Question 1

An action against an accountant for failing to properly perform the job for which the accountant was hired is referred to as a[n] _________ action.

Accepted Answer

A)   Malfeasance
B)   Malpractice
C)   Impropriety
D)   Misguidance
E)   MisjudgmentF) A) and B)
G) B) and C)

Question 2

Which of the following does the Sarbanes-Oxley Act of 2002 require regarding working papers?

Accepted Answer

A)   Accountants must maintain working papers for ten years starting with the end of the fiscal period in which the audit was conducted.
B)   Accountants must maintain working papers for seven years starting on the last day of the audit.
C)   Accountants must maintain working papers for five years starting with the end of the fiscal period in which the audit was conducted.
D)   Accountants must maintain working papers for one year starting on the last day of the audit.
E)   The act does not require that accountants maintain working papers.F) A) and C)
G) A) and B)

Question 3

Which of the following may be held liable in a malpractice action?

Accepted Answer

A)   Doctors but not accountants or real estate brokers
B)   Doctors and accountants but not real estate brokers
C)   Doctors and real estate brokers but not accountants
D)   Accountants and real estate brokers but not doctors
E)   Doctors, accountants, and real estate brokersF) D) and E)
G) A) and D)

Question 4

When an accountant is found liable for fraud,what type of damages may be assessed in addition to compensatory damages in order to punish the accountant?

Accepted Answer

A)   Punishable
B)   Punitive
C)   Material
D)   Nominal
E)   IncidentalF) A) and B)
G) None of the above

Question 5

In the Case Opener "WorldCom," the court ruled that the chairman of WorldCom's board of directors could have no personal liability for misrepresentations of the company's condition in filings with the Securities and Exchange Commission.

Accepted Answer

A) True 
 B)False

Question 6

After an audit,the accountant is the legal owner of working papers.

Accepted Answer

A) True 
 B)False

Question 7

Accountants may not be sued for malpractice because that action is only available in the medical community.

Accepted Answer

A) True 
 B)False

Question 8

A plaintiff may only recover under Section 11 of the Securities Act of 1933 if the plaintiff can establish that the plaintiff purchased securities in an initial public offering.

Accepted Answer

A) True 
 B)False

Question 9

In the instance of a breach of contract where the accountant,however,completed substantial performance,an accountant is entitled to which of the following?

Accepted Answer

A)   The full amount of the contractually agreed-on fee minus the amount of damages caused by the accountant.
B)   The contractually agreed-on fee without any deduction.
C)   A reasonable hourly rate.
D)   No more than one thousand dollars.
E)   Nothing.F) A) and E)
G) A) and B)

Question 10

The Sarbanes-Oxley Act prohibits registered public accounting firms from engaging in non-auditing acts for their auditing clients.List any six such non-auditing acts currently prohibited.

Accepted Answer

Following are the currently prohibited a...

Question 11

Which of the following is false regarding the Private Securities Litigation Reform Act?

Accepted Answer

A)   The act sets forth a specific set of actions and guidelines an accountant must follow after identifying a potentially illegal activity when conducting an audit.
B)   The act makes no reference to notifying the SEC of wrongdoing although it does reference notifying the applicable company's board of directors.
C)   The act states that accountants are liable for the portion of the damages for which they are responsible.
D)   In the event of a willful violation of the act, the SEC can seek an injunction against the accountant.
E)   Under the act, an accountant's silence when the accountant thinks he or she might have discovered fraud is enough to constitute aiding and abetting.F) A) and E)
G) D) and E)

Question 12

Which of the following standards is used in applying the reasonably foreseeable users test regarding accountant liability to third-parties?

Accepted Answer

A)   Strict product liability
B)   Negligence
C)   Fraud
D)   Breach of contract
E)   PrivityF) A) and E)
G) A) and C)

Question 13

Which of the following are penalties under the Sarbanes-Oxley Act for the willful violation of the section requiring the retention of working papers?

Accepted Answer

A)   There are no penalties because the Sarbanes-Oxley Act does not require the retention of working papers.
B)   Accountants may be fined but not imprisoned.
C)   Accountants may be fined or imprisoned for up to ten years, but not both.
D)   Accountants may be fined, imprisoned for up to ten years, or both.
E)   Accountants may be fined, imprisoned for up to five years, or both.F) A) and E)
G) B) and E)

Question 14

Which of the following requires accountants to use adequate procedures so that they can detect illegal acts committed by an audited company?

Accepted Answer

A)   The Private Securities Litigation Reform Act
B)   The Public Securities Auditing Reform Act
C)   The Public Detection Act
D)   The Accountant Crime Deterrence Act
E)   The Fraud and Illegality Deterrence ActF) C) and E)
G) All of the above

Question 15

Which of the following is true regarding the use of working papers in negligence cases involving the accountant's work?

Accepted Answer

A)   Working papers can be used as evidence in negligence cases.
B)   Working papers cannot be used as evidence in negligence cases.
C)   Working papers can be used as evidence in negligence cases only if a bank is the plaintiff.
D)   Working papers can be used as evidence in negligence cases only if a non-corporate plaintiff is involved.
E)   Working papers may be used as evidence in negligence cases only if the accountant failed to provide the client with copies of them.F) A) and B)
G) A) and C)

Question 16

Under the _____,an accountant is liable to known third-party users of the accountant's work product and also to those in the limited class whose reliance on the work the accountant specifically foresaw.

Accepted Answer

A)   Ultramares rule
B)   Class test
C)   Reliance rule
D)   Restatement test
E)   Carroll ruleF) A) and D)
G) A) and E)

Question 17

If Paul engaged in ____________ breach,he is not entitled to compensation for work completed.

Accepted Answer

A)   A substantial
B)   An adequate
C)   A material
D)   Any type of
E)   A comprehensiveF) B) and C)
G) C) and D)

Question 18

Which of the following is true regarding what a plaintiff must do in order to recover damages under the Securities Act of 1933 after purchasing a security covered by a registration statement containing false information or missing information?

Accepted Answer

A)   A plaintiff must prove reliance on the registration statement.
B)   A plaintiff must prove privity with the accountant at issue.
C)   The plaintiff must establish reliance and privity.
D)   The plaintiff must establish reliance on the financial statement, privity with the accountant, and also that the securities were purchased in an initial public offering.
E)   The plaintiff does not have to prove reliance on the financial statement nor must the plaintiff prove contractual privity.F) All of the above
G) D) and E)

Question 19

GAAS was established by which of the following?

Accepted Answer

A)   The American Institute of Certified Public Accountants
B)   The American Institute of Auditors
C)   The Financial Accounting Standards Board
D)   The American Accounting and Auditing Standards Board
E)   The Federal Accounting Standards BoardF) A) and C)
G) C) and D)

Question 20

Which of the following are various documents used and developed during an audit and included notes,calculations,and memorandums?

Accepted Answer

A)   Calculation documents.
B)   Working papers.
C)   Auditing copies.
D)   Accounting memoranda.
E)   Client documentation.F) C) and D)
G) A) and C)

Exam 11: Liability of Accountants and Other Professionals

If Paul engaged in ____________ breach,he is not entitled to compensation for work completed.

Correct AnswerverifiedShow Answer

Which of the following are various documents used and developed during an audit and included notes,calculations,and memorandums?

Correct AnswerverifiedShow Answer

Which of the following are penalties under the Sarbanes-Oxley Act for the willful violation of the section requiring the retention of working papers?

Correct AnswerverifiedShow Answer

In the instance of a breach of contract where the accountant,however,completed substantial performance,an accountant is entitled to which of the following?

Correct AnswerverifiedShow Answer

Which of the following standards is used in applying the reasonably foreseeable users test regarding accountant liability to third-parties?

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act prohibits registered public accounting firms from engaging in non-auditing acts for their auditing clients.List any six such non-auditing acts currently prohibited.

Correct AnswerverifiedFollowing are the currently prohibited a...View AnswerShow Answer

Which of the following may be held liable in a malpractice action?

Correct AnswerverifiedShow Answer

Which of the following does the Sarbanes-Oxley Act of 2002 require regarding working papers?

Correct AnswerverifiedShow Answer

Which of the following is true regarding what a plaintiff must do in order to recover damages under the Securities Act of 1933 after purchasing a security covered by a registration statement containing false information or missing information?

Correct AnswerverifiedShow Answer

Which of the following is false regarding the Private Securities Litigation Reform Act?

Correct AnswerverifiedShow Answer

Accountants may not be sued for malpractice because that action is only available in the medical community.

Correct AnswerverifiedShow Answer

A plaintiff may only recover under Section 11 of the Securities Act of 1933 if the plaintiff can establish that the plaintiff purchased securities in an initial public offering.

Correct AnswerverifiedShow Answer

Which of the following is true regarding the use of working papers in negligence cases involving the accountant's work?

Correct AnswerverifiedShow Answer

An action against an accountant for failing to properly perform the job for which the accountant was hired is referred to as a[n] _________ action.

Correct AnswerverifiedShow Answer

After an audit,the accountant is the legal owner of working papers.

Correct AnswerverifiedShow Answer

When an accountant is found liable for fraud,what type of damages may be assessed in addition to compensatory damages in order to punish the accountant?

Correct AnswerverifiedShow Answer

Under the _____,an accountant is liable to known third-party users of the accountant's work product and also to those in the limited class whose reliance on the work the accountant specifically foresaw.

Correct AnswerverifiedShow Answer

Which of the following requires accountants to use adequate procedures so that they can detect illegal acts committed by an audited company?

Correct AnswerverifiedShow Answer

GAAS was established by which of the following?

Correct AnswerverifiedShow Answer

In the Case Opener "WorldCom," the court ruled that the chairman of WorldCom's board of directors could have no personal liability for misrepresentations of the company's condition in filings with the Securities and Exchange Commission.

Correct AnswerverifiedShow Answer

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Following are the currently prohibited a...
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