Question 1

A defendant accountant will likely first try to argue that it had no privity relationship with the plaintiff.

Accepted Answer

A) True 
 B)False

Question 2

When referring to public accountants,what does breach of contract mean?

Accepted Answer

A) A lawsuit involving a client and an auditor. 
B) Services were not performed as agreed. 
C) Auditor bills clients for extra services. 
D) There is no engagement letter signed by the client. 
A) A lawsuit involving a client and an auditor. 
B) Services were not performed as agreed. 
C) Auditor bills clients for extra services. 
D) There is no engagement letter signed by the client.

Question 3

Who would be considered a reasonably foreseeable third party for an auditor?

Accepted Answer

A reasonably foreseeable third party wou

Question 4

The Securities and Exchange Commission in the United States will hold a negligent auditor liable under common law.

Accepted Answer

A) True 
 B)False

Question 5

The OSC in Canada has powers to decide what is GAAP,similar to the SEC in the United States.

Accepted Answer

A) True 
 B)False

Question 6

Some people argue that there is a legal liability crisis for auditors in Canada.Do you agree or disagree? Provide some evidence supporting this argument,and some evidence contradicting this argument.

Accepted Answer

Auditors are increasingly being held to

Question 7

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

Accepted Answer

A) True 
 B)False

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

Due professional care implies that the practitioner is conducting his or her work to the highest possible standard and will make no errors.

Accepted Answer

A) True 
 B)False

Question 10

Beckler & Associates CAs issued an unqualified opinion on the financial statements of Queen Ltd.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 to recover the 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.

Accepted Answer

A) I only. 
B) II only. 
C) Both I and II. 
D) Neither I nor II. 
A) I only. 
B) II only. 
C) Both I and II. 
D) Neither I nor II.

Question 11

Due professional care occurs when an auditor observes all the rules of conduct for the profession and applies all the standards of the profession.

Accepted Answer

A) True 
 B)False

Question 12

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

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 13

While conducting an audit,Larson & Larson Chartered Accountants failed to detect a material misstatement in its client's financial statements.Larson's unqualified opinion was included with the financial statements in a 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?

Accepted Answer

A) The purchaser must prove that Larson was negligent in conducting the audit. 
B) The purchaser must prove that Larson knew of the material misstatements. 
C) Larson will not be liable if they had reasonable grounds to believe the financial statements were accurate. 
D) Larson will be liable unless the purchaser did not rely on the financial statements. 
A) The purchaser must prove that Larson was negligent in conducting the audit. 
B) The purchaser must prove that Larson knew of the material misstatements. 
C) Larson will not be liable if they had reasonable grounds to believe the financial statements were accurate. 
D) Larson will be liable unless the purchaser did not rely on the financial statements.

Question 14

An important case that limits the auditor's liability to those third parties of which the auditor had knowledge was ________.

Accepted Answer

A) Dupuis v.Pan American Mines 
B) Hedley Byrne & Co.Ltd.v.Heller & Partners Ltd. 
C) Caparo Industries PLC.v.Dickman et al. 
D) Haig v.Bamford et al. 
A) Dupuis v.Pan American Mines 
B) Hedley Byrne & Co.Ltd.v.Heller & Partners Ltd. 
C) Caparo Industries PLC.v.Dickman et al. 
D) Haig v.Bamford et al.

Question 15

While conducting an audit,Larson Associates CAs failed to detect a material misstatement 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 a suit by a purchaser against Larson for common law negligence,Larson's best defence would be that the ________.

Accepted Answer

A) audit was conducted in accordance with generally accepted auditing standards 
B) client was aware of the misstatements 
C) purchaser was not in privity of contract with Larson 
D) identity of the purchaser was not known to Larson at the time of the audit 
A) audit was conducted in accordance with generally accepted auditing standards 
B) client was aware of the misstatements 
C) purchaser was not in privity of contract with Larson 
D) identity of the purchaser was not known to Larson at the time of the audit

Question 16

Accountants are liable under the common law for breach of contract if they fail to fulfill their contractual obligations with their clients and for negligence if they fail to exercise due care in the performance of services for their clients

Accepted Answer

A) True 
 B)False

Question 17

A reasonably foreseeable third party would include current shareholders but not lenders.

Accepted Answer

A) True 
 B)False

Question 18

What are the legal liabilities of professional accountants under the common law?

Accepted Answer

Accountants are liable under the common

Question 19

A company whose partners' liability is limited to the capital they have invested in the business is known as a ________.

Accepted Answer

A) partnership 
B) corporation 
C) proprietorship 
D) limited liability partnership 
A) partnership 
B) corporation 
C) proprietorship 
D) limited liability partnership

Question 20

What is privity?

Accepted Answer

A relationship of direct invol

A defendant accountant will likely first try to argue that it had no privity relationship with the plaintiff.

When referring to public accountants,what does breach of contract mean?

Who would be considered a reasonably foreseeable third party for an auditor?

The Securities and Exchange Commission in the United States will hold a negligent auditor liable under common law.

The OSC in Canada has powers to decide what is GAAP,similar to the SEC in the United States.

Some people argue that there is a legal liability crisis for auditors in Canada.Do you agree or disagree? Provide some evidence supporting this argument,and some evidence contradicting this argument.

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

Which of the following statements represents an audit failure?

Due professional care implies that the practitioner is conducting his or her work to the highest possible standard and will make no errors.

Due professional care occurs when an auditor observes all the rules of conduct for the profession and applies all the standards of the profession.

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

An important case that limits the auditor's liability to those third parties of which the auditor had knowledge was ________.

Accountants are liable under the common law for breach of contract if they fail to fulfill their contractual obligations with their clients and for negligence if they fail to exercise due care in the performance of services for their clients

A reasonably foreseeable third party would include current shareholders but not lenders.

What are the legal liabilities of professional accountants under the common law?

A company whose partners' liability is limited to the capital they have invested in the business is known as a ________.

What is privity?

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

hapter 15 Completing the Audit Work

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

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters

Exam 20: Legal Liability Cases

A defendant accountant will likely first try to argue that it had no privity relationship with the plaintiff.

When referring to public accountants,what does breach of contract mean?

Who would be considered a reasonably foreseeable third party for an auditor?

The Securities and Exchange Commission in the United States will hold a negligent auditor liable under common law.

The OSC in Canada has powers to decide what is GAAP,similar to the SEC in the United States.

Some people argue that there is a legal liability crisis for auditors in Canada.Do you agree or disagree? Provide some evidence supporting this argument,and some evidence contradicting this argument.

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

Which of the following statements represents an audit failure?

Due professional care implies that the practitioner is conducting his or her work to the highest possible standard and will make no errors.

Due professional care occurs when an auditor observes all the rules of conduct for the profession and applies all the standards of the profession.

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

An important case that limits the auditor's liability to those third parties of which the auditor had knowledge was ________.

Accountants are liable under the common law for breach of contract if they fail to fulfill their contractual obligations with their clients and for negligence if they fail to exercise due care in the performance of services for their clients

A reasonably foreseeable third party would include current shareholders but not lenders.

What are the legal liabilities of professional accountants under the common law?

A company whose partners' liability is limited to the capital they have invested in the business is known as a ________.

What is privity?

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

hapter 15 Completing the Audit Work

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

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters