Question 1

Which of the following is untrue regarding the relationship of an accountant and the client?

Accepted Answer

A)  The accountant must act in a competent and professional manner. 
B)  The accountant is under an ethical obligation not to disclose confidential information. 
C)  The accountant is under a contractual obligation to follow all of the client's instructions and to use the client's figures without question. 
D)  It is based upon mutual agreement. 
A)  The accountant must act in a competent and professional manner. 
B)  The accountant is under an ethical obligation not to disclose confidential information. 
C)  The accountant is under a contractual obligation to follow all of the client's instructions and to use the client's figures without question. 
D)  It is based upon mutual agreement.

Question 2

An accountant may not disclose the contents of his working papers under any circumstances.

Accepted Answer

A) True 
 B)False

Question 3

An accountant-client privilege is statutorily recognized in all states, permitting the accountant to refuse to disclose confidential information gleaned from his client.

Accepted Answer

A) True 
 B)False

Question 4

An accountant is subject to potential civil liability arising from the professional services he provides to his clients and third parties.

Accepted Answer

A) True 
 B)False

Question 5

What are the requisite elements of fraud?

Accepted Answer

The requisite elements of fraud include:

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

In which of the following types of cases can issues of accountant-client confidentiality arise?

Accepted Answer

A)  Civil litigation. 
B)  Criminal cases. 
C)  Tax cases. 
D)  All of these are situations where it can arise. 
A)  Civil litigation. 
B)  Criminal cases. 
C)  Tax cases. 
D)  All of these are situations where it can arise.

Question 8

List the services that the Sarbanes-Oxley Act prohibits accounting firms from performing for audit clients.

Accepted Answer

In order to make auditors more independe

Question 9

Under the Securities Exchange Act of 1934, an accountant's liability for false or misleading statements is based on a good faith negligence standard.

Accepted Answer

A) True 
 B)False

Question 10

An accountant's legal responsibility under state law may be based on:

Accepted Answer

A)  criminal law. 
B)  contract law. 
C)  tort law. 
D)  All of these. 
A)  criminal law. 
B)  contract law. 
C)  tort law. 
D)  All of these.

Question 11

Barbara, a CPA, fails to discover a fairly obvious error in the books of her client, Banana Computers.If Ben relies on Barbara's certification of the financial statement in deciding to accept the position of president of the company, Barbara will:

Accepted Answer

A)  not be liable to Ben unless Ben notified Barbara in advance of his intention to rely on the financials. 
B)  be liable to Ben only if she has a contract with Ben. 
C)  not be liable if Ben is not a party to the original contract. 
D)  in most states be liable to Ben as a third party beneficiary of her contract with Banana. 
A)  not be liable to Ben unless Ben notified Barbara in advance of his intention to rely on the financials. 
B)  be liable to Ben only if she has a contract with Ben. 
C)  not be liable if Ben is not a party to the original contract. 
D)  in most states be liable to Ben as a third party beneficiary of her contract with Banana.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

Diane prepared a registration for the first issuance of stock of the Ledmar Corporation.Diane took the assignment very seriously and spent a great deal of time preparing the statement.Two years after the statement was filed, the SEC began to investigate the company and claims that the information in Diane's statement was misleading, because some of the information given to her by the corporation was false.Diane had tried to verify the information, but was not able to do so.An investor is now suing Diane claiming that she violated the 1933 act.Is Diane liable?

Accepted Answer

Diane will be able to avoid liability by

Question 16

Section 11 of the 1933 Securities Act imposes liability upon an accountant for negligence in the conduct of an audit.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  material breach. 
B)  negligence. 
C)  substantial performance. 
D)  fraud. 
A)  material breach. 
B)  negligence. 
C)  substantial performance. 
D)  fraud.

Question 18

The Public Company Accounting Oversight Board can impose sanctions in its disciplinary proceedings, including the permanent revocation of an accounting firm's registration, a permanent ban on a person's associating with any registered firm, and civil monetary penalties.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  Tampering with accounting records. 
B)  Falsely completing a tax return. 
C)  Advising a client to falsely complete his own tax return. 
D)  All of these could subject an accountant to criminal liability. 
A)  Tampering with accounting records. 
B)  Falsely completing a tax return. 
C)  Advising a client to falsely complete his own tax return. 
D)  All of these could subject an accountant to criminal liability.

Question 20

An accountant can ethically disclose a client's confidential information if the accountant complies with:

Accepted Answer

A)  a court order. 
B)  Generally Accepted Auditing Standards requirements. 
C)  the client's request. 
D)  All of these. 
A)  a court order. 
B)  Generally Accepted Auditing Standards requirements. 
C)  the client's request. 
D)  All of these.

Exam 43: Accountants Legal Liability

Which of the following is untrue regarding the relationship of an accountant and the client?

An accountant may not disclose the contents of his working papers under any circumstances.

An accountant-client privilege is statutorily recognized in all states, permitting the accountant to refuse to disclose confidential information gleaned from his client.

An accountant is subject to potential civil liability arising from the professional services he provides to his clients and third parties.

What are the requisite elements of fraud?

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

In which of the following types of cases can issues of accountant-client confidentiality arise?

List the services that the Sarbanes-Oxley Act prohibits accounting firms from performing for audit clients.

Under the Securities Exchange Act of 1934, an accountant's liability for false or misleading statements is based on a good faith negligence standard.

An accountant's legal responsibility under state law may be based on:

Barbara, a CPA, fails to discover a fairly obvious error in the books of her client, Banana Computers.If Ben relies on Barbara's certification of the financial statement in deciding to accept the position of president of the company, Barbara will:

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

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

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.

Section 11 of the 1933 Securities Act imposes liability upon an accountant for negligence in the conduct of an audit.

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

The Public Company Accounting Oversight Board can impose sanctions in its disciplinary proceedings, including the permanent revocation of an accounting firm's registration, a permanent ban on a person's associating with any registered firm, and civil monetary penalties.

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

An accountant can ethically disclose a client's confidential information if the accountant complies with:

Introduction to Law

Business Ethicspart Ii: the Legal Environment of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Negligence and Strict Liabilitypart Iii: Contracts

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remediespart Iv: Sales

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remediespart V: Negotiable Instruments

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transferspart Vi: Agency

Relationship of Principal and Agent

Relationship With Third Partiespart Vii: Business Associations

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporationspart Viii: Debtor and Creditor Relations

Secured Transactions and Suretyship

Bankruptcypart Ix: Regulation of Business

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Consumer Protection

International Business Lawpart X: Property

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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