Question 1

When courts adopt the "foreseeable parties" ruling, auditor liability for ordinary negligence is extended to:

Accepted Answer

A)  all current and future creditors. 
B)  a distinct but unlimited class of users. 
C)  virtually all legitimate users of the financial statements. 
D)  all current and future investors. 
E)  a distinct but limited class of users. 
A)  all current and future creditors. 
B)  a distinct but unlimited class of users. 
C)  virtually all legitimate users of the financial statements. 
D)  all current and future investors. 
E)  a distinct but limited class of users.

Question 2

The Fund of Funds case illustrated that auditors could be found liable for failure to report wrong-doings discovered:

Accepted Answer

A)  only on audit engagements for a particular client. 
B)  on any type of engagement for a particular client. 
C)  only on special fraud audits conducted under separate contract. 
D)  even on engagements for other clients. 
E)  even on engagements for consulting clients. 
A)  only on audit engagements for a particular client. 
B)  on any type of engagement for a particular client. 
C)  only on special fraud audits conducted under separate contract. 
D)  even on engagements for other clients. 
E)  even on engagements for consulting clients.

Question 3

The Securities Act of 1933 makes the auditor liable for:

Accepted Answer

A)  fraud to all users and buyers of the statements. 
B)  gross negligence or fraud to all users of the statements. 
C)  gross negligence or fraud to all buyers of the securities. 
D)  ordinary negligence to all users of the statements. 
E)  ordinary negligence to all buyers of the securities. 
A)  fraud to all users and buyers of the statements. 
B)  gross negligence or fraud to all users of the statements. 
C)  gross negligence or fraud to all buyers of the securities. 
D)  ordinary negligence to all users of the statements. 
E)  ordinary negligence to all buyers of the securities.

Question 4

Which one of the following was not a characteristic of the court cases against auditors in the 1960s?

Accepted Answer

A)  growth in the volume of cases 
B)  extension of the concept of auditor's criminal liability 
C)  use of RICO against auditors 
D)  extension of auditor liability to third parties 
E)  extension of auditor liability for ordinary negligence 
A)  growth in the volume of cases 
B)  extension of the concept of auditor's criminal liability 
C)  use of RICO against auditors 
D)  extension of auditor liability to third parties 
E)  extension of auditor liability for ordinary negligence

Question 5

Failure to use even slight care in the circumstances constitutes ordinary negligence.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following is not true of Section 18 of the 1934 Securities Exchange Act?

Accepted Answer

A)  allows recovery for simple negligence 
B)  requires the person sued to prove they acted in good faith 
C)  allows both buyers and sellers of the securities to recover 
D)  does not normally apply to annual reports issued to shareholders 
E)  plaintiff must be either a buyer or seller of the security 
A)  allows recovery for simple negligence 
B)  requires the person sued to prove they acted in good faith 
C)  allows both buyers and sellers of the securities to recover 
D)  does not normally apply to annual reports issued to shareholders 
E)  plaintiff must be either a buyer or seller of the security

Question 7

Section 10 of the 1934 Securities Exchange Act is broad in scope because it applies to both public and private trading of securities.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following establishes criminal liability for "willfully" and "knowingly" making false or misleading statements in reports filed under the 1934 Securities Exchange Act?

Accepted Answer

A)  Section 32(a) 
B)  Section 18(a) 
C)  Section 10(b) 
D)  Section 11(b) 
E)  Section 17(a) 
A)  Section 32(a) 
B)  Section 18(a) 
C)  Section 10(b) 
D)  Section 11(b) 
E)  Section 17(a)

Question 9

Section 18 liability is relatively narrow in scope because it relates only to a false or misleading statement in documents "filed" with the:

Accepted Answer

A)  FASB 
B)  IRS 
C)  SEC 
D)  AICPA 
E)  IMA 
A)  FASB 
B)  IRS 
C)  SEC 
D)  AICPA 
E)  IMA

Question 10

Under the Ultramares ruling, in order for parties to recover for ordinary negligence they must be:

Accepted Answer

A)  in privity. 
B)  members of a foreseen group. 
C)  named in the contract. 
D)  foreseeable. 
E)  secondary beneficiaries. 
A)  in privity. 
B)  members of a foreseen group. 
C)  named in the contract. 
D)  foreseeable. 
E)  secondary beneficiaries.

Question 11

The liability of an auditor is less extensive under statutory law than under common law.

Accepted Answer

A) True 
 B)False

Question 12

Explain the responsibilities of the plaintiff and the defendant in a 1933 Act suit.

Accepted Answer

Plaintiff: 1.May be any person ac

Question 13

Under the Rosenblum ruling, in order for parties to recover for ordinary negligence they must be:

Accepted Answer

A)  foreseeable. 
B)  in privity. 
C)  named in the contract. 
D)  members of a foreseen group. 
E)  secondary beneficiaries. 
A)  foreseeable. 
B)  in privity. 
C)  named in the contract. 
D)  members of a foreseen group. 
E)  secondary beneficiaries.

Question 14

A CPA is liable under RICO for ordinary negligence.

Accepted Answer

A) True 
 B)False

Question 15

An accountant may be held liable to a client under either contract law or tort law.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following was not provided by the Private Securities Litigation Reform Act of 1995?

Accepted Answer

A)  Requires plaintiffs to pay defendants reasonable attorney's fees and expenses directly related to litigation found by the court to be frivolous and unwarranted. 
B)  Provides for a stay of discovery during the period a motion to dismiss is pending, thereby reducing a cost that often forces innocent parties to settle frivolous class action suits. 
C)  Limits punitive damages by defining securities fraud as a basis for bringing action under the Racketeer Influenced and Corrupt Organization Act, which provides for treble damages. 
D)  Places limits on the rights of third parties to sue by limiting the number of times a plaintiff can be a lead plaintiff to no more than five class actions in any three-year period and by imposing stricter pleading standards to be met by plaintiffs. 
E)  Changes the manner in which the court appoints lead plaintiffs in class actions to favor institutional investors likely to have the largest financial stake in the relief sought and to mitigate the "race to the courthouse by professional plaintiffs" who hold minimal ownership interests. 
A)  Requires plaintiffs to pay defendants reasonable attorney's fees and expenses directly related to litigation found by the court to be frivolous and unwarranted. 
B)  Provides for a stay of discovery during the period a motion to dismiss is pending, thereby reducing a cost that often forces innocent parties to settle frivolous class action suits. 
C)  Limits punitive damages by defining securities fraud as a basis for bringing action under the Racketeer Influenced and Corrupt Organization Act, which provides for treble damages. 
D)  Places limits on the rights of third parties to sue by limiting the number of times a plaintiff can be a lead plaintiff to no more than five class actions in any three-year period and by imposing stricter pleading standards to be met by plaintiffs. 
E)  Changes the manner in which the court appoints lead plaintiffs in class actions to favor institutional investors likely to have the largest financial stake in the relief sought and to mitigate the "race to the courthouse by professional plaintiffs" who hold minimal ownership interests.

Question 17

Match between columns
                        Premises:  Is relatively narrow in scope because it relates only to a false or misleading statement in documents “filed” with the SEC under the Act.
 Establishes criminal liability for “willfully” and “knowingly” making false or misleading statements in reports filed under the 1934 Act.
 It is unlawful for any person, directly or indirectly, to (a) employ any device, scheme, or artifice to defraud; (b) make any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in the light of the circumstances under which they made, not misleading; and (c) engage in any act, practice, or course of business that operates, or would operate, as a fraud or deceit on any person in connection with the purchase or sale of any security.

Accepted Answer

The Answer of  Section 10 Liability and  Section is...

Question 18

The Securities Act of 1933 is also known as the :

Accepted Answer

A)  Truth in Lending Act 
B)  Truth in Securities Act 
C)  Great Depression Act 
D)  Sale of Securities Act 
E)  Savings and Loan Act 
A)  Truth in Lending Act 
B)  Truth in Securities Act 
C)  Great Depression Act 
D)  Sale of Securities Act 
E)  Savings and Loan Act

Question 19

Which of the following would be an example of a foreseeable party?

Accepted Answer

A)  all creditors 
B)  stockholders 
C)  present investors 
D)  future investors 
E)  all of the above 
A)  all creditors 
B)  stockholders 
C)  present investors 
D)  future investors 
E)  all of the above

Question 20

An auditor may be liable to a client for breach of contract under which of the following?

Accepted Answer

A)  Issues a standard audit report when he or she has not made an audit in accordance with GAAS. 
B)  Does not deliver the audit report by the agreed-upon date. 
C)  Violates the client's confidential relationship. 
D)  All of the above. 
E)  None of the above. 
A)  Issues a standard audit report when he or she has not made an audit in accordance with GAAS. 
B)  Does not deliver the audit report by the agreed-upon date. 
C)  Violates the client's confidential relationship. 
D)  All of the above. 
E)  None of the above.

When courts adopt the "foreseeable parties" ruling, auditor liability for ordinary negligence is extended to:

The Fund of Funds case illustrated that auditors could be found liable for failure to report wrong-doings discovered:

The Securities Act of 1933 makes the auditor liable for:

Which one of the following was not a characteristic of the court cases against auditors in the 1960s?

Failure to use even slight care in the circumstances constitutes ordinary negligence.

Which one of the following is not true of Section 18 of the 1934 Securities Exchange Act?

Section 10 of the 1934 Securities Exchange Act is broad in scope because it applies to both public and private trading of securities.

Which one of the following establishes criminal liability for "willfully" and "knowingly" making false or misleading statements in reports filed under the 1934 Securities Exchange Act?

Section 18 liability is relatively narrow in scope because it relates only to a false or misleading statement in documents "filed" with the:

Under the Ultramares ruling, in order for parties to recover for ordinary negligence they must be:

The liability of an auditor is less extensive under statutory law than under common law.

Explain the responsibilities of the plaintiff and the defendant in a 1933 Act suit.

Under the Rosenblum ruling, in order for parties to recover for ordinary negligence they must be:

A CPA is liable under RICO for ordinary negligence.

An accountant may be held liable to a client under either contract law or tort law.

Which of the following was not provided by the Private Securities Litigation Reform Act of 1995?

The Securities Act of 1933 is also known as the :

Which of the following would be an example of a foreseeable party?

An auditor may be liable to a client for breach of contract under which of the following?

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters

Exam 4: Auditors Legal Liability

When courts adopt the "foreseeable parties" ruling, auditor liability for ordinary negligence is extended to:

The Fund of Funds case illustrated that auditors could be found liable for failure to report wrong-doings discovered:

The Securities Act of 1933 makes the auditor liable for:

Which one of the following was not a characteristic of the court cases against auditors in the 1960s?

Failure to use even slight care in the circumstances constitutes ordinary negligence.

Which one of the following is not true of Section 18 of the 1934 Securities Exchange Act?

Section 10 of the 1934 Securities Exchange Act is broad in scope because it applies to both public and private trading of securities.

Which one of the following establishes criminal liability for "willfully" and "knowingly" making false or misleading statements in reports filed under the 1934 Securities Exchange Act?

Section 18 liability is relatively narrow in scope because it relates only to a false or misleading statement in documents "filed" with the:

Under the Ultramares ruling, in order for parties to recover for ordinary negligence they must be:

The liability of an auditor is less extensive under statutory law than under common law.

Explain the responsibilities of the plaintiff and the defendant in a 1933 Act suit.

Under the Rosenblum ruling, in order for parties to recover for ordinary negligence they must be:

A CPA is liable under RICO for ordinary negligence.

An accountant may be held liable to a client under either contract law or tort law.

Which of the following was not provided by the Private Securities Litigation Reform Act of 1995?

The Securities Act of 1933 is also known as the :

Which of the following would be an example of a foreseeable party?

An auditor may be liable to a client for breach of contract under which of the following?

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters