Question 1

Regarding Joel's assertion that Norah violated the accountant-client privilege,which statement is accurate?

Accepted Answer

A)  Joel was correct because the accountant-client privilege is recognized in all states through statutory law.
B)  Joel was incorrect because there is no an accountant-client privilege in any state.
C)  Joel was correct since the accountant-client privilege exists in all states through common law.
D)  Joel was correct because the accountant-client privilege is recognized by federal law.
E)  More information is needed in order to know if Joel is correct because the accountant-client privilege is recognized in some states,but not in all states.F) All of the above
G) C) and D)

Question 2

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 Fraud and Illegality Deterrence Act
C)  The Public Securities Auditing Reform Act
D)  The Accountant Crime Deterrence Act
E)  The Public Detection ActF) A) and D)
G) A) and E)

Question 3

GAAP was established by which of the following groups?

Accepted Answer

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

Question 4

For which of the following does the Securities Exchange Act impose liability?

Accepted Answer

A)  Negligence in performing an audit or in the construction of a financial statement.
B)  Fraudulent statements made to courts.
C)  Fraudulent statements made to a client in connection with performing an audit.
D)  Fraudulent statements made to the SEC.
E)  Fraud in performing an audit.F) C) and E)
G) B) and D)

Question 5

The attorney-client privilege means that information given by a client to his or her accountant cannot be revealed without the client's permission.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following was the result on appeal in the case in the text In re Century Aluminum Company Securities Litigation,the case in the text involving plaintiffs who purchased secondary-offering shares and who attempted to sue under Section 11 of the Securities Act of 1933 for misrepresentations allegedly released regarding the secondary offering?

Accepted Answer

A)  The court allowed the case to proceed contingent on the plaintiffs submitting proof by an expert that misrepresentations occurred.
B)  The court affirmed the trial court's dismissal of the case recognizing that it is impossible as a matter of law for purchasers of aftermarket shares to have claims based on Section 11 because Section 11 does not apply to secondary-offering shares.
C)  The court affirmed the trial court's dismissal of the case recognizing that it is often impossible for purchasers of aftermarket shares to have claims based on Section 11 because they normally purchase through brokers that do not acknowledge the source of the shares.
D)  The court affirmed the trial court's dismissal of the case recognizing that the plaintiffs had not submitted sufficient evidence of misrepresentations.
E)  Finding that the plaintiffs had met all prerequisites in regard to proof,the court ruled that the case should be allowed to proceed to trial.F) B) and C)
G) C) and E)

Question 7

Under common law,what are the three primary types of liability assessed against accountants?

Accepted Answer

A)  Breach of contract,fraud,and accounting misalignment
B)  Fraud,negligence,and accounting misalignment
C)  Breach of contract,negligence,and innocent misrepresentation
D)  Negligence,breach of contract,and accounting misalignment
E)  Negligence,breach of contract,and fraudF) B) and E)
G) B) and D)

Question 8

How many states have adopted the Restatement Test of accountant liability for negligence to third-parties?

Accepted Answer

A)  About half the states
B)  All the states
C)  One-fourth of the states
D)  None because there is no Restatement test
E)  Only a few statesF) A) and B)
G) B) and D)

Question 9

Which of the following was created by the Sarbanes-Oxley Act to obtain greater government oversight of public accounting firms?

Accepted Answer

A)  The Auditing Analysis and Review Board
B)  The Certified Public Accountant Commission
C)  The Public Accounting Firms Oversight Commission
D)  The Public Company Accounting Oversight Board
E)  The Securities Review BoardF) C) and E)
G) A) and C)

Question 10

Which of the following is not a requirement in order to recover damages under Section 10b) of the Securities Exchange Act of 1934 and the corresponding SEC Rule 10b-5?

Accepted Answer

A)  Privity.
B)  Reliance on the statement as the cause of the plaintiff's loss.
C)  Reliance on the fraudulent statement.
D)  Fraudulent act or deception.
E)  Scienter.F) A) and B)
G) B) and E)

Question 11

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 cu...

Question 12

If Kayla is called to testify at trial,would she likely be required to reveal information about Carter's financial statements?

Accepted Answer

A)  No,because federal law recognizes the accountant-client privilege.
B)  No,because of the attorney-client privilege.
C)  Yes,because no accountant-client privilege exists and the attorney-client privilege does not apply because Kayla is not an attorney.
D)  Yes,because no accountant-client privilege exists.
E)  Yes,because the communication was not made in confidence for the purpose of obtaining legal advice from the attorney.F) B) and C)
G) A) and D)

Question 13

Discuss the defenses available to an accountant charged with negligence.

Accepted Answer

Defenses to an accou...

Question 14

Which of the following is true regarding any affirmative defenses available under Section 20a) of the Securities Exchange Act?

Accepted Answer

A)  Comparative negligence is an affirmative defense.
B)  Comparative negligence and contributory negligence are affirmative defenses,and also an affirmative defense exists when the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the underlying violation or cause of action.
C)  An affirmative defense exists when the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the underlying violation or cause of action.
D)  There are no affirmative defenses available.
E)  Contributory negligence is an affirmative defense.F) A) and D)
G) A) and E)

Question 15

Many accountants and other professionals store confidential information on servers owned and maintained by a third party.

Accepted Answer

A) True 
 B)False

Question 16

When hired to perform a task,the accountant enters into a contract called an engagement letter with the client that makes explicit and implicit promises,which,if not fulfilled,subject the accountant to liability.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  Fraud
B)  Negligence
C)  Privity
D)  Breach of contract
E)  Strict product liabilityF) D) and E)
G) None of the above

Question 18

Generally,unless engaged to detect ________,an accountant is not a fraud detector unless the fraud is uncovered in the course of exercising reasonable care and skill.

Accepted Answer

A)  Malpractice
B)  Malfeasance
C)  Fraud
D)  Negligence
E)  MisfeasanceF) B) and C)
G) C) and D)

Question 19

An insurance policy that covers a person for errors or omissions made in the course of carrying out his or her professional responsibilities is sometimes referred to as a[n] ________.

Accepted Answer

A)  errors and omissions policy.
B)  deductible policy.
C)  professional indemnification and malpractice policy.
D)  professional errors policy.
E)  professional malpractice policy.F) C) and E)
G) A) and D)

Question 20

[Sami's Coffee Shop] Javier,a new accountant who just opened his accounting firm,contracted with LittleBank to engage in accounting work for approval of loan applications.One of the applications was from Sami,owner of Sami's Coffee Shop.Sami provided Javier with copies of her income and loss statements.While looking through Sami's documents,Javier noticed multiple payments in large amounts for items listed only as "inventory" or "miscellaneous office supplies",which was odd since Sami told him the Coffee Shop served only coffee and tea.Javier did not ask Sami about the discrepancy because Sami seemed like an honest person.Javier completed the audit and prepared an opinion letter to LittleBank stating that Sami's Coffee Shop was in excellent financial condition and should feel confident in approving Sami's loan.The letter included a broad,general disclaimer.After sending the letter,Javier procured professional indemnity insurance to protect him from any malpractice claim.A month later,Sami was arrested for selling stolen jewelry from her shop and she defaulted on the loan.
-Under what theory could LittleBank sue Javier?

Accepted Answer

A)  None,because Sami's conduct was not reasonably foreseeable.
B)  None,because Sami,not Javier,engaged in fraud.
C)  Strict liability.
D)  Fraud,because there is evidence of Javier's wrongful intent.
E)  Negligence,because Javier failed to exercise the care of a competent,reasonable professional.F) C) and E)
G) D) and E)

Exam 11: Liability of Accountants and Other Professionals

Correct Answer
verified

GAAP was established by which of the following groups?

Correct Answer
verified

How many states have adopted the Restatement Test of accountant liability for negligence to third-parties?

Correct Answer
verified

When hired to perform a task,the accountant enters into a contract called an engagement letter with the client that makes explicit and implicit promises,which,if not fulfilled,subject the accountant to liability.

Correct Answer
verified

Regarding Joel's assertion that Norah violated the accountant-client privilege,which statement is accurate?

Correct Answer
verified

Which of the following was created by the Sarbanes-Oxley Act to obtain greater government oversight of public accounting firms?

Correct Answer
verified

If Kayla is called to testify at trial,would she likely be required to reveal information about Carter's financial statements?

Correct Answer
verified

Correct Answer
verified

An insurance policy that covers a person for errors or omissions made in the course of carrying out his or her professional responsibilities is sometimes referred to as a[n] ________.

Correct Answer
verified

Which of the following is not a requirement in order to recover damages under Section 10b) of the Securities Exchange Act of 1934 and the corresponding SEC Rule 10b-5?

Correct Answer
verified

Many accountants and other professionals store confidential information on servers owned and maintained by a third party.

Correct Answer
verified

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

Correct Answer
verified

Discuss the defenses available to an accountant charged with negligence.

Correct Answer
verified
Defenses to an accou...
View Answer

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

Correct Answer
verified

Which of the following is true regarding any affirmative defenses available under Section 20a) of the Securities Exchange Act?

Correct Answer
verified

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 Answer
verified
Following are the cu...
View Answer

Under common law,what are the three primary types of liability assessed against accountants?

Correct Answer
verified

Generally,unless engaged to detect ________,an accountant is not a fraud detector unless the fraud is uncovered in the course of exercising reasonable care and skill.

Correct Answer
verified

For which of the following does the Securities Exchange Act impose liability?

Correct Answer
verified

The attorney-client privilege means that information given by a client to his or her accountant cannot be revealed without the client's permission.

Correct Answer
verified

Exam 11: Liability of Accountants and Other Professionals

Correct AnswerverifiedShow Answer

GAAP was established by which of the following groups?

Correct AnswerverifiedShow Answer

How many states have adopted the Restatement Test of accountant liability for negligence to third-parties?

Correct AnswerverifiedShow Answer

When hired to perform a task,the accountant enters into a contract called an engagement letter with the client that makes explicit and implicit promises,which,if not fulfilled,subject the accountant to liability.

Correct AnswerverifiedShow Answer

Regarding Joel's assertion that Norah violated the accountant-client privilege,which statement is accurate?

Correct AnswerverifiedShow Answer

Which of the following was created by the Sarbanes-Oxley Act to obtain greater government oversight of public accounting firms?

Correct AnswerverifiedShow Answer

If Kayla is called to testify at trial,would she likely be required to reveal information about Carter's financial statements?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An insurance policy that covers a person for errors or omissions made in the course of carrying out his or her professional responsibilities is sometimes referred to as a[n] ________.

Correct AnswerverifiedShow Answer

Which of the following is not a requirement in order to recover damages under Section 10b) of the Securities Exchange Act of 1934 and the corresponding SEC Rule 10b-5?

Correct AnswerverifiedShow Answer

Many accountants and other professionals store confidential information on servers owned and maintained by a third party.

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

Discuss the defenses available to an accountant charged with negligence.

Correct AnswerverifiedDefenses to an accou...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true regarding any affirmative defenses available under Section 20a) of the Securities Exchange Act?

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 cu...View AnswerShow Answer

Under common law,what are the three primary types of liability assessed against accountants?

Correct AnswerverifiedShow Answer

Generally,unless engaged to detect ________,an accountant is not a fraud detector unless the fraud is uncovered in the course of exercising reasonable care and skill.

Correct AnswerverifiedShow Answer

For which of the following does the Securities Exchange Act impose liability?

Correct AnswerverifiedShow Answer

The attorney-client privilege means that information given by a client to his or her accountant cannot be revealed without the client's permission.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
Defenses to an accou...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Following are the cu...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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