Exam 20: Legal Liability

While conducting an audit,Larson Associates,CPAs,failed to detect material misstatements included in its client's financial statements.Larson's unqualified opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client.Larson knew that its opinion and the financial statements would be used for this purpose.In suit by a purchaser against Larson for common-law fraud,Larson's best defense would be that

(Multiple Choice)

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Question 21

Under common law,which of the following statements most accurately reflects the liability of a CPA who fraudulently gives an opinion on an audit of a client's financial statements?

(Multiple Choice)

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Question 22

Under the antifraud provisions of Section 10(b)of the Securities Exchange Act of 1934,a CPA may be liable if the CPA acted

(Multiple Choice)

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Question 23

Under the liability provisions of Section 11 of the Securities Act of 1933,a CPA may be liable to any purchaser of a security for certifying materially misstated financial statements that are included in the security's registration statement.Under Section 11,a CPA usually will not be liable to the purchaser

(Multiple Choice)

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Question 24

An auditor can be sued by a client for negligence under common law.

(True/False)

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Question 25

To be successful in a civil action under Section 11 of the Securities Act of 1933 concerning liability for a misleading registration statement,the plaintiff must prove

(Multiple Choice)

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Question 26

Gold,CPA,rendered an unqualified opinion on the financial statements of Eastern Power Company.Egan purchased Eastern bonds in a public offering subject to the Securities Act of 1933.The registration statement filed with the SEC included the audited financial statements.Gold is being sued by Egan under Section 11 of the Securities Act of 1933 for the misstatements contained in the financial statements.To prevail,Egan must prove

(Multiple Choice)

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Question 27

A tort is a breach of contract for which civil action may be taken.

(True/False)

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Question 28

Common law is written law enacted by the legislative branches of governments.

(True/False)

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Question 29

Which of the following is the best defense a CPA firm can assert in a suit for common law fraud based on its unqualified opinion on materially false financial statements?

(Multiple Choice)

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Question 30

An auditor,using the same degree of due care as other members of the profession,fails to create an adequate allowance for bad debts.This occurrence is an example of

(Multiple Choice)

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Question 31

Under the "Ultramares" doctrine,to which of the following parties will an accountant be liable for negligence?

(Multiple Choice)

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Question 32

When performing an audit,a CPA will most likely be considered negligent when the CPA fails to

(Multiple Choice)

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Question 33

Rule 10b-5 under Section 10(b)of the Securities Exchange Act of 1934 imposes liability on an accountant for violation of certain duties.Which of the following is an investor not required to prove to recover from a CPA?

(Multiple Choice)

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Question 34

Jay and Co.,CPAs,audited the financial statements of Maco Corp.Jay intentionally gave an unqualified opinion on the financial statements even though material misstatements were discovered as a result of the audit.The financial statements and Jay's unqualified opinion were included in a 10-K (annual report filed with the SEC)for the company.Which of the following statements is correct regarding Jay's liability to a purchaser of the offering under Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934?

(Multiple Choice)

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Question 35

Which of the following is not required for establishing an auditor's liability for negligence?

(Multiple Choice)

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Question 36

Which of the following statements is (are)correct regarding the common law elements that must be proven to support a finding of constructive fraud against a CPA? I.The plaintiff has justifiably relied on the CPA's misrepresentation. II.The CPA has acted in a grossly negligent manner.

(Multiple Choice)

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Question 37

In a common law action against an accountant in a state following the Ultramares doctrine,lack of privity is a viable defense if the plaintiff

(Multiple Choice)

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Question 38

Which of the following is something that the plaintiff must prove in order for an accountant to be liable for damages under Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934?

(Multiple Choice)

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Question 39

Beckler & Associates,CPAs,audited and gave an unqualified opinion on the financial statements of Queen Co.The financial statements contained misstatements that resulted in a material overstatement of Queen's net worth.Queen provided the audited financial statements to Mac Bank in connection with a loan made by Mac to Queen.Beckler knew that the financial statements would be provided to Mac.Queen defaulted on the loan.Mac sued Beckler for ordinary negligence to recover for its losses associated with Queen's default.Which of the following must Mac prove in order to recover? I.Beckler was negligent in conducting the audit. II.Mac relied on the financial statements.

(Multiple Choice)

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Question 40

Showing 21 - 40 of 68

Under common law,which of the following statements most accurately reflects the liability of a CPA who fraudulently gives an opinion on an audit of a client's financial statements?

Under the antifraud provisions of Section 10(b)of the Securities Exchange Act of 1934,a CPA may be liable if the CPA acted

An auditor can be sued by a client for negligence under common law.

To be successful in a civil action under Section 11 of the Securities Act of 1933 concerning liability for a misleading registration statement,the plaintiff must prove

A tort is a breach of contract for which civil action may be taken.

Common law is written law enacted by the legislative branches of governments.

Which of the following is the best defense a CPA firm can assert in a suit for common law fraud based on its unqualified opinion on materially false financial statements?

An auditor,using the same degree of due care as other members of the profession,fails to create an adequate allowance for bad debts.This occurrence is an example of

Under the "Ultramares" doctrine,to which of the following parties will an accountant be liable for negligence?

When performing an audit,a CPA will most likely be considered negligent when the CPA fails to

Rule 10b-5 under Section 10(b)of the Securities Exchange Act of 1934 imposes liability on an accountant for violation of certain duties.Which of the following is an investor not required to prove to recover from a CPA?

Which of the following is not required for establishing an auditor's liability for negligence?

Which of the following statements is (are)correct regarding the common law elements that must be proven to support a finding of constructive fraud against a CPA? I.The plaintiff has justifiably relied on the CPA's misrepresentation. II.The CPA has acted in a grossly negligent manner.

In a common law action against an accountant in a state following the Ultramares doctrine,lack of privity is a viable defense if the plaintiff

Which of the following is something that the plaintiff must prove in order for an accountant to be liable for damages under Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning,Types of Audit Tests,and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct,Independence,and Quality Control

Assurance,Attestation,and Internal Auditing Services

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