing standards.