Question 1

To whom does an accountant have potential liability?

Accepted Answer

A)  To his client only. 
B)  To an intended third party beneficiary. 
C)  To a foreseen user of the accountant's work. 
D)  All of these. 
A)  To his client only. 
B)  To an intended third party beneficiary. 
C)  To a foreseen user of the accountant's work. 
D)  All of these.

Question 2

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

Accepted Answer

A)  establishing a new regulatory board to oversee public company auditors. 
B)  making auditors more independent from their clients. 
C)  requiring yearly certification refresher courses for all public company auditors to ensure they are using the latest conventions in accounting. 
D)  placing direct responsibility for the audit relationship on audit committees . 
A)  establishing a new regulatory board to oversee public company auditors. 
B)  making auditors more independent from their clients. 
C)  requiring yearly certification refresher courses for all public company auditors to ensure they are using the latest conventions in accounting. 
D)  placing direct responsibility for the audit relationship on audit committees .

Question 3

Which of the following would NOT constitute scienter?

Accepted Answer

A)  Negligent performance of a substandard audit. 
B)  Being paid to conceal fraud. 
C)  Reckless disregard for truth. 
D)  Actual knowledge of fraud. 
A)  Negligent performance of a substandard audit. 
B)  Being paid to conceal fraud. 
C)  Reckless disregard for truth. 
D)  Actual knowledge of fraud.

Question 4

For an accountant to be civilly liable under Rule 10b-5, the accountant must have acted with scienter.

Accepted Answer

A) True 
 B)False

Question 5

An accountant who willfully violates Section 11 of the 1933 Securities Act is subject only to civil liability.

Accepted Answer

A) True 
 B)False

Question 6

An accountant is negligent if she does not exercise the degree of care a reasonably competent accountant would exercise under the circumstances.

Accepted Answer

A) True 
 B)False

Question 7

A group of investors brings a class action lawsuit against the Z & R Accounting Firm under Section 10b and Rule 10b-5 of the 1934 Securities Act.Angela, an accountant with the firm, had done an audit of the Pennymart Inc.books.The audit failed to disclose that Orrin, the president of Pennymart, had stolen large amounts of cash from the firm.Pennymart eventually filed for bankruptcy as a result of the thefts.What is the likely result of the suit?

Accepted Answer

In general, accountants may be held civi

Question 8

Anna has a contract to perform accounting services for Intercend Corporation.She breaches her contract in a nonmaterial way.Which of the following is correct with respect to Anna's liability?

Accepted Answer

A)  Anna does not have liability to third party intended beneficiaries. 
B)  Anna will get full compensation only after she corrects the breach. 
C)  Anna is not entitled to any compensation for her services. 
D)  Anna is entitled to the contractually agreed upon fee less any damages or loss her breach has caused her clients. 
A)  Anna does not have liability to third party intended beneficiaries. 
B)  Anna will get full compensation only after she corrects the breach. 
C)  Anna is not entitled to any compensation for her services. 
D)  Anna is entitled to the contractually agreed upon fee less any damages or loss her breach has caused her clients.

Question 9

What sort of liability does an accountant have under the Securities Exchange Act of 1934?

Accepted Answer

A)  Criminal liability where there is a willful violation. 
B)  Civil liability where there is scienter. 
C)  Both of these are correct. 
D)  Neither of these is correct. 
A)  Criminal liability where there is a willful violation. 
B)  Civil liability where there is scienter. 
C)  Both of these are correct. 
D)  Neither of these is correct.

Exam 43: Accountants Legal Liability

To whom does an accountant have potential liability?

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

Which of the following would NOT constitute scienter?

For an accountant to be civilly liable under Rule 10b-5, the accountant must have acted with scienter.

An accountant who willfully violates Section 11 of the 1933 Securities Act is subject only to civil liability.

An accountant is negligent if she does not exercise the degree of care a reasonably competent accountant would exercise under the circumstances.

Anna has a contract to perform accounting services for Intercend Corporation.She breaches her contract in a nonmaterial way.Which of the following is correct with respect to Anna's liability?

What sort of liability does an accountant have under the Securities Exchange Act of 1934?

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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