Exam 20: Legal Liability Cases

In a common law action against an accountant,all that a plaintiff must prove is that the accountant was negligent,grossly negligent,fraudulent,or otherwise responsible for the damages claimed.

A CA may be liable to any purchaser of a security if the CA issued a clean opinion on materially misstated financial statements.The CA usually will not be liable to the purchaser ________.

Joint and several liability is a doctrine that allows a successful plaintiff to recover the full amount of damage award from the defendants who have money or insurance.

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

What is joint and several liability?

Negligence is the failure to perform a duty with the requisite standard of care.What are the four elements of negligence and what would be an auditor's defence against them?

Auditors are increasingly obligated to report illegal acts to third parties outside the company in which they occurred.

During a review engagement,CA discovers that the gross margin has increased by 20% over the last few years.To avoid potential liability due to possibly misstated financial statements,what should CA do?

What is a primary beneficiary?

If a professional accountant is able to reasonably foresee a limited class of potential users for his or her work,liability may then be imposed for ________.

When an auditor is found guilty of a fraudulent misrepresentation,there is liability owed to ________.

Under the common law,in a lawsuit concerning auditor liability,the primary beneficiary is _______.

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

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

Constructive fraud is characterized by an intentional act designed to deceive,mislead or injure the rights of another person.

A letter where accountants sign that they have been notified that a particular recipient of the financial statements and audit report intends to rely upon them for particular purposes is known as a(n)________.

A relationship of direct involvement between parties to a contract is known as privity

Even in a review engagement,the accountant cannot merely accept client-supplied information that appears to be false or misleading.

case,it was held that the auditor takes complete responsibility for detecting fraud in a set of financial statements they are auditing.

Which of the following is NOT an element of a successful negligence action against auditors?