Exam 5: Legal Liability

The legal term for when an auditor issues an audit opinion, knowing that an adequate audit was not performed, is a

Which of the following factors does not explain why the number of lawsuits and the sizes of awards to plaintiffs in cases involving CPA firms remains high even today?

Which of the following statements about the Securities Act of 1933 is not true?

Little enforcement of the provisions of the Foreign Corrupt Practices Act (FCPA) has been required since management's responsibilities were reinforced and extended by the Sarbanes-Oxley Act of 2002.

Section 10 and Rule 10b-5 of the Securities Exchange Act of 1934 are often referred to as

The most significant audit issue that came as a result of the court decision in the Escott et al. v. BarChris Construction Corporation case in 1968 was

The 2012 news of a massive alleged bribery scheme involving Wal-Mart has brought charges against the company under the

According to the principle established by the Restatement of Torts, foreseen users must be members of

Tort actions against CPAs are more common than breach of contract actions because

The Sarbanes-Oxley Act of 2002 is an example of a statutory law passed by the U.S. Congress which affects auditors.

There is a public perception that auditors guarantee the accuracy of the financial statements they have audited and guarantee the financial viability of the business.

Laws that have been passed by the U.S. Congress and other governmental units are

The increased litigation under the federal securities laws has resulted from

Which of the following resulted in a federal law passed in 1995 that significantly reduced potential damages in securities-related litigation?

A broad interpretation of the rights of third-party beneficiaries holds that users whom the auditor should have been able to foresee as being likely users of financial statements have the same rights as those with privity of contract. This is known as the concept of

Under the Securities Act of 1933,

Audit risk is the risk there will be an audit failure for a given audit engagement.

Which of the following is an illustration of liability to clients under common law?

Auditors may be liable to their clients if they are found guilty of

Assume that an auditor failed to complete an audit for a client on an agreed-upon date. The client files a lawsuit against the auditor, claiming that this delay caused the client to delay a public offering of common stock. A potential defense for the auditor is that the public offering was delayed by the underwriters due to the weakening financial condition of the client.