Exam 27: Accountants' Duties and Liability

According to the Sarbanes-Oxley Act of 2002,any person who is employed by a public accounting firm that audits a client cannot be employed by that client as the chief executive officer (CEO)or chief financial officer (CFO)for a period of five years following the audit.

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

Violations of GAAPs or GAASs,or IFRSs,if applicable,are prima facie evidence of negligence,although compliance does not automatically relieve the accountant of such liability.

The ________ Act of 1976 specifically imposes penalties and fines on accountants and others who prepare federal tax returns for the willful understatement of a client's tax liability.

Only purchasers and sellers of securities can sue under Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934.

What prohibition does the Sarbanes-Oxley Act impose on an accounting firm providing audit and nonaudit services to the same company?

In Ultramares Corporation vs.Touche,the court found the defendant accounting firm not liable for negligence due to the plaintiff's lack of privity of contract or a privity-like relationship with the defendant.

An adverse opinion is usually issued when an auditor determines that a company has materially misstated certain items on its financial statements.

________ is a rule that limits the liability of an accountant or other securities professional to his or her personal degree of fault.

Standards for the preparation and presentation of financial statements are known as ________.

Which of the following rules provides that an accountant is liable only for negligence to third parties who are members of a limited class of intended users of the client's financial statements?

A disclaimer of opinion is a corporate auditing exemption that effectively prohibits an auditor from accessing a high-priority portion of the company's financial records.

The Ultramares doctrine is the broadest standard for holding accountants liable to third parties for negligence.

Monica is an accountant with Mildred & Lane Inc. ,and she has recently been asked to visit Maine Manufacturers to survey their financial records,assess their compliance with federal and state laws,and provide an opinion reflecting the state of the company's financial records.Monica's assessment of the financial records of Maine Manufacturers is called a(n)________.

If an auditor makes a disclaimer of opinion,this means that the auditor ________.

Which of the following is true of an auditor of a corporation?

The Financial Accounting Standards Board (FASB)issues new GAAP rules and amends existing ones.

Under the Sarbanes-Oxley Act,in order to audit a public company,________.

Which of the following statements is true of accountants?

A formal entrance into a contract between a client and an accountant is called an abatement.