Exam 27: Accountants Liability

Auditors cannot protect themselves from liability to third parties by issuing a qualified or an adverse opinion.

Which statement best describes the 1934 Act's position on whistleblowing?

John is auditing MegaCorp.He finds an accounts payable for 10,000 cases of ball bearings.He checks to make sure the paper actually arrived and that the receiving department signed and dated the invoice.He also checks the original purchase order to make sure the purchase was properly authorized.This illustrates

In 2007,the Securities and Exchange Commission (SEC)began to allow foreign companies to use which of the following for its reporting standards?

Discuss how SEC rules affect the legal and the ethical relationship between accountants and the companies they audit.

Which of the following correctly lists auditor opinions from most to least favorable?

An auditor suspects its client is committing illegal acts that will have a material impact on its financial statements.What is the auditor legally required to do and under what circumstances would the auditor directly notify the SEC?

Accounting contracts can be either written or oral.

The accounting firm of Gray & Co.did accounting work for both Regional Bank and Carter Electronics.Without Carter's knowledge or approval,Gray & Co.discussed Carter's financial problems with Regional Bank.In this situation,Gray & Co.

Rick prepared financial statements for MegaCorp knowing that it was going to use his statements to apply for a loan with Big Bank.When Big Bank turned MegaCorp down,it applied to Fourth Bank for a loan.MegaCorp presented the statements prepared by Rick to Fourth Bank,which gave the company a loan.It was discovered that Rick was negligent in preparing the statements,and Fourth Bank sued Rick.Under which of the following tests is Rick liable?

Under the amended Securities Exchange Act of 1934,accountants are liable jointly and severally whether or not they knew they were violating the law.

One of the accountant's most important roles is to serve as an independent evaluator of the financial statements issued by management to investors and creditors.

Sally prepared financial statements for MegaCorp knowing that the company would be using her statements when applying for a loan at Big Bank.It is discovered she was negligent in preparing the statements,and Big Bank sues her.Sally is liable under the

Adam claimed that N & A,its accounting firm,negligently prepared an audit.To hold the accounting firm liable,which of the following elements must be established?

The accounting firm of Griggs,Macon,and Fiurre audits the financial records of Chasse,a public company.The Sarbanes-Oxley Act prohibits the accounting firm from providing consulting services to Chasse on human resource matters.

Fast Auditors prepared audited financial statements for Mega Company's registration statement in compliance with the 1933 Securities Act.John bought stock in Mega Company.It was discovered that the financial statements prepared for the registration statement contained some important omissions.John sued Fast Auditors to recover his investment when Mega Company turned out to be a bad investment.What must John prove to recover from Fast Auditors?

To verify transactions,accountants use two mirror-image processes: vouching and tracing.Tracing is a process where the accountant begins with an item of original data and checks out all the activity that has occurred from beginning to end to make sure it has been properly recorded throughout the bookkeeping process.

Under what circumstances are accountants liable to their clients for fraud?

Larry is a certified public accountant in a firm that audits public companies.Larry is accused of unethical conduct.Is Larry required to abide by the ethical standards of the Public Company Accounting Oversight Board?

The Big Four accounting firms spend about what percentage of their revenue on litigation,including settlements and insurance?