Exam 40: Accountants' Duties and Liability

Sean is an accountant who is facing a civil lawsuit.The lawsuit has been filed by one of his clients,Naturs,Inc.To recover punitive damages,Naturs should prove that ________.

Carl is an accountant who helped Sireus,Inc.to evaluate and sell its securities.Mark,who purchased the securities,finds that they have been overvalued.Which of the following statements is true of this scenario?

Carl,a certified public accountant,prepares a registration statement for Blue Scales,Inc.He discovers that some of the financial information provided by Blue Scales is inaccurate and discusses this with his point of contact in the company.Carl conceals this and includes misstatements of material fact in his registration statement.Blue Scales files this registration statement with the Securities and Exchange Commission (SEC).If these misstatements are discovered by an investor,what is Carl's liability under securities laws?

Holly Lane is an accountant with Mildred & Lane Co.She has recently been asked to visit Maine Manufacturers to survey their financial records,assess their compliance with federal and state laws,and provide an opinion reflecting the state of the company's financial records.Holly's assessment of the financial records of Maine Manufacturers is called a(n)________.

Which of the following statements is true of the audit committee mandated by the Sarbanes-Oxley Act?

By showing that the defendant acted negligently,a plaintiff can win a lawsuit filed under Section 18(a)of the Securities Exchange Act of 1934.

A public accounting firm that is registered with the Public Company Accounting Oversight Board (PCAOB)is reviewed ________.

Which of the following is a necessity to bring a private civil action against a violator of the Racketeer Influenced and Corrupt Organizations Act (RICO)based on securities fraud?

Ordinary negligence by accountants violates Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934.

Which of the following statements is true of the Private Securities Litigation Reform Act of 1995?

Persons injured by a RICO violation can bring a private civil action against the violator and recover treble (triple)damages.

Plaintiffs must prove that the accountants behaved intentionally or recklessly in a lawsuit based on Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934.

The International Financial Reporting Standards (IFRSs)are used primarily by companies operating within the United States.

A(n)________ is defined as intentional misrepresentation or omission of a material fact that is relied on by the client and causes the client damage.

Which of the following statements is true of Section 18(a)of the Securities Exchange Act of 1934?

Which of the following acts replaces joint and several liability with proportionate liability?

Stan is an independent public accountant.He is hired by Raustus,Inc.to prepare financial statements for the company.Raustus uses these statements to obtain investors for the company.It provides copies of the financial statements to potential investors.While preparing the financial statements,Stan commits some errors,which misstate the true financial position of Raustus.One of the investors discovers this and files a lawsuit.What are the factors that determine Stan's liability?

Which of the following statements is true of the generally accepted accounting principles (GAAPs)?

If an auditor makes a disclaimer of opinion,this means that the auditor ________.

An accountant can defeat the imposition of liability under Section 18(a)if the accountant ________.