Question 1

Under the Sarbanes-Oxley Act,in order to audit a public company,________.

Accepted Answer

A)  the auditing committee must comprise only of public accountants 
B)  a public accounting firm must register with the PCAOB 
C)  all public accounting firms must assign an accountant who works closely with one client over a long duration of time 
D)  all public companies must subject themselves to inspection and review by the board twice a year 
A)  the auditing committee must comprise only of public accountants 
B)  a public accounting firm must register with the PCAOB 
C)  all public accounting firms must assign an accountant who works closely with one client over a long duration of time 
D)  all public companies must subject themselves to inspection and review by the board twice a year

Question 2

Which of the following opinions would an auditor render about a company that has materially misstated certain items on its financial statements?

Accepted Answer

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

Question 3

________ imposes civil liability on accountants and others for making misstatements or omissions of material facts in a registration statement,or failing to find such misstatements or omissions.

Accepted Answer

A)  Section 11(a) of the Securities Act of 1933 
B)  Section 10(b) of the Securities Exchange Act of 1934 
C)  Section 15 of the Securities Act of 1933 
D)  Section 12(a)(1) of the Securities Act of 1933 
A)  Section 11(a) of the Securities Act of 1933 
B)  Section 10(b) of the Securities Exchange Act of 1934 
C)  Section 15 of the Securities Act of 1933 
D)  Section 12(a)(1) of the Securities Act of 1933

Question 4

Under the common law,accountants may be held liable by their clients for fraud.

Accepted Answer

A) True 
 B)False

Question 5

A person cannot be imprisoned under Section 32(a)unless he or she had knowledge of the rule or regulation violated.

Accepted Answer

A) True 
 B)False

Question 6

________ 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)  The foreseeability standard 
B)  The Ultramares doctrine 
C)  Due diligence defense 
D)  Disclaimer of opinion 
A)  The foreseeability standard 
B)  The Ultramares doctrine 
C)  Due diligence defense 
D)  Disclaimer of opinion

Question 7

Ronald is an independent accountant.He is hired by Procious,Inc.to audit its financial statements.He fails to uncover that Procious,Inc.has been involved in embezzlement.A corporation makes a tender offer for the shares of Procious,Inc.and discovers the embezzlement.According to which of the following standards is Ronald liable for negligence?

Accepted Answer

A)  the Ultramares doctrine 
B)  Section 552 of the Restatement (Second) of Torts 
C)  the foreseeability standard 
D)  implied warranty of fitness for a particular purpose 
A)  the Ultramares doctrine 
B)  Section 552 of the Restatement (Second) of Torts 
C)  the foreseeability standard 
D)  implied warranty of fitness for a particular purpose

Question 8

Mary is an accountant who was hired by Jupison,Inc.to file reports with the SEC.It is discovered that the report contains some False statements of material facts.Discuss Mary's liability under Section 18(a)of the Securities Exchange Act of 1934.How can Mary defeat the imposition of liability under this section?

Accepted Answer

Section 18(a)of the Securities Exchange

Question 9

While conducting an audit,an auditor must verify information from third parties.

Accepted Answer

A) True 
 B)False

Question 10

Section 11(a)of the Securities Act of 1933 holds accountants liable for omissions of material facts in registration statements regardless of the accountant's intentions.

Accepted Answer

A) True 
 B)False

Question 11

The Financial Accounting Standards Board (FASB)issues new GAAP rules and amends existing GAAP rules.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is true about an audit?

Accepted Answer

A)  Only an independent CPA must perform an audit. 
B)  An auditor may use the accounting standards defined by his or her accounting firm to perform an audit. 
C)  Verifying information from third parties is not a necessary step in an audit. 
D)  The process of preparing a company's annual financial statements is called auditing. 
A)  Only an independent CPA must perform an audit. 
B)  An auditor may use the accounting standards defined by his or her accounting firm to perform an audit. 
C)  Verifying information from third parties is not a necessary step in an audit. 
D)  The process of preparing a company's annual financial statements is called auditing.

Question 13

The U.S.Supreme Court has held that there is no accountant-client privilege under federal law.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true of accountants' liability to third parties in breach of contract and fraud cases?

Accepted Answer

A)  An accountant is liable to a third party for fraud only if the accountant has committed constructive fraud. 
B)  An accountant is not liable to a third party for fraud as the accountant is not in privity of contract with the third party. 
C)  An accountant is not liable to a third party in breach of contract cases as the accountant is not in privity of contract with the third party. 
D)  An accountant is liable to a third party for breach of contract if the accountant willfully refuses to perform the terms of the contract. 
A)  An accountant is liable to a third party for fraud only if the accountant has committed constructive fraud. 
B)  An accountant is not liable to a third party for fraud as the accountant is not in privity of contract with the third party. 
C)  An accountant is not liable to a third party in breach of contract cases as the accountant is not in privity of contract with the third party. 
D)  An accountant is liable to a third party for breach of contract if the accountant willfully refuses to perform the terms of the contract.

Question 15

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)  exclusionary rule 
B)  due diligence defense 
C)  the Ultramares doctrine 
D)  the foreseeability standard 
A)  exclusionary rule 
B)  due diligence defense 
C)  the Ultramares doctrine 
D)  the foreseeability standard

Question 16

Paul is an independent auditor who has been hired to audit Pattorna,Inc.'s financial records.He finds that there is insufficient information about the financial records to draw a conclusion about their accuracy.Which of the following would Paul issue?

Accepted Answer

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

Question 17

The members of the Public Company Accounting Oversight Board are appointed for a term of seven years.

Accepted Answer

A) True 
 B)False

Question 18

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 CPA certification are called public accountants. 
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 CPA certification are called public accountants.

Question 19

A certified public accounting firm that audits a public company may provide ________ to the same client.

Accepted Answer

A)  bookkeeping services 
B)  internal audit services 
C)  investment banking services 
D)  tax services 
A)  bookkeeping services 
B)  internal audit services 
C)  investment banking services 
D)  tax services

Question 20

A verification of a company's books and records pursuant to federal securities laws,state laws,and stock exchange rules that must be performed by an independent CPA is known as a(n)________.

Accepted Answer

A)  probate 
B)  ademption 
C)  audit 
D)  deposition 
A)  probate 
B)  ademption 
C)  audit 
D)  deposition

Exam 40: Accountants' Duties and Liability

Under the Sarbanes-Oxley Act,in order to audit a public company,________.

Which of the following opinions would an auditor render about a company that has materially misstated certain items on its financial statements?

________ imposes civil liability on accountants and others for making misstatements or omissions of material facts in a registration statement,or failing to find such misstatements or omissions.

Under the common law,accountants may be held liable by their clients for fraud.

A person cannot be imprisoned under Section 32(a)unless he or she had knowledge of the rule or regulation violated.

________ 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.

While conducting an audit,an auditor must verify information from third parties.

Section 11(a)of the Securities Act of 1933 holds accountants liable for omissions of material facts in registration statements regardless of the accountant's intentions.

The Financial Accounting Standards Board (FASB)issues new GAAP rules and amends existing GAAP rules.

Which of the following statements is true about an audit?

The U.S.Supreme Court has held that there is no accountant-client privilege under federal law.

Which of the following statements is true of accountants' liability to third parties in breach of contract and fraud cases?

Which of the following can be used by an accountant to counter liability imposed under Section 11(a)of the Securities Act of 1933?

Paul is an independent auditor who has been hired to audit Pattorna,Inc.'s financial records.He finds that there is insufficient information about the financial records to draw a conclusion about their accuracy.Which of the following would Paul issue?

The members of the Public Company Accounting Oversight Board are appointed for a term of seven years.

Which of the following statements is true of accountants?

A certified public accounting firm that audits a public company may provide ________ to the same client.

A verification of a company's books and records pursuant to federal securities laws,state laws,and stock exchange rules that must be performed by an independent CPA is known as a(n)________.

Legal Heritage and the Digital Age

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Judicial Alternative Administrative and E-Dispute Resolution

Intentional Torts and Negligence

Criminal Law and Cyber Crimes

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Ethics and Social Responsibility of Business

Nature of Traditional and E-Contracts

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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

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Creation and Transfer of Negotiable Instruments

Holder in Due Course and Liability of Parties

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Agency law

Small Business, Entrepreneurship, and Partnerships

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Corporate Governance and the Sarbanes-Oxley Act

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