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

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)   engagementE) A) and C)
F) All of the above

Question 3

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 4

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.E) A) and B)
F) A) and C)

Question 5

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 6

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 2002E) C) and D)
F) All of the above

Question 7

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 1934E) A) and B)
F) None of the above

Question 8

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

Question 9

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 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 contractE) C) and D)
F) B) and D)

Question 13

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 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 ActE) A) and D)
F) All of the above

Question 15

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.E) B) and D)
F) A) and D) D

Question 16

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.E) A) and B)
F) B) and C)

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.E) A) and B)
F) None of the above

Question 18

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.E) None of the above
F) B) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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.E) A) and D)
F) None of the above A

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.

Correct Answer
verified
False

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

Correct Answer
verified

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

Correct Answer
verified
During the late 1990s and early 2000s,ma...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified
The attorney-client privilege provides t...
View Answer

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

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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 ________.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
D

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

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified
A

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.

Correct AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedDuring the late 1990s and early 2000s,ma...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe attorney-client privilege provides t...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 ________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

Correct Answer
verified
False

Correct Answer
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Correct Answer
verified
During the late 1990s and early 2000s,ma...
View Answer

Correct Answer
verified

Correct Answer
verified
The attorney-client privilege provides t...
View Answer

Correct Answer
verified

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Correct Answer
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Correct Answer
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Correct Answer
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D

Correct Answer
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A