Question 1

Which of the following is true of an auditor of a corporation?

Accepted Answer

A)  The auditor must be an independent certified public accountant.
B)  The auditor cannot use information about the corporation from third parties.
C)  The auditor cannot inspect the corporation's real property unless he is closely associated with the company.
D)  The auditor must provide a qualified opinion wherever possible since it helps the company in business.E) B) and D)
F) B) and C)

Question 2

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 3

The Securities Exchange Commission (SEC)has oversight and enforcement authority over the Public Company Accounting Oversight Board (PCAOB).

Accepted Answer

A) True 
 B)False

Question 4

The Generally Accepted Auditing Standards (GAASs)are established by the American Institute of Certified Public Accountants.

Accepted Answer

A) True 
 B)False

Question 5

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.E) None of the above
F) A) and B)

Question 6

The ________ Act of 1976 specifically imposes penalties and fines for the willful understatement of a client's tax liability.

Accepted Answer

A)  Tax Reform
B)  Racketeer Influenced and Corrupt Organizations
C)  Private Taxation Litigation Reform
D)  Uniform SecuritiesE) B) and C)
F) None of the above

Question 7

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)  depositionE) A) and C)
F) B) and C)

Question 8

The Sarbanes-Oxley Act makes it lawful for an accounting firm to simultaneously provide audit and certain nonaudit services to a public company if the firm is registered.

Accepted Answer

A) True 
 B)False

Question 9

A person who practices as an accountant,but is not certified,is referred to as a public accountant.

Accepted Answer

A) True 
 B)False

Question 10

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.E) None of the above
F) A) and B)

Question 11

Under the foreseeability standard,an accountant is liable even if he or she had no knowledge of the intended user of the audited financial statements.

Accepted Answer

A) True 
 B)False

Question 12

________ specify the methods and procedures that are to be used by public accountants when conducting external audits of company financial statements

Accepted Answer

A)  Generally accepted accounting principles
B)  Generally accepted auditing standards
C)  Auditor's expert opinions
D)  General engagements and agreementsE) A) and D)
F) None of the above

Question 13

Under the Sarbanes-Oxley Act,in order to audit a public company,________.

Accepted Answer

A)  only public accountants must constitute the audit committee
B)  a public accounting firm must register with the Public Company Accounting Oversight Board (PCAO
B)  
C)  all public accounting firms must assign an accountant who works closely with one client over a long duration of time
D)  the law of accountant-client privilege must be accepted by the state legislative mechanismE) None of the above
F) A) and B)

Question 14

The ________ is a rule that says that an accountant is liable only for negligence to third parties who are in privity of contract or in a privity-like relationship with the accountant.

Accepted Answer

A)  foreseeability standard
B)  Ultramares doctrine
C)  due diligence defense
D)  disclaimer of opinionE) A) and D)
F) None of the above

Question 15

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)  engagementE) A) and D)
F) B) and C)

Question 16

A disclaimer of opinion is a clause in auditing that a company can claim wherein the auditor is not allowed to access a high-priority portion of a company's financial records.

Accepted Answer

A) True 
 B)False

Question 17

The Securities and Exchange Commission (SEC)has the power to file criminal charges and award punishment for violations that come under Section 32(a)of the Securities Exchange Act of 1934.

Accepted Answer

A) True 
 B)False

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

A third party can bring a tort action against an accountant in case of constructive fraud.

Accepted Answer

A) True 
 B)False

Question 20

An accountant's failure to follow the Generally Accepted Auditing Standards (GAASs)when conducting audits constitutes negligence.

Accepted Answer

A) True 
 B)False

Exam 51: Accountants Duties and Liability

________ 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 Securities and Exchange Commission (SEC)has the power to file criminal charges and award punishment for violations that come under Section 32(a)of the Securities Exchange Act of 1934.

Correct AnswerverifiedShow Answer

Under the foreseeability standard,an accountant is liable even if he or she had no knowledge of the intended user of the audited financial statements.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true of an auditor of a corporation?

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act makes it lawful for an accounting firm to simultaneously provide audit and certain nonaudit services to a public company if the firm is registered.

Correct AnswerverifiedShow Answer

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) ________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The ________ is a rule that says that an accountant is liable only for negligence to third parties who are in privity of contract or in a privity-like relationship with the accountant.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An accountant's failure to follow the Generally Accepted Auditing Standards (GAASs)when conducting audits constitutes negligence.

Correct AnswerverifiedShow Answer

The Generally Accepted Auditing Standards (GAASs)are established by the American Institute of Certified Public Accountants.

Correct AnswerverifiedShow Answer

A person who practices as an accountant,but is not certified,is referred to as a public accountant.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A third party can bring a tort action against an accountant in case of constructive fraud.

Correct AnswerverifiedShow Answer

The Securities Exchange Commission (SEC)has oversight and enforcement authority over the Public Company Accounting Oversight Board (PCAOB).

Correct AnswerverifiedShow Answer

Under the Sarbanes-Oxley Act,in order to audit a public company,________.

Correct AnswerverifiedShow Answer

The ________ Act of 1976 specifically imposes penalties and fines for the willful understatement of a client's tax liability.

Correct AnswerverifiedShow Answer

A disclaimer of opinion is a clause in auditing that a company can claim wherein the auditor is not allowed to access a high-priority portion of a company's financial records.

Correct AnswerverifiedShow Answer

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