Question 1

Under common law,a plaintiff who is owed a legal duty of care must prove reliance on misleading statements and damages suffered because of that reliance.

Accepted Answer

A) True 
 B)False

Question 2

Primary beneficiaries are third parties who have paid to have an audit performed.

Accepted Answer

A) True 
 B)False

Question 3

Foreseeable third parties are best described as ________.

Accepted Answer

A) management of the company 
B) those that have direct involvement through a contract 
C) those third parties who will rely on the audit and are specifically known by the auditor 
D) those third parties who potentially will rely on the audit but are not specifically known by the auditor 
A) management of the company 
B) those that have direct involvement through a contract 
C) those third parties who will rely on the audit and are specifically known by the auditor 
D) those third parties who potentially will rely on the audit but are not specifically known by the auditor

Question 4

A breach of contract suit is a claim that could be brought by a client against an accountant that accounting services were not performed in the manner agreed upon.

Accepted Answer

A) True 
 B)False

Question 5

To protect themselves,before an engagement letter is submitted to a client,what should an auditor complete to assist in deciding whether to accept a particular client for an engagement?

Accepted Answer

A) Management letter. 
B) Client acceptance checklist. 
C) Reliance letter. 
D) Limited liability letter. 
A) Management letter. 
B) Client acceptance checklist. 
C) Reliance letter. 
D) Limited liability letter.

Question 6

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

Question 7

Sun Corp.approved a merger plan with Cord Corp.One of the factors that led to the approval of the merger was the fact that the Cord's financial statements were audited by Frank & Co.CAs.Sun had engaged Frank to audit Cord's financial statements.While performing the audit,Frank failed to discover certain irregularities that later caused Sun to suffer substantial losses.For the lawsuit to be successful,Sun must prove that Frank & Co. ,CAs ________.

Accepted Answer

A) knew of the irregularities 
B) failed to exercise due care 
C) was grossly negligent 
D) acted with scienter 
A) knew of the irregularities 
B) failed to exercise due care 
C) was grossly negligent 
D) acted with scienter

Question 8

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 nonaudit 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 nonaudit or review engagements.

Under common law,a plaintiff who is owed a legal duty of care must prove reliance on misleading statements and damages suffered because of that reliance.

Primary beneficiaries are third parties who have paid to have an audit performed.

Foreseeable third parties are best described as ________.

A breach of contract suit is a claim that could be brought by a client against an accountant that accounting services were not performed in the manner agreed upon.

To protect themselves,before an engagement letter is submitted to a client,what should an auditor complete to assist in deciding whether to accept a particular client for an engagement?

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

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

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

Under common law,a plaintiff who is owed a legal duty of care must prove reliance on misleading statements and damages suffered because of that reliance.

Primary beneficiaries are third parties who have paid to have an audit performed.

Foreseeable third parties are best described as ________.

A breach of contract suit is a claim that could be brought by a client against an accountant that accounting services were not performed in the manner agreed upon.

To protect themselves,before an engagement letter is submitted to a client,what should an auditor complete to assist in deciding whether to accept a particular client for an engagement?

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

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

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