Exam 43: Accountants Legal Liability

An accountant who substantially performs his contractual duties is generally entitled to be compensated for the contractually agreed-upon fee, less any damages caused to the client.

The purposes of the Sarbanes-Oxley Act include all of the following except:

Which of the following would NOT constitute scienter?

Accountants are subject to civil liability under the Securities Act of 1933 if the financial statements they prepare or certify for inclusion in a registration statement contain any untrue statement or omit any material fact, but only if reliance on the financial statements is proven.

In recent years, accountants have been subject to civil lawsuits based on the Racketeering Influenced and Corrupt Organizations Act.

Angela tells her accountant, "I must have this year's audit completed by March 10, and time is of the essence." The accountant agrees to complete the audit by March 10. Under general contract law, if the audit is not completed by March 10, Angela does not have to pay the accountant for the audit.

In the Ernst & Ernst v. Hochfelder case, the Supreme Court stated that Section 10(b) of the 1934 Act and SEC Rule 10b-5 apply only to intentional conduct and not to negligence.

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

In what situations is the accountant-client privilege recognized?

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

The failure by an accountant to use the care of a reasonably competent accountant under the circumstances is:

Pam certified a statement prepared by John, her employee, without checking John's work. He was never known to be anything but diligent and his integrity had never been questioned. The audit contained gross misstatements. Pam defends a suit against her claiming "due diligence." She will:

Section 1 of the 1934 Securities Act imposes liability upon an accountant for negligence in the conduct of an audit.

The group responsible for registering public accounting firms that prepare audit reports for issuers; overseeing the audit of public companies; establishing audit report standards and rules; and inspecting, investigating, and enforcing compliance on the part of registered public accounting firms is the:

The Sarbanes-Oxley Act establishes a new regulatory body to oversee public company auditors, makes auditors more closely connected to their clients, and places direct responsibility for the audit relationship on the auditor himself.

An accounting firm may perform both bookkeeping services and audits for the same client.

To whom does an accountant have potential liability?

What are the requisite elements of fraud?

An accountant has no liability to parties other than the client.

Both the common law and federal law recognize an accountant-client privilege.