Question 1

The Private Securities Litigation Reform Act of 1995 replaced proportionate liability of the defendant with joint and several liability.

Accepted Answer

A) True 
 B)False

Question 2

The issuance of an unqualified opinion means that the company's financial statements are not in conformity with GAAPs.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is the form of business ownership used by most public accounting firms?

Accepted Answer

A) limited liability partnership 
B) C corporation 
C) S corporation 
D) general partnership 
A) limited liability partnership 
B) C corporation 
C) S corporation 
D) general partnership

Question 4

Which of the following is true of the Public Company Accounting Oversight Board (PCAOB)?

Accepted Answer

A) All members of the PCAOB must be CPAs. 
B) The PCOAB was created by the Tax Reform Act of 1976. 
C) The SEC has oversight and enforcement authority over the PCOAB. 
D) The PCOAB does not have any disciplinary authority over accountants and accounting firms. 
A) All members of the PCAOB must be CPAs. 
B) The PCOAB was created by the Tax Reform Act of 1976. 
C) The SEC has oversight and enforcement authority over the PCOAB. 
D) The PCOAB does not have any disciplinary authority over accountants and accounting firms.

Question 5

The ________,an organization created by the accounting profession,issues new GAAP rules and amends existing rules.

Accepted Answer

A) Financial Accounting Standards Board (FAS
B)  
B) International Accounting Standards Board (IAS
B)  
C) International Financial Reporting Board (IFR
B)  
D) American Institute of Certified Public Accountants (AICP
A)  
A) Financial Accounting Standards Board (FAS
B)  
B) International Accounting Standards Board (IAS
B)  
C) International Financial Reporting Board (IFR
B)  
D) American Institute of Certified Public Accountants (AICP
A)

Question 6

All members of the Public Company Accounting Oversight Board (PCAOB)must be CPAs.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is the broadest standard for holding accountants liable to third parties for negligence?

Accepted Answer

A) Section 552 of the Restatement (Second)of Torts 
B) the foreseeability standard 
C) the Ultramares doctrine 
D) the due diligence doctrine 
A) Section 552 of the Restatement (Second)of Torts 
B) the foreseeability standard 
C) the Ultramares doctrine 
D) the due diligence doctrine

Question 8

A third party can bring a tort action against an accountant for constructive fraud.

Accepted Answer

A) True 
 B)False

Question 9

An accountant's failure to follow GAASs when conducting audits constitutes negligence.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true of Generally Accepted Accounting Principles (GAAP)?

Accepted Answer

A) They are used by auditors as a guide,but only for non-audit services. 
B) They are accepted and applied by accounting firms globally. 
C) They cannot be modified once initially established by the American Institute of Certified Public Accountants. 
D) They establish rules for how corporations and accounting firms prepare financial statements. 
A) They are used by auditors as a guide,but only for non-audit services. 
B) They are accepted and applied by accounting firms globally. 
C) They cannot be modified once initially established by the American Institute of Certified Public Accountants. 
D) They establish rules for how corporations and accounting firms prepare financial statements.

Question 11

Federal law allows for discovery of an accountant's work papers in a federal case against the accountant's client.

Accepted Answer

A) True 
 B)False

Question 12

Pursuant to federal securities laws,an audit must be performed by a CPA who works as the chief executive officer (CEO)or chief financial officer (CFO)of the company being audited.

Accepted Answer

A) True 
 B)False

Question 13

Explain Section 552 of the Restatement (Second)of Torts.

Accepted Answer

Section 552 of the Restatement (Second)o

Question 14

Probate is defined as the verification of a company's books and records by a certified accountant.

Accepted Answer

A) True 
 B)False

Question 15

A(n)________ opinion is an auditor's opinion that the company's financial statements fairly represent the company's financial position,the results of its operations,and the change in cash flows for the period under audit,in conformity with generally accepted accounting principles.

Accepted Answer

A) disclaimer of 
B) adverse 
C) qualified 
D) unqualified 
A) disclaimer of 
B) adverse 
C) qualified 
D) unqualified

Question 16

Constructive fraud is defined as the intentional misrepresentation or omission of a material fact that is relied on by the client and causes the client damage.

Accepted Answer

A) True 
 B)False

Question 17

The Tax Reform Act of 1976 created the Public Company Accounting Oversight Board (PCAOB).

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is the most favorable opinion an auditor can give a company following an audit?

Accepted Answer

A) an unqualified opinion 
B) a disclaimer of opinion 
C) an adverse opinion 
D) a qualified opinion 
A) an unqualified opinion 
B) a disclaimer of opinion 
C) an adverse opinion 
D) a qualified opinion

Question 19

The accountant-client privilege provides that ________.

Accepted Answer

A) only an accountant can serve as a witness for his or her client in a court action 
B) an accountant's paperwork be used as prima facie evidence against his or her client in a court action 
C) an accountant cannot be called as a witness against his or her client in a court action 
D) an accountant does not enjoy work product immunity when his or her client is accused of gross negligence 
A) only an accountant can serve as a witness for his or her client in a court action 
B) an accountant's paperwork be used as prima facie evidence against his or her client in a court action 
C) an accountant cannot be called as a witness against his or her client in a court action 
D) an accountant does not enjoy work product immunity when his or her client is accused of gross negligence

Question 20

Generally Accepted Auditing Standards (GAASs)are established by the American Institute of Certified Public Accountants.

Accepted Answer

A) True 
 B)False

Exam 27: Accountants' Duties and Liability

The Private Securities Litigation Reform Act of 1995 replaced proportionate liability of the defendant with joint and several liability.

The issuance of an unqualified opinion means that the company's financial statements are not in conformity with GAAPs.

Which of the following is the form of business ownership used by most public accounting firms?

Which of the following is true of the Public Company Accounting Oversight Board (PCAOB)?

The ________,an organization created by the accounting profession,issues new GAAP rules and amends existing rules.

All members of the Public Company Accounting Oversight Board (PCAOB)must be CPAs.

Which of the following is the broadest standard for holding accountants liable to third parties for negligence?

A third party can bring a tort action against an accountant for constructive fraud.

An accountant's failure to follow GAASs when conducting audits constitutes negligence.

Which of the following statements is true of Generally Accepted Accounting Principles (GAAP)?

Federal law allows for discovery of an accountant's work papers in a federal case against the accountant's client.

Pursuant to federal securities laws,an audit must be performed by a CPA who works as the chief executive officer (CEO)or chief financial officer (CFO)of the company being audited.

Explain Section 552 of the Restatement (Second)of Torts.

Probate is defined as the verification of a company's books and records by a certified accountant.

A(n)________ opinion is an auditor's opinion that the company's financial statements fairly represent the company's financial position,the results of its operations,and the change in cash flows for the period under audit,in conformity with generally accepted accounting principles.

Constructive fraud is defined as the intentional misrepresentation or omission of a material fact that is relied on by the client and causes the client damage.

The Tax Reform Act of 1976 created the Public Company Accounting Oversight Board (PCAOB).

Which of the following is the most favorable opinion an auditor can give a company following an audit?

The accountant-client privilege provides that ________.

Generally Accepted Auditing Standards (GAASs)are established by the American Institute of Certified Public Accountants.

Legal Heritage and the Digital Age

Ethics and Social Responsibility of Business

Courts, Jurisdiction, and Administrative Agencies

Alternative, Judicial, and E-Dispute Resolution

Constitutional Law for Business and E-Commerce

Torts and Strict Liability

Cyber Law and Cyber Crimes

Intellectual Property and Cyber Piracy

Formation and Requirements of Contracts

Performance and Breach of Contracts

Digital Law and E-Commerce

UCC Sales Contracts, Leases, and Warranties

Credit, Secured Transactions, and Bankruptcy

Small Business, General Partnerships, and Limited Partnerships

Limited Liability Companies, Limited Liability Partnerships, and Special Forms of Business

Corporations and Corporate Governance

Investor Protection, E-Securities, and Wall Street Reform

Agency Law

Equal Opportunity in Employment

Employment Law and Worker Protection

Labor Law and Immigration Law

Antitrust Law and Unfair Trade Practices

Consumer Protection

Environmental Protection

Real Property and Land Use Regulation

International and World Trade Law

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