Question 1

Violations of generally accepted accounting principles (GAAPs)or generally accepted auditing standards (GAASs),or International Financial Reporting Standards (IFRSs),if applicable,are prima facie evidence of negligence in any court action.

Accepted Answer

A) True 
 B)False  True

Question 2

Why do accountants come under the purview of Section 18(a) of the Securities Exchange Act of 1934?

Accepted Answer

A)  because they often file reports and other documents with the Securities and Exchange Commission (SE
C)  on behalf of clients
B)  because certified public accountants (CPAs) are directly employed by the Securities and Exchange Commission (SE
C)  
C)  because all companies require an accountant's approval before buying securities from the Securities and Exchange Commission (SE
C)  
D)  because securities can only be bought through a certified public accountant (CP
A)  E) B) and D)
F) All of the above

Question 3

Which of the following provides the broadest standard for holding accountants liable to third parties for negligence?

Accepted Answer

A)  due diligence defense
B)  the foreseeability standard
C)  the Ultramares doctrine
D)  nolo contendereE) A) and D)
F) A) and C)

Question 4

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 5

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 6

The Financial Accounting Standards Board (FASB)issues new Generally Accepted Accounting Principle (GAAP)rules and amends existing ones.

Accepted Answer

A) True 
 B)False

Question 7

If a state has passed the accountant-client privilege law,it implies that only an accountant can serve as a witness in a case against the client.

Accepted Answer

A) True 
 B)False

Question 8

The legal theory that holds accountants liable to any member of a limited class of intended users for whose benefit the accountant has been employed is the Section 552 of the Restatement (Second)of Torts.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following can be used by an accountant to counter liability imposed under Section 11(a) of the Securities Act of 1933?

Accepted Answer

A)  the nolo contendere rule
B)  the due diligence defense
C)  the Ultramares doctrine
D)  the foreseeability standardE) A) and B)
F) A) and C) B

Question 10

When does an auditor submit a disclaimer of opinion? What is the significance of an auditor's opinion?

Accepted Answer

A disclaimer of opinion expresses the au...

Question 11

Only purchasers and sellers of securities can sue under Section 10(b)and Rule 10b-5.

Accepted Answer

A) True 
 B)False

Question 12

A(n) ________ is an auditor's opinion that states that the financial statements are fairly represented except for,or subject to,a departure from Generally Accepted Accounting Principles (GAAPs) ,a change in accounting principles,or a material uncertainty.

Accepted Answer

A)  unqualified opinion
B)  qualified opinion
C)  adverse opinion
D)  disclaimer of opinionE) A) and D)
F) B) and C)

Question 13

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 14

The accountant-client privilege is a law that entails that ________.

Accepted Answer

A)  only an accountant can serve as a witness for the client in a court action
B)  only an accountant's paperwork be taken as prima facie evidence against a client in a court action
C)  an accountant cannot be called as a witness against a client in a court action
D)  an accountant does not enjoy work product immunity when a client is accused of gross negligenceE) All of the above
F) A) and B)

Question 15

A(n) ________ is defined as intentional misrepresentation or omission of a material fact that is relied on by the client and causes the client damage.

Accepted Answer

A)  unqualified opinion
B)  actual fraud
C)  disclaimer of opinion
D)  constructive fraudE) A) and C)
F) A) and B) B

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following is the most favorable opinion an auditor can give a company following an audit?

Accepted Answer

A)  an unqualified opinion
B)  a disclaimer of opinion
C)  an adverse opinion
D)  a qualified opinionE) A) and C)
F) All of the above

Question 18

Accountants cannot be held criminally liable for material irregularities in financial statements prepared for registration statements.

Accepted Answer

A) True 
 B)False

Question 19

________ is a law that prohibits any manipulative or deceptive practice in connection with the purchase or sale of a security.

Accepted Answer

A)  Section 11(a) of the Securities Act of 1933
B)  Section 32(a) of the Securities Exchange Act of 1934
C)  Section 10(b) of the Securities Exchange Act of 1934
D)  Section 101 of the Uniform Securities ActE) A) and D)
F) A) and B)

Question 20

Which of the following rules provides that an accountant is liable only for negligence to third parties who are members of a limited class of intended users of the client's financial statements?

Accepted Answer

A)  Section 552 of the Restatement (Second) of Torts
B)  the foreseeability standard
C)  the Ultramares doctrine
D)  due diligence defenseE) None of the above
F) All of the above

Exam 51: Accountants Duties and Liability

Violations of generally accepted accounting principles (GAAPs)or generally accepted auditing standards (GAASs),or International Financial Reporting Standards (IFRSs),if applicable,are prima facie evidence of negligence in any court action.

Correct AnswerverifiedTrue

Why do accountants come under the purview of Section 18(a) of the Securities Exchange Act of 1934?

Correct AnswerverifiedShow Answer

Which of the following provides the broadest standard for holding accountants liable to third parties for negligence?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The Financial Accounting Standards Board (FASB)issues new Generally Accepted Accounting Principle (GAAP)rules and amends existing ones.

Correct AnswerverifiedShow Answer

If a state has passed the accountant-client privilege law,it implies that only an accountant can serve as a witness in a case against the client.

Correct AnswerverifiedShow Answer

The legal theory that holds accountants liable to any member of a limited class of intended users for whose benefit the accountant has been employed is the Section 552 of the Restatement (Second)of Torts.

Correct AnswerverifiedShow Answer

Which of the following can be used by an accountant to counter liability imposed under Section 11(a) of the Securities Act of 1933?

Correct AnswerverifiedB

When does an auditor submit a disclaimer of opinion? What is the significance of an auditor's opinion?

Correct AnswerverifiedA disclaimer of opinion expresses the au...View AnswerShow Answer

Only purchasers and sellers of securities can sue under Section 10(b)and Rule 10b-5.

Correct AnswerverifiedShow Answer

A(n) ________ is an auditor's opinion that states that the financial statements are fairly represented except for,or subject to,a departure from Generally Accepted Accounting Principles (GAAPs) ,a change in accounting principles,or a material uncertainty.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The accountant-client privilege is a law that entails that ________.

Correct AnswerverifiedShow Answer

A(n) ________ is defined as intentional misrepresentation or omission of a material fact that is relied on by the client and causes the client damage.

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

Which one of the following is the most favorable opinion an auditor can give a company following an audit?

Correct AnswerverifiedShow Answer

Accountants cannot be held criminally liable for material irregularities in financial statements prepared for registration statements.

Correct AnswerverifiedShow Answer

________ is a law that prohibits any manipulative or deceptive practice in connection with the purchase or sale of a security.

Correct AnswerverifiedShow Answer

Which of the following rules provides that an accountant is liable only for negligence to third parties who are members of a limited class of intended users of the client's financial statements?

Correct AnswerverifiedShow Answer

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True

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B

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A disclaimer of opinion expresses the au...
View Answer

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B

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