Question 1

Which of the following is true of Section 10A of the Securities Exchange Act of 1934?

Accepted Answer

A)  It prohibits any manipulative or deceptive practice in connection with the process of the probate. 
B)  It serves as a defense an accountant can assert by claiming due diligence to avoid civil liability. 
C)  It enforces a duty on auditors to detect and report illegal acts committed by their clients. 
D)  It imposes a criminal liability on accountants for making misstatements or omissions in nonaudit services. 
A)  It prohibits any manipulative or deceptive practice in connection with the process of the probate. 
B)  It serves as a defense an accountant can assert by claiming due diligence to avoid civil liability. 
C)  It enforces a duty on auditors to detect and report illegal acts committed by their clients. 
D)  It imposes a criminal liability on accountants for making misstatements or omissions in nonaudit services.

Question 2

________ imposes civil liability on accountants and others for making misstatements or omissions of material facts in a registration statement, or failing to find such misstatements or omissions.

Accepted Answer

A)  Section 11(a) of the Securities Act of 1933 
B)  Section 10A of the Securities Exchange Act of 1934 
C)  Section 101 of the Uniform Securities Act 
D)  Section 18(a) of the Securities Exchange Act of 1934 
A)  Section 11(a) of the Securities Act of 1933 
B)  Section 10A of the Securities Exchange Act of 1934 
C)  Section 101 of the Uniform Securities Act 
D)  Section 18(a) of the Securities Exchange Act of 1934

Question 3

Generally Accepted Accounting Principles (GAAPs) specify the methods and procedures that are to be used by public accountants when conducting external audits of company financial statements.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is true of Rule 10b-5?

Accepted Answer

A)  Privity of contract is a necessity for bringing a lawsuit under this rule. 
B)  Civil private lawsuits are not permitted under this rule. 
C)  Only purchasers and sellers of securities can sue under this rule. 
D)  Ordinary negligence is a violation of this rule. 
A)  Privity of contract is a necessity for bringing a lawsuit under this rule. 
B)  Civil private lawsuits are not permitted under this rule. 
C)  Only purchasers and sellers of securities can sue under this rule. 
D)  Ordinary negligence is a violation of this rule.

Question 5

A formal entrance into a contract between a client and an accountant is known as an ________.

Accepted Answer

A)  abatement 
B)  arraignment 
C)  easement 
D)  engagement 
A)  abatement 
B)  arraignment 
C)  easement 
D)  engagement

Question 6

The Sarbanes-Oxley Act of 2002 prohibits the employment of an accountant by a previous audit client for five years after the first appointment.

Accepted Answer

A) True 
 B)False

Question 7

The Private Securities Litigation Reform Act of 1995 replaced proportionate liability of the defendant with joint and several liability.

Accepted Answer

A) True 
 B)False

Question 8

________ is a rule that limits a defendant's accountability to his or her equivalent degree of fault.

Accepted Answer

A)  Privity of contract 
B)  Due diligence defense 
C)  Proportionate liability 
D)  Ultramares doctrine 
A)  Privity of contract 
B)  Due diligence defense 
C)  Proportionate liability 
D)  Ultramares doctrine

Question 9

What prohibition does the Sarbanes-Oxley Act impose on an accounting firm providing audit and nonaudit services to the same company?

Accepted Answer

The act makes it unlawful for a register

Question 10

Limited partners are personally liable for the debts and obligations of the limited liability partnerships (LLP).

Accepted Answer

A) True 
 B)False

Question 11

Most accounting firms in the United States operate as limited liability partnerships (LLPs).

Accepted Answer

A) True 
 B)False

Question 12

What is the accountant-client privilege?

Accepted Answer

Sometimes clients of accountants are sue

Question 13

Which of the following opinions is necessary for a company to avoid unfavorable repercussions on the company?

Accepted Answer

A)  an adverse opinion 
B)  a qualified opinion 
C)  a disclaimer of opinion 
D)  an unqualified opinion 
A)  an adverse opinion 
B)  a qualified opinion 
C)  a disclaimer of opinion 
D)  an unqualified opinion

Question 14

A private civil Racketeer Influenced and Corrupt Organizations Act (RICO) based on securities fraud can only be brought once the defendant has been convicted for the crime.

Accepted Answer

A) True 
 B)False

Question 15

All members of the Public Company Accounting Oversight Board (PCAOB) have to be certified public accountants (CPAs).

Accepted Answer

A) True 
 B)False

Question 16

A verification of a company's books and records pursuant to federal securities laws, state laws, and stock exchange rules that must be performed by an independent certified public accountant (CPA) is known as a(n) ________.

Accepted Answer

A)  probate 
B)  ademption 
C)  audit 
D)  deposition 
A)  probate 
B)  ademption 
C)  audit 
D)  deposition

Question 17

Which of the following is a necessity to bring a private civil action against a violator of Racketeer Influenced and Corrupt Organizations Act (RICO) based on securities fraud?

Accepted Answer

A)  The accountant must not be a third-party independent contractor. 
B)  The defendant has to be first criminally convicted in connection with the securities fraud. 
C)  The plaintiff should file the case before the government brings a lawsuit. 
D)  The defendant has to be tried by the application of the Section 32(a) of the Securities Exchange Act of 1934 first. 
A)  The accountant must not be a third-party independent contractor. 
B)  The defendant has to be first criminally convicted in connection with the securities fraud. 
C)  The plaintiff should file the case before the government brings a lawsuit. 
D)  The defendant has to be tried by the application of the Section 32(a) of the Securities Exchange Act of 1934 first.

Question 18

Accountants can be named as defendants in lawsuits that assert violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).

Accepted Answer

A) True 
 B)False

Question 19

In which of the following ways can an accountant defeat the imposition of liability under Section 18(a)?

Accepted Answer

A)  if he or she can show that the misleading statement was made to protect the company from bankruptcy 
B)  if he or she had acted out of recklessness 
C)  if he or she was an employee to the plaintiff 
D)  if he or she can show that the plaintiff had knowledge of the false statement 
A)  if he or she can show that the misleading statement was made to protect the company from bankruptcy 
B)  if he or she had acted out of recklessness 
C)  if he or she was an employee to the plaintiff 
D)  if he or she can show that the plaintiff had knowledge of the false statement

Question 20

The Ultramares doctrine provides the broadest standard for holding accountants liable to third parties for negligence.

Accepted Answer

A) True 
 B)False

Exam 51: Accountants Duties and Liability

Which of the following is true of Section 10A of the Securities Exchange Act of 1934?

________ imposes civil liability on accountants and others for making misstatements or omissions of material facts in a registration statement, or failing to find such misstatements or omissions.

Generally Accepted Accounting Principles (GAAPs) specify the methods and procedures that are to be used by public accountants when conducting external audits of company financial statements.

Which of the following is true of Rule 10b-5?

A formal entrance into a contract between a client and an accountant is known as an ________.

The Sarbanes-Oxley Act of 2002 prohibits the employment of an accountant by a previous audit client for five years after the first appointment.

The Private Securities Litigation Reform Act of 1995 replaced proportionate liability of the defendant with joint and several liability.

________ is a rule that limits a defendant's accountability to his or her equivalent degree of fault.

What prohibition does the Sarbanes-Oxley Act impose on an accounting firm providing audit and nonaudit services to the same company?

Limited partners are personally liable for the debts and obligations of the limited liability partnerships (LLP).

Most accounting firms in the United States operate as limited liability partnerships (LLPs).

What is the accountant-client privilege?

Which of the following opinions is necessary for a company to avoid unfavorable repercussions on the company?

A private civil Racketeer Influenced and Corrupt Organizations Act (RICO) based on securities fraud can only be brought once the defendant has been convicted for the crime.

All members of the Public Company Accounting Oversight Board (PCAOB) have to be certified public accountants (CPAs).

A verification of a company's books and records pursuant to federal securities laws, state laws, and stock exchange rules that must be performed by an independent certified public accountant (CPA) is known as a(n) ________.

Which of the following is a necessity to bring a private civil action against a violator of Racketeer Influenced and Corrupt Organizations Act (RICO) based on securities fraud?

Accountants can be named as defendants in lawsuits that assert violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).

In which of the following ways can an accountant defeat the imposition of liability under Section 18(a)?

The Ultramares doctrine provides the broadest standard for holding accountants liable to third parties for negligence.

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