Exam 44: Accountants Legal Liability

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:

In what situations is the accountant-client privilege recognized?

An accountant who willfully violates Section 11 of the 1933 Act is subject to fines of up to $100,000 or imprisonment of not more than three years, or both.

Wurst & Wurst is the accounting firm that has been used by the Intercontinental Bank for over twenty years.Tim approached Alfred, a Wurst partner, at a cocktail party.Tim asked about the bank's stability.Although Alfred knew that the bank's stock was overvalued, he felt a considerable amount of loyalty to the bank for being a good customer of his accounting firm.Alfred told Tim that Wurst had just finished an audit of the bank, and that the bank was as sound as the Rock of Gibraltar.The next day Tim bought 1,000 shares of Intercontinental.One month later, the bank's losses became the subject of a major financial scandal.Tim is angry and wants to sue.Does he have a case?

Which of the following is correct with regard to an accountant's contractual liability?

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

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

Most courts allow an accountant to raise the defense of the plaintiff's contributory or comparative negligence.

An accountant is generally held to be the owner of the working papers he uses in performing an audit.

To lessen his tax liability, a client asks his accountant to misstate information on his tax return.If the accountant does so, she may be subject to fines and up to three years in prison.

What are the requisite elements of fraud?

A binding contract between an accountant and the client is called an engagement.

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

In providing services for his client, an accountant obtains information concerning the client's business affairs.What are the legal issues concerning this client information?

Which of the following can be the basis for an accountant's liability under state law?

Protected individuals under the Restatement view of tort liability for an accountant include potential investors and the general public.

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?

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

The lead audit partner having primary responsibility for an audit and the partner responsible for reviewing the audit must rotate at least every 3 years.

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