Exam 44: Accountants Legal Liability

Which of the following defenses may be raised by an accountant under Section 11 of the 1933 Securities Act?

An accountant who willfully violates Section 11 of the 1933 Securities Act will be subject to criminal liability.

Criminal sanctions for accountants are limited to punitive fines.

Pam certified a statement prepared by John, her employee, without checking John's work.He was never known to be anything but diligent and his integrity had never been questioned.The audit contained gross misstatements.Pam defends a suit against her claiming "due diligence." She will:

When can an accountant release audit working papers?

Accountants would be subject to criminal liability where they:

An accountant can ethically disclose a client's confidential information if the accountant complies with:

As a result of the Sarbanes-Oxley Act, the lead audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit must rotate at least every three years.

An accountant must disclose the contents of his working papers under a court order.

Baxsen, Inc.wanted to acquire the common stock of the Acme Corporation and hired Clark to audit the financial statements of Acme.Clark failed to discover a large embezzlement by Acme's chief financial officer.In a common law action by Baxsen against Clark, Baxsen must at a minimum prove:

In most statutes granting an accountant-client privilege, it belongs to the client and not to the accountant.

Foreseen plaintiffs under the Restatement view of tort liability for an accountant include potential investors and the general public.

The Sarbanes-Oxley Act was enacted in response to:

Under the majority view and the Restatement test for determining liability, negligence of an accountant in conducting an audit may result in damage awards to potential investors.

An accountant who contractually promises to conduct an audit to detect possible embezzlement is under a contractual obligation to provide for the client an expanded audit beyond Generally Accepted Auditing Standards.

The failure by an accountant to use the care of a reasonably competent accountant is:

An accountant has no liability to third parties other than the client.

Accountants authorized under federal law to practice before the IRS have the privilege of confidentiality for tax advice given to their client-taxpayers with respect to Internal Revenue Code matters.

Mary tells her accountant, "I must have this year's audit completed by March 1." The accountant agrees to complete the audit by March 1.Under general contract law, if the audit is not completed by March 1, Mary does not have to pay the accountant for the audit.

An accountant-client privilege is statutorily recognized in some states and would generally permit the accountant to refuse to disclose confidential information gleaned from his client.