Question 1

Plaintiffs have been successful in recent years bringing fraud suits against accountants under the Racketeer Influenced and Corrupt Organizations Act.

Accepted Answer

A) True 
 B)False

Question 2

Fraud without fraudulent intent is known by which term?

Accepted Answer

A)  Immaterial fraud
B)  Constructive fraud
C)  Reliance fraud
D)  Actual fraud
E)  Presumed fraudF) B) and D)
G) B) and C)

Question 3

Which of the following,if true,would likely persuade a judge to require Kayla to testify about Carter's financial statements?

Accepted Answer

A)  Kayla met with Carter at Rudy's direction.
B)  Kayla's meeting with Carter occurred before Rudy was involved in Carter's case.
C)  Carter provided Kayla with a factual background of the case.
D)  Kayla provided accounting services to Carter.
E)  Kayla provided legal advice to Carter.F) A) and D)
G) B) and E)

Question 4

Under the Restatement test,regarding liability for negligence to third parties,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) True 
 B)False

Question 5

If no,or insubstantial,accounting procedures were used in the compilation of the document,a financial statement is considered .

Accepted Answer

A)  Audited
B)  Generally accepted
C)  Qualified
D)  Unaudited
E)  UnqualifiedF) C) and D)
G) B) and D)

Question 6

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

Accepted Answer

A)  In the event of a willful violation of the act,the SEC can seek an injunction against the accountant.
B)  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.
C)  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.
D)  The act states that accountants are liable for the portion of the damages for which they are responsible.
E)  The act makes no reference to notifying the SEC of wrongdoing although it does reference notifying the applicable company's board of directors.F) D) and E)
G) A) and D)

Question 7

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

Accepted Answer

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

Question 8

An accountant is entitled to which of the following in the instance of a breach of contract where the accountant completed substantial performance?

Accepted Answer

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

Question 9

Are there any circumstances under which Abe could be held liable for the contents of the unaudited financial statements?

Accepted Answer

A)  Yes if liability is reasonably foreseeable.
B)  No,accountants are not liable for the contents of unaudited financial statements.
C)  No,if Abe included an opinion letter with a qualification.
D)  Yes,if Abe failed to clearly mark the financial statements as being unaudited.
E)  No,if Abe included an opinion letter with a broad and general disclaimer.F) C) and D)
G) B) and C)

Question 10

The various documents used and developed during an audit,including notes,calculations,and memorandums,are called which of the following?

Accepted Answer

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

Question 11

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)  Material
B)  Punitive
C)  Nominal
D)  Punishable
E)  IncidentalF) A) and B)
G) B) and E)

Question 12

[Accountant Dissatisfaction] Andrew agreed to perform accounting services for Dominique,and they entered into a contract setting forth the terms of their agreement.Dominique wanted Andrew to review her financial information and her system of internal controls.Dominique became dissatisfied with Andrew's work after he reported some irregularities in her financial statements.Andrew,on the other hand,claimed that he had adequately performed his duties and that,at the most,any mistakes that he made were minimal.
-The contract that Andrew and Dominique entered into setting the scope of Andrew's duties is referred to as a[n] ________.

Accepted Answer

A)  Accounting contractual letter
B)  Engagement letter
C)  GAAP letter
D)  GAAS letter
E)  Auditing contractual letterF) A) and E)
G) None of the above

Question 13

Whether third parties have a claim against an accountant on the basis of their reliance upon negligently prepared financial statements is the same in all states because it is governed by federal law.

Accepted Answer

A) True 
 B)False

Question 14

If Javier is sued for malpractice,would his new policy likely protect him?

Accepted Answer

A)  No,because insurance does not cover mistakes made by professionals.
B)  Yes,because he was insured at the time the claim was filed.
C)  Yes,because it is a professional indemnity insurance policy.
D)  No,because he was not insured at the time the claim arose.
E)  No,because professional indemnity policies do not usually cover malpractice.F) B) and D)
G) A) and B)

Question 15

Which of the following is false regarding compliance with GAAP and GAAS?

Accepted Answer

A)  In some circumstances,a reasonable,competent accountant would do more than that the GAAP or GAAS requires.
B)  State statutes may not impose additional legal requirements on accountants beyond GAAP and GAAS.
C)  Failure to comply with GAAP and GAAS will almost certainly constitute a breach of duty.
D)  GAAP standards are established by the Financial Accounting Standards Board,and GAAS standards are established by the American Institute of Certified Public Accountants.
E)  Compliance with GAAP and GAAS does not automatically mean that the duty of care has been met.F) None of the above
G) B) and D)

Question 16

Which statement accurately describes the liability of accountants under the law of Canada?

Accepted Answer

A)  Canadian law does not recognize liability on the part of an auditor for misrepresentations made in secondary-market disclosures made with the auditors' written consent.
B)  As in the U.S. ,in Canada the common law holds accountants liable for negligence to clients.
C)  Canadian law is well settled in relation to an accountant's liability to nonclients.
D)  In Quebec alone,accountants may not be held liable even if a causal link between fault and damage is established.
E)  Canadian law does not recognize liability of an auditor in relation to a prospectus distributed with the auditor's filed consent by an issuer of securities containing misrepresentations.F) B) and C)
G) All of the above

Question 17

Section 11 of the Securities Act creates a duty for accountants to perform their tasks with ________.

Accepted Answer

A)  due diligence.
B)  reasonableness.
C)  no errors or omissions.
D)  accuracy and efficiency.
E)  efficiency.F) A) and E)
G) A) and D)

Question 18

Wallace claims that he should not be liable because he relied on the accounting firms' expertise with regard to the registration statements.Is Wallace correct?

Accepted Answer

A)  No,as a director,Wallace cannot use a defense of reliance because he was aware of questionable issues in the statements.
B)  Yes,but only if the accounting firm performed a due diligence inquiry.
C)  No,because he is a director.
D)  Yes,directors are not required to perform a due diligence inquiry if another expert compiles the statement.
E)  Yes,reliance is a valid defense where a director is involved.F) A) and C)
G) C) and E)

Question 19

Which group established GAAS?

Accepted Answer

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

Question 20

Which statement accurately describes the requirements regarding working papers under the Sarbanes-Oxley Act of 2002?

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)  The act does not require that accountants maintain working papers.
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)  Accountants must maintain working papers for seven years starting on the last day of the audit.F) A) and E)
G) A) and D)

Exam 11: Liability of Accountants and Other Professionals

Fraud without fraudulent intent is known by which term?

Correct Answer
verified

Under the Restatement test,regarding liability for negligence to third parties,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 Answer
verified

Which group established GAAS?

Correct Answer
verified

Correct Answer
verified

If no,or insubstantial,accounting procedures were used in the compilation of the document,a financial statement is considered .

Correct Answer
verified

If Javier is sued for malpractice,would his new policy likely protect him?

Correct Answer
verified

Which of the following,if true,would likely persuade a judge to require Kayla to testify about Carter's financial statements?

Correct Answer
verified

Whether third parties have a claim against an accountant on the basis of their reliance upon negligently prepared financial statements is the same in all states because it is governed by federal law.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Wallace claims that he should not be liable because he relied on the accounting firms' expertise with regard to the registration statements.Is Wallace correct?

Correct Answer
verified

The various documents used and developed during an audit,including notes,calculations,and memorandums,are called which of the following?

Correct Answer
verified

An accountant is entitled to which of the following in the instance of a breach of contract where the accountant completed substantial performance?

Correct Answer
verified

Which of the following is false regarding compliance with GAAP and GAAS?

Correct Answer
verified

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 Answer
verified

Which statement accurately describes the requirements regarding working papers under the Sarbanes-Oxley Act of 2002?

Correct Answer
verified

Plaintiffs have been successful in recent years bringing fraud suits against accountants under the Racketeer Influenced and Corrupt Organizations Act.

Correct Answer
verified

Are there any circumstances under which Abe could be held liable for the contents of the unaudited financial statements?

Correct Answer
verified

Which statement accurately describes the liability of accountants under the law of Canada?

Correct Answer
verified

Section 11 of the Securities Act creates a duty for accountants to perform their tasks with ________.

Correct Answer
verified

Exam 11: Liability of Accountants and Other Professionals

Fraud without fraudulent intent is known by which term?

Correct AnswerverifiedShow Answer

Under the Restatement test,regarding liability for negligence to third parties,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 group established GAAS?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If no,or insubstantial,accounting procedures were used in the compilation of the document,a financial statement is considered .

Correct AnswerverifiedShow Answer

If Javier is sued for malpractice,would his new policy likely protect him?

Correct AnswerverifiedShow Answer

Which of the following,if true,would likely persuade a judge to require Kayla to testify about Carter's financial statements?

Correct AnswerverifiedShow Answer

Whether third parties have a claim against an accountant on the basis of their reliance upon negligently prepared financial statements is the same in all states because it is governed by federal law.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Wallace claims that he should not be liable because he relied on the accounting firms' expertise with regard to the registration statements.Is Wallace correct?

Correct AnswerverifiedShow Answer

The various documents used and developed during an audit,including notes,calculations,and memorandums,are called which of the following?

Correct AnswerverifiedShow Answer

An accountant is entitled to which of the following in the instance of a breach of contract where the accountant completed substantial performance?

Correct AnswerverifiedShow Answer

Which of the following is false regarding compliance with GAAP and GAAS?

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

Which statement accurately describes the requirements regarding working papers under the Sarbanes-Oxley Act of 2002?

Correct AnswerverifiedShow Answer

Plaintiffs have been successful in recent years bringing fraud suits against accountants under the Racketeer Influenced and Corrupt Organizations Act.

Correct AnswerverifiedShow Answer

Are there any circumstances under which Abe could be held liable for the contents of the unaudited financial statements?

Correct AnswerverifiedShow Answer

Which statement accurately describes the liability of accountants under the law of Canada?

Correct AnswerverifiedShow Answer

Section 11 of the Securities Act creates a duty for accountants to perform their tasks with ________.

Correct AnswerverifiedShow Answer

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