Exam 15: Legal Liability

The effect of section 11 of the Securities Act of 1933 is to shift the major burden of proof from auditors to the plaintiff.

Auditors should not be liable to any party if they perform services that meet the standards of

The restatement of torts is a general legal doctrine that extends liability for ordinary negligence to

The SEC's __________________________________________ express new rules and policies about accounting and disclosures.

Under section 11(b)of the Securities Act of 1933,if auditors can prove that a reasonable investigation was performed (e.g.,an audit conducted in accordance with __________________________________________,they are not liable for damages.

The general registration form for new issues of securities is Form 10-K.

The Securities Act of 1933 regulates subsequent trading of securities,and the Securities Exchange Act of 1934 regulates the initial issuance of securities.

While conducting an audit of a public entity,Wallace failed to identify material misstatements in its client's financial statements.Investors then sued Wallace in connection with this audit.Which of the following would not need to be demonstrated in order for the shareholders to successfully bring suit against Wallace?

Which of the following is a third party whose name the auditor knows and for whose purpose the audit is conducted?

At the request of James Company's management,

The Securities and Exchange Commission document that governs accounting in financial statements filed with the SEC is

Which of the following is a major difference in auditors' liability under the Securities Act of 1933 and the Securities Exchange Act of 1934?

A group of investors sued Anderson,Olds,and Watershed,CPAs (AOW)for alleged damages suffered when the entity in which they held common stock went bankrupt.To avoid liability under the common law,AOW must prove which of the following?

Under section 11 of the Securities Act of 1933,a plaintiff suing for damages must prove

Sleek Corporation is a public corporation whose stock is traded on a national securities exchange.Sleek hired Garson Associates,CPAs,to audit Sleek's financial statements.Sleek needed the audit to obtain bank loans and to make a public stock offering so that it could undertake a business expansion program. Before the engagement, F. Hedge, Sleek's president, told Garson's managing partner that the audited financial statements would be submitted to Sleek's banks to obtain the necessary loans. During the course of the audit, Garson's managing partner found that Hedge and other Sleek officers had embezzled substantial amounts of money from the corporation. These embezzlements threatened Sleek's financial stability. When these findings were brought to Hedge's attention, Hedge promised that the money would be repaid and begged Garson not to disclose the embezzlements.

The Securities Act of 1933 and Securities Exchange Act of 1934 contain

From the auditors' point of view,which of the following is a preferable provision for imposition of civil liability in a lawsuit for financial damages?

To prevail in an action brought under common law,the plaintiff must show all of the following except

Under the liability provisions of section 11 of the Securities Act of 1933,auditors may be liable to any purchaser of securities for certifying materially misstated financial statements that are included in the registration statement.Under section 11,which of the following must a purchaser of the security prove?

The Securities Act of 1933