Question 1

Pursuant to federal securities laws, an audit must be performed by a certified public accountant (CPA) who works closely with the company in the capacity of a chief executive officer (CEO) or a chief financial officer (CFO).

Accepted Answer

A) True 
 B)False

Question 2

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 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 opinion

Question 7

Which of the following legislations provides for both civil and criminal penalties, including up to recovering treble damages, for securities fraud by accountants?

Accepted Answer

A)   Private Securities Litigation Reform Act of 1995
B)   Section 32(a)  of the Securities Exchange Act of 1934
C)   Tax Reform Act of 1976
D)   Racketeer Influenced and Corrupt Organizations Act

Question 8

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 9

The Tax Reform Act of 1976 created the Public Company Accounting Oversight Board (PCAOB).

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A formal entrance into a contract between a client and an accountant is called abatement.

Accepted Answer

A) True 
 B)False

Question 12

Constructive fraud is defined as intentional misrepresentation or omission of a material fact that is relied on by a client and causes the client damage.

Accepted Answer

A) True 
 B)False

Question 13

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 standard

Question 14

An auditor's opinion that the company's financial statements fairly represent the company's financial position, the results of its operations, and the change in cash flows for the period under audit, in conformity with generally accepted accounting principles is referred to as a(n)  ________.

Accepted Answer

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

Question 15

Which of the following statements is true of accountants?

Accepted Answer

A)   Accountants cannot be hired to perform nonaudit services.
B)   Accountants cannot be held liable by provisions of common law.
C)   Accountants can be held liable to clients but not to third parties.
D)   Accountants who lack certified public accountant (CP
A)   certification are called public accountants.

Question 16

The Securities Act of 1933 requires that before a corporation or another business sells securities to the public, the issuer must file a registration statement with the Securities and Exchange Commission (SEC).

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 opinion

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 Securities

Question 20

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.

Exam 51: Accountants Duties and Liability

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

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 AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Tax Reform Act of 1976 created the Public Company Accounting Oversight Board (PCAOB).

Correct AnswerverifiedShow Answer

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

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

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

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

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

The Securities Act of 1933 requires that before a corporation or another business sells securities to the public, the issuer must file a registration statement with the Securities and Exchange Commission (SEC).

Correct AnswerverifiedShow Answer

A formal entrance into a contract between a client and an accountant is called abatement.

Correct AnswerverifiedShow Answer

Which of the following statements is true of accountants?

Correct AnswerverifiedShow Answer

Pursuant to federal securities laws, an audit must be performed by a certified public accountant (CPA) who works closely with the company in the capacity of a chief executive officer (CEO) or a chief financial officer (CFO).

Correct AnswerverifiedShow Answer

Which of the following legislations provides for both civil and criminal penalties, including up to recovering treble damages, for securities fraud by accountants?

Correct AnswerverifiedShow Answer

An auditor's opinion that the company's financial statements fairly represent the company's financial position, the results of its operations, and the change in cash flows for the period under audit, in conformity with generally accepted accounting principles is referred to as a(n) ________.

Correct AnswerverifiedShow Answer

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

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

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

Constructive fraud is defined as intentional misrepresentation or omission of a material fact that is relied on by a client and causes the client damage.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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