Exam 5: Legal Liability

During a review engagement, CA discovers that the gross margin has increased by 20% over the last few years.To avoid potential liability due to possibly misstated financial statements, CA should

Due professional care implies that the practitioner is conducting his/her work to the highest possible standard and will make no errors.

The purpose of Bill C-25, known as the "proceeds of crime" legislation, is to ensure that accountants disclose all suspected cases of money laundering to law officers.

A plaintiff, who is a normal trade creditor, can collect damages under common law for negligence from the corporation's auditors.

The lessons for accountants that are inherent in the 1136 Tenants' Corporation v.Rothenberg case include all of the following except

Accountants are not liable for misstatements in compilation or review engagements.

Primary beneficiaries are third parties who have paid to have an audit performed.

Sun Corp.approved a merger plan with Cord Corp.One of the factors that led to the approval of the merger was the fact that the Cord's financial statements were audited by Frank & Co.CAs.Sun had engaged Frank to audit Cord's financial statements.While performing the audit, Frank failed to discover certain irregularities that later caused Sun to suffer substantial losses.For the lawsuit to be successful, Sun must prove that Frank & Co., CAs

Constructive fraud is characterized by an intentional act designed to deceive, mislead or injure the rights of another person.

Which of the following elements, if present, would support a finding of constructive fraud on the part of a CA?

Under common law, which of the following statements most accurately reflects the liability of a CA who gives a fraudulent opinion on an audit of a client's financial statements?

The CBCA is important to auditors in Canada because it.

What does a tort refer to?

In the London vs.General Bank (1895) case, it was held that the auditor takes complete responsibility for detecting fraud in a set of financial statements they are auditing.

Due professional care occurs when an auditor observes all the rules of conduct for the profession and applies all the standards of the profession.

Under common law, a plaintiff who is owed a legal duty of care must prove reliance on misleading statements and damages suffered because of that reliance.

A defendant accountant will likely first try to argue that it had no privity relationship with the plaintiff.

When referring to public accountants, what does breach of contract mean?

The OSC in Canada has powers to decide GAAP similar to the SEC in the United States.

To prove due diligence as a defence under Bill 198, auditors need to document their work in the audit file.