Exam 32: Legal Liability of Accountantspart Six Property

The accountant issues a(n)_____ if the audited financial statements accurately reflect the client's financial condition in compliance with generally accepted accounting principles.

Raunak,an accountant,has been subpoenaed to testify and produce its working papers as well as conversations regarding a lawsuit brought against Shyam,one of his clients.Which of the following statements is true of Raunak's attempt to avoid having to present such evidence?

The privity doctrine does not limit recovery from a suit to those with a direct contractual relationship to the accountant.

Under Rule 10b-5 of the Securities Act of 1934,_____.

The near privity approach was adopted by courts in contrast to the strict privity rule of the:

Akira purchased a certain number of securities and incurred losses due to a decline in the price of securities in the market.She held her accountant,Jason,liable for her entire loss.Given this information,which of the following statements is true?

Under the near privity approach,an accountant may be liable in negligence to third parties when:

A purchaser of securities sold on a stock exchange lost all or part of his investment as a result of an accountant's errors in preparing a corporation's financial statements.Explain why he or she would not prefer to sue the accountant under Rule 10b-5.

Accountants' duty of care:

The failure of an accountant to discover fraud by the client's employees or others would not be considered proof of negligence by the accountant.