Question 1

The financial statement prepared by an accountant is considered an expertised portion of the registration statement only if the accountant is a CPA.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following statements is true of the Tax Reform Act of 1976?

Accepted Answer

A)  It imposes fines and imprisonment for an individual for aiding and assisting in the preparation of a False tax return. 
B)  An accountant who negligently understates a client's tax liability can be imprisoned under this act. 
C)  It provides for both criminal and civil penalties for securities fraud. 
D)  It makes it a criminal offense for any person who willfully makes any False statements in a registration statement. 
A)  It imposes fines and imprisonment for an individual for aiding and assisting in the preparation of a False tax return. 
B)  An accountant who negligently understates a client's tax liability can be imprisoned under this act. 
C)  It provides for both criminal and civil penalties for securities fraud. 
D)  It makes it a criminal offense for any person who willfully makes any False statements in a registration statement. A

Question 3

Pursuant to obtaining a bank loan,Artcross,Inc.appointed William,an accountant,to prepare audited financial statements.William was made aware of the use of the financial statements.Upon inspection by the bank,the financial statements were found to be negligently prepared.Which of the following would be true in this scenario?

Accepted Answer

A)  According to the foreseeability standard, William is liable to the bank for negligence only if he was aware that the financial statements were going to be used to obtain a loan. 
B)  According to Section 552 of the Restatement (Second) of Torts, William is not liable to the bank, as he did not know the identity of the third party. 
C)  William cannot be held liable for negligence if the foreseeability standard is applied. 
D)  William cannot be held liable for negligence if the Ultramares doctrine is applied. 
A)  According to the foreseeability standard, William is liable to the bank for negligence only if he was aware that the financial statements were going to be used to obtain a loan. 
B)  According to Section 552 of the Restatement (Second) of Torts, William is not liable to the bank, as he did not know the identity of the third party. 
C)  William cannot be held liable for negligence if the foreseeability standard is applied. 
D)  William cannot be held liable for negligence if the Ultramares doctrine is applied. D

Question 4

Violations of GAAPs or GAASs are prima facie evidence of negligence.

Accepted Answer

A) True 
 B)False

Question 5

GAAPs and GAASs are used to determine the conduct of a "reasonable accountant" in negligence suits.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following legislations makes it a criminal offense to willfully make any untrue statement of material fact in a registration statement filed with the SEC?

Accepted Answer

A)  Section 24 of the Securities Act of 1933 
B)  Tax Reform Act of 1976 
C)  Private Securities Litigation Reform Act of 1995 
D)  Section 10(b) of the Securities Exchange Act of 1934 
A)  Section 24 of the Securities Act of 1933 
B)  Tax Reform Act of 1976 
C)  Private Securities Litigation Reform Act of 1995 
D)  Section 10(b) of the Securities Exchange Act of 1934

Question 7

Why did the Congress enact the federal Sarbanes-Oxley Act of 2002? What are the goals of this act?

Accepted Answer

During the late 1990s and early 2000s,ma

Question 8

The Public Company Accounting Oversight Board (PCAOB)can place temporary limitations on the activities of public accountants and accounting firms.

Accepted Answer

A) True 
 B)False

Question 9

Privity of contract is irrelevant in lawsuits based on Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true of limited liability partnerships (LLP)?

Accepted Answer

A)  All the partners lose only their capital contribution in the LLP if the LLP fails. 
B)  The limited partners are personally liable for the debts and obligations of the LLP. 
C)  A limited partner whose negligent or intentional conduct causes injury cannot be held personally liable for his or her conduct. 
D)  If an LLP fails, the LLP's remaining assets are sold to help the largest stakeholder recover his or her investments in the LLP. 
A)  All the partners lose only their capital contribution in the LLP if the LLP fails. 
B)  The limited partners are personally liable for the debts and obligations of the LLP. 
C)  A limited partner whose negligent or intentional conduct causes injury cannot be held personally liable for his or her conduct. 
D)  If an LLP fails, the LLP's remaining assets are sold to help the largest stakeholder recover his or her investments in the LLP.

Question 11

Which of the following statements is true of the Sarbanes-Oxley Act?

Accepted Answer

A)  It requires all audit papers to be retained for at least ten years. 
B)  It requires the Public Company Accounting Oversight Board to inspect and review registered accounting firms that audit more than 100 public companies once a year. 
C)  It created the Securities Exchange Committee. 
D)  It allows a registered public accounting firm to simultaneously provide audit and legal services to a public company. 
A)  It requires all audit papers to be retained for at least ten years. 
B)  It requires the Public Company Accounting Oversight Board to inspect and review registered accounting firms that audit more than 100 public companies once a year. 
C)  It created the Securities Exchange Committee. 
D)  It allows a registered public accounting firm to simultaneously provide audit and legal services to a public company.

Question 12

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)  engagement 
A)  abatement 
B)  arraignment 
C)  easement 
D)  engagement

Question 13

What are the protections offered to an accountant and his or her work papers when the accountant's client is facing a court action?

Accepted Answer

The attorney-client privilege provides t

Question 14

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

Accepted Answer

A)  Tax Reform Act of 1976 
B)  Racketeer Influenced and Corrupt Organizations Act 
C)  Private Taxation Litigation Reform Act 
D)  Uniform Securities Act 
A)  Tax Reform Act of 1976 
B)  Racketeer Influenced and Corrupt Organizations Act 
C)  Private Taxation Litigation Reform Act 
D)  Uniform Securities Act

Question 15

All states have provisions that protect an accountant's work papers from discovery in a court case against the accountant's client.

Accepted Answer

A) True 
 B)False

Question 16

A rule that says that an accountant is liable for negligence to third parties who are projected users of the client's financial statements is known as ________.

Accepted Answer

A)  the foreseeability standard 
B)  the Ultramares doctrine 
C)  due diligence defense 
D)  privity of contract 
A)  the foreseeability standard 
B)  the Ultramares doctrine 
C)  due diligence defense 
D)  privity of contract

Question 17

Tom was hired to prepare and certify a registration statement for Blue Scales,Inc.The Securities and Exchange Commission (SEC)found some omissions of material facts in the registration statement.Which of the following statements is true of this scenario?

Accepted Answer

A)  Tom cannot be held liable as the SEC is not a member of the limited class of intended users of his statements. 
B)  Tom cannot be held liable as the SEC is not in privity of contract with him. 
C)  Tom can be held liable under Section 11(a) of the Securities Act of 1933 regardless of his willfulness in making misstatements of facts. 
D)  Tom can avoid liability if he can show that he had reasonable grounds to believe that the statements made were true. 
A)  Tom cannot be held liable as the SEC is not a member of the limited class of intended users of his statements. 
B)  Tom cannot be held liable as the SEC is not in privity of contract with him. 
C)  Tom can be held liable under Section 11(a) of the Securities Act of 1933 regardless of his willfulness in making misstatements of facts. 
D)  Tom can avoid liability if he can show that he had reasonable grounds to believe that the statements made were true.

Question 18

Which of the following statements is true of the generally accepted auditing standards (GAASs)?

Accepted Answer

A)  These standards are set by the International Accounting Standards Board (IAS
B) . 
B)  The International Accounting Standards are replacing GAAS. 
C)  They set forth rules for how corporations and accounting firms declare accounts on the corporation's financial statements. 
D)  They require sufficient evidence to afford a reasonable basis for issuing an opinion on the financial statements under audit. 
A)  These standards are set by the International Accounting Standards Board (IAS
B) . 
B)  The International Accounting Standards are replacing GAAS. 
C)  They set forth rules for how corporations and accounting firms declare accounts on the corporation's financial statements. 
D)  They require sufficient evidence to afford a reasonable basis for issuing an opinion on the financial statements under audit.

Question 19

The Public Company Accounting Oversight Board (PCAOB)was created by the ________.

Accepted Answer

A)  Securities Exchange Act of 1934 
B)  Securities Act of 1933 
C)  Tax Reform Act of 1976 
D)  Sarbanes-Oxley Act of 2002 
A)  Securities Exchange Act of 1934 
B)  Securities Act of 1933 
C)  Tax Reform Act of 1976 
D)  Sarbanes-Oxley Act of 2002

Question 20

Accountants who have violated the provisions of the Tax Reform Act of 1976 can be prohibited from further federal income tax practice.

Accepted Answer

A) True 
 B)False

Exam 40: Accountants' Duties and Liability

The financial statement prepared by an accountant is considered an expertised portion of the registration statement only if the accountant is a CPA.

Which of the following statements is true of the Tax Reform Act of 1976?

Violations of GAAPs or GAASs are prima facie evidence of negligence.

GAAPs and GAASs are used to determine the conduct of a "reasonable accountant" in negligence suits.

Which of the following legislations makes it a criminal offense to willfully make any untrue statement of material fact in a registration statement filed with the SEC?

Why did the Congress enact the federal Sarbanes-Oxley Act of 2002? What are the goals of this act?

The Public Company Accounting Oversight Board (PCAOB)can place temporary limitations on the activities of public accountants and accounting firms.

Privity of contract is irrelevant in lawsuits based on Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934.

Which of the following statements is true of limited liability partnerships (LLP)?

Which of the following statements is true of the Sarbanes-Oxley Act?

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

What are the protections offered to an accountant and his or her work papers when the accountant's client is facing a court action?

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

All states have provisions that protect an accountant's work papers from discovery in a court case against the accountant's client.

A rule that says that an accountant is liable for negligence to third parties who are projected users of the client's financial statements is known as ________.

Tom was hired to prepare and certify a registration statement for Blue Scales,Inc.The Securities and Exchange Commission (SEC)found some omissions of material facts in the registration statement.Which of the following statements is true of this scenario?

Which of the following statements is true of the generally accepted auditing standards (GAASs)?

The Public Company Accounting Oversight Board (PCAOB)was created by the ________.

Accountants who have violated the provisions of the Tax Reform Act of 1976 can be prohibited from further federal income tax practice.

Legal Heritage and the Digital Age

Constitutional Law for Business and E-commerce

Courts and Jurisdiction

Judicial Alternative Administrative and E-Dispute Resolution

Intentional Torts and Negligence

Criminal Law and Cyber Crimes

Intellectual Property and Cyber Piracy

Ethics and Social Responsibility of Business

Nature of Traditional and E-Contracts

Agreement and Consideration

Capacity and Legality

Genuineness of Assent and Statute of Frauds

Third-Party Rights and Discharge

Breach of Contract and Remedies

Digital Law and E-Commerce

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Warranties and Product Liability

Creation and Transfer of Negotiable Instruments

Holder in Due Course and Liability of Parties

Banking System and Electronic Financial Transactions

Credit, Real Property Financing, and Secured Transactions

Bankruptcy and Reorganization

Agency law

Small Business, Entrepreneurship, and Partnerships

Corporate Formation and Financing

Corporate Governance and the Sarbanes-Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Franchise and Special Forms of Business

Investor Protection, E-Securities, and Wall Street Reform

Antitrust Law and Unfair Trade Practices

Consumer Safety and Environmental Protection

Labor, Worker Protection, and Immigration Laws

Equal Opportunity in Employment

Personal Property, Bailment, and Insurance

Real Property, Landlord-Tenant Law, and Land Use Regulation

Family Law, Wills, and Trusts

International and World Trade Law

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