Exam 44: Accountants Legal Liability

What is the basis for an accountant's potential criminal liability in rendering professional services?

The client is generally held to be the owner of the working papers the accountant uses in performing an audit.

Audit working papers would include all but:

Matt agrees to perform an audit within 30 days, knowing that time is of the essence.When the 30 days are up, Matt has only performed 60% of the audit.Matt has materially breached his contract.

Under the Private Securities Litigation Reform Act of 1995, those who audit financial statements required by the 1934 Securities Exchange Act must establish procedures capable of:

In recent years, more and more courts have followed the Ultramares doctrine in deciding cases.

An accountant's records, including the data-gathering process followed and the information and conclusions drawn therefrom are known as:

Anna has a contract to perform accounting services for Interior Corporation.She breaches her contract in a nonmaterial way.Which of the following is correct with respect to Anna's right to be paid for her work?

An accountant's legal liability is imposed both by the common law at the state level and by securities laws at the federal level.

Sara holds 1,000 shares of stock in B B & B, Inc., which she purchased, based upon the financial statements that Adam had prepared.She now realizes that the statements were false and wants to sue Adam for common law fraud.What is Adam's best defense?

The Sarbanes-Oxley Act prohibits accounting firms from performing which of the following services for audit clients?

An accountant who substantially performs his contractual duties under a contract with a client is entitled to compensation at the agreed upon rate less any damages he has caused the client.

For negligence cases, the Restatement has adopted the requirement of privity as set forth in the landmark opinion of Judge Cardozo in Ultramares Corp.v.Touche.

Which of the following could give rise to an accountant's criminal liability?

An accountant who commits fraud may be held liable for compensatory, but not punitive, damages.

An accountant who acts in a reasonably competent and professional manner is an insurer of the accuracy of her report.

An implied agreement in the contractual relationship is the agreement by the accountant to act in a competent and professional manner.

The common law recognizes an accountant-client privilege.

Most courts allow an accountant to raise the defense of the plaintiff's contributory or comparative negligence.

The Ultramares case involved the liability of an accountant under the Securities Act of 1933.