Exam 4: Legal Liability Considerations for Auditors

The assessment against a defendant of the full loss suffered by a plaintiff regardless of the extent to which other parties shared in the wrongdoing is called:

Under the laws of agency,partners of a CPA firm may be liable for the work of others on whom they rely.This would not include:

A group typically included as "third parties" in common law is:

If an auditor fails to fulfill a certain requirement in the contract,they may be guilty of:

Which of the following is an accurate statement regarding recent actions brought against accountants by clients and third parties?

The same three defenses available to auditors in common lawsuits by third parties nonnegligent performance,lack of duty,and absence of causal connection-are also available for suits under the Securities Exchange Act of 1934.

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

Which of the following most accurately describes fraud?

Match eight of the following terms (a-n)with the definitions provided below (1-8): a.Foreign Corrupt Practices Act b.Securities Exchange Act of 1934 c.Securities Litigation Uniform Standards Act of 1998 d.Securities Act of 1933 e.Ultramares doctrine f.Audit risk g.Audit failure h.Standards failure i.Business failure j.Absence of causal connection k.Contributory negligence l.Lack of duty to perform m.Private Securities Litigation Reform Act n.Nonnegligent performance ________ 1.A situation in which an incorrect audit opinion is issued because it failed to comply with the requirements of auditing standards. ________ 2.A federal statute dealing with companies that trade securities on national and over-the-counter exchanges.Auditors are involved because the annual reporting requirements include audited financial statements. ________ 3.An auditor's legal defense under which the auditor claims that the client's own actions either resulted in the loss that is the basis for damages or interfered with the conduct of the audit in such a way that prevented the auditor from discovering the cause of the loss. ________ 4.A federal statute that makes it illegal to offer a bribe to an official of a foreign country. ________ 5.A common-law approach to third-party liability in which ordinary negligence is insufficient for liability to third parties,because of the lack of privity of contract between the third-party and the auditor unless the third-party is a primary beneficiary. ________ 6.A federal statute designed to significantly reduce the potential damages in federal securities-related litigation by providing for proportionate liability in most cases. ________ 7.An auditor's legal defense under which the auditor claims that the audit was performed in accordance with generally accepted auditing standards. ________ 8.An auditor's legal defense under which the auditor claims that the failure to follow auditing standards did not cause the damages suffered by the client.

One result from the Escott et al.v.Bar Chris case was a greater emphasis being placed on audit staff understanding the client's business and industry.

Which of the following statements is true?

Critical lessons learned after analyzing major criminal cases against auditors include the fact that:

Under the Securities Act of 1933,a third party plaintiff does not have the burden of proof that he or she relied on the financial statements or that the auditor was negligent or fraudulent in doing the audit.Rather,the plaintiff need only prove that the audited financial statements contained a material misrepresentation or omission.

In order to protect themselves from legal liability,it is important that CPAs:

In which case were auditors prosecuted for filing false financial statements for a client with the government?

An adequate system of internal control for SEC registrants was originally required by the:

The principal issue to be resolved in cases involving alleged negligence is usually:

The major conclusion of the 1931 Ultramares case was that:

The Private Securities Litigation Reform Act of 1995 capped damage awards against auditors to the amount of the audit fees charged.

The Sarbanes-Oxley Act requires the CEO and CFO of a public company to certify the annual and quarterly financial statements filed with the PCAOB.