Question 1

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

Accepted Answer

A)  Gross negligence in applying generally accepted auditing standards. 
B)  Ordinary negligence in applying generally accepted accounting principles. 
C)  Identified third-party users. 
D)  Scienter. 
A)  Gross negligence in applying generally accepted auditing standards. 
B)  Ordinary negligence in applying generally accepted accounting principles. 
C)  Identified third-party users. 
D)  Scienter.

Question 2

A plaintiff, who is a normal trade creditor, can collect damages under common law for negligence from the corporation's auditors.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  The CPA is liable only to third parties who are in privity of contract with the CPA. 
B)  The CPA is liable only to known users of the financial statements. 
C)  The CPA probably is liable to any person who suffered a loss as a result of the fraud. 
D)  The CPA probably is liable to the client even if the client was aware of the fraud and did not rely on the opinion. 
A)  The CPA is liable only to third parties who are in privity of contract with the CPA. 
B)  The CPA is liable only to known users of the financial statements. 
C)  The CPA probably is liable to any person who suffered a loss as a result of the fraud. 
D)  The CPA probably is liable to the client even if the client was aware of the fraud and did not rely on the opinion.

Question 4

Third-party plaintiffs bringing action under common law need NOT prove ________.

Accepted Answer

A)  they were damaged or suffered a loss 
B)  reliance on the financial statements 
C)  the financial statements were direct cause of loss 
D)  breach of contract 
A)  they were damaged or suffered a loss 
B)  reliance on the financial statements 
C)  the financial statements were direct cause of loss 
D)  breach of contract

Question 5

Accountants are not liable for misstatements in compilation or review engagements.

Accepted Answer

A) True 
 B)False

Question 6

The lessons for accountants that are inherent in the 1136 Tenants' Corporation v. Rothenberg & Co. case include all of the following EXCEPT which one?

Accepted Answer

A)  Engagement letters are as essential for accounting engagements as they are for audit engagements. 
B)  Regardless of the nature of the engagement, a public accountant should be alert for and should follow up on any unusual items such as missing invoices. 
C)  Accountants should clearly communicate the extent of their association with financial information. 
D)  Public accountants cannot be held liable to third parties in non-audit or review engagements. 
A)  Engagement letters are as essential for accounting engagements as they are for audit engagements. 
B)  Regardless of the nature of the engagement, a public accountant should be alert for and should follow up on any unusual items such as missing invoices. 
C)  Accountants should clearly communicate the extent of their association with financial information. 
D)  Public accountants cannot be held liable to third parties in non-audit or review engagements.

Question 7

What is privity?

Accepted Answer

A relationship of direct invol

Question 8

Which of the following statements represents an audit failure?

Accepted Answer

A)  A client goes bankrupt or has serious financial difficulty. 
B)  An auditor failed to conduct an audit in accordance with GAAS. 
C)  An auditor cannot collect the audit fees from the client. 
D)  An auditor is sued by a third party. 
A)  A client goes bankrupt or has serious financial difficulty. 
B)  An auditor failed to conduct an audit in accordance with GAAS. 
C)  An auditor cannot collect the audit fees from the client. 
D)  An auditor is sued by a third party.

Question 9

In a common law action against an accountant, lack of privity is a viable defence if the plaintiff ________.

Accepted Answer

A)  is the client's creditor who sues the accountant for negligence 
B)  can prove the presence of gross negligence that amounts to a reckless disregard for the truth 
C)  is the accountant's client 
D)  bases the action upon fraud 
A)  is the client's creditor who sues the accountant for negligence 
B)  can prove the presence of gross negligence that amounts to a reckless disregard for the truth 
C)  is the accountant's client 
D)  bases the action upon fraud

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

A plaintiff, who is a normal trade creditor, can collect damages under common law for negligence from the corporation's auditors.

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

Third-party plaintiffs bringing action under common law need NOT prove ________.

Accountants are not liable for misstatements in compilation or review engagements.

The lessons for accountants that are inherent in the 1136 Tenants' Corporation v. Rothenberg & Co. case include all of the following EXCEPT which one?

What is privity?

Which of the following statements represents an audit failure?

In a common law action against an accountant, lack of privity is a viable defence if the plaintiff ________.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Other Professional Accounting Services and Reports, Including Fraud

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Exam 20: Legal Liability Cases

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

A plaintiff, who is a normal trade creditor, can collect damages under common law for negligence from the corporation's auditors.

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

Third-party plaintiffs bringing action under common law need NOT prove ________.

Accountants are not liable for misstatements in compilation or review engagements.

The lessons for accountants that are inherent in the 1136 Tenants' Corporation v. Rothenberg & Co. case include all of the following EXCEPT which one?

What is privity?

Which of the following statements represents an audit failure?

In a common law action against an accountant, lack of privity is a viable defence if the plaintiff ________.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue Theaudit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

Part I the Audit of Accounting Estimates: Basic Material Relating to Accountingestimates

Other Professional Accounting Services and Reports, Including Fraud

Filters