Exam 20: Legal Liability

The Sarbanes-Oxley Act of 2002 is considered the most sweeping securities law since the 1933 and 1934 Acts.Which item in the list below was not part of the Sarbanes-Oxley Act of 2002?

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(Multiple Choice)

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Question 1

Correct Answer:

Verified

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.Which of the following statements is correct with regard to a suit against Larson and the client by a purchaser of the securities under Section 11 of the Securities Act of 1933?

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

Which of the following elements,if present,would support a finding of constructive fraud on the part of a CPA?

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(Multiple Choice)

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Question 3

Correct Answer:

Verified

To recover against an auditor in a negligence case,the client must prove that the client sustained an actual loss or damage.

(True/False)

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Question 4

The Sarbanes-Oxley Act enhances prosecutorial tools available in major fraud cases by

(Multiple Choice)

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Question 5

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 6

Which of the following is the best statement of the general standard of performance owed by an accountant in his or her professional work?

(Multiple Choice)

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Question 7

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 8

The Securities Exchange Act of 1934

(Multiple Choice)

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Question 9

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 10

When performing an audit,a CPA

(Multiple Choice)

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Question 11

Privity of contract is the most restrictive view for plaintiffs under common law.

(True/False)

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Question 12

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

(Multiple Choice)

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Question 13

Auditors can be held liable under two classes of law when sued by clients,investors,creditors,or the government.Identify and briefly explain both classes of law.

(Essay)

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Question 14

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

(Multiple Choice)

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Question 15

An auditor can be guilty under federal statutory law if s/he was reckless in performance of her/his professional duties.

(True/False)

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Question 16

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 17

Ritz Corporation wished to acquire the stock of Stale,Inc.In conjunction with its plan of acquisition,Ritz hired Fein,CPA,to audit the financial statements of Stale.Based on the audited financial statements and Fein's unqualified opinion,Ritz acquired Stale.Within 6 months,it was discovered that the inventory of Stale had been overstated by $500,000.Ritz commenced an action against Fein.Ritz believes that Fein failed to exercise the knowledge,skill,and judgment commonly possessed by CPAs in the locality,but is not able to prove that Fein either intentionally deceived it or showed a reckless disregard for the truth.Ritz also is unable to prove that Fein had any knowledge that the inventory was overstated.Which of the following two causes of action would provide Ritz with proper bases upon which Ritz would most likely prevail?

(Multiple Choice)

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Question 18

Common law requires the auditor perform professional services with due care.

(True/False)

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Question 19

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

(True/False)

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Question 20

Showing 1 - 20 of 65

The Sarbanes-Oxley Act of 2002 is considered the most sweeping securities law since the 1933 and 1934 Acts.Which item in the list below was not part of the Sarbanes-Oxley Act of 2002?

Which of the following elements,if present,would support a finding of constructive fraud on the part of a CPA?

To recover against an auditor in a negligence case,the client must prove that the client sustained an actual loss or damage.

The Sarbanes-Oxley Act enhances prosecutorial tools available in major fraud cases by

Which of the following is the best statement of the general standard of performance owed by an accountant in his or her professional work?

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?

The Securities Exchange Act of 1934

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

When performing an audit,a CPA

Privity of contract is the most restrictive view for plaintiffs under common law.

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

Auditors can be held liable under two classes of law when sued by clients,investors,creditors,or the government.Identify and briefly explain both classes of law.

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

An auditor can be guilty under federal statutory law if s/he was reckless in performance of her/his professional duties.

Common law requires the auditor perform professional services with due care.

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

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

Auditing the Inventory Management Process

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

Professsional Conduct,Independence,and Quality Control

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

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