Question 1

Which of the following was the result at the Supreme Court level in Matrixx Initiatives Inc.,v.Siracusano,the case in the text in which the plaintiffs brought a class action alleging that the defendant violated security laws by failing to release reports that its product Zicam Cold Remedy had been found to result in a loss of smell?

Accepted Answer

A)   That the plaintiffs would not be allowed to proceed because they did not present statistically significant evidence that Zicam caused loss of smell.
B)   That the plaintiffs would be allowed to proceed because they sufficiently pled scienter and also presented statistically significant evidence that Zicam caused loss of smell.
C)   That under the "total mix" standard, the plaintiffs sufficient pled materiality in regard to the alleged failure to disclose; that plaintiffs sufficiently pled scienter; and that plaintiffs would be allowed to proceed.
D)   That under the "total mix" standard, the plaintiffs failed to sufficient plead materiality in regard to the alleged failure to disclose and therefore would not be allowed to proceed.
E)   That although under the "total mix" standard, the plaintiffs pled materiality in regard to the alleged failure to disclose, the plaintiffs failed to sufficiently plead scienter and would therefore not be allowed to proceed.F) A) and D)
G) B) and E)

Question 2

The reasonably foreseeable users test holds an accountant liable to any third-party who was or should have been foreseen as a possible user of the accountant's work product and did,in fact,use and rely upon that work product for a proper business purpose.

Accepted Answer

A) True 
 B)False

Question 3

Under which of the following are accountants civilly liable for misstatements and omissions of material facts made in registration statements the SEC requires?

Accepted Answer

A)   Section 11 of the Securities Act of 1933
B)   Section 10 of the Securities Act of 1934
C)   Section 12 of the Securities Act of 1934
D)   Section 13 of the Securities Act of 1935
E)   Section 12 of the Securities Act of 1933F) C) and E)
G) B) and D)

Question 4

Which of the following is true regarding the number of states that have adopted the Restatement Test of accountant liability for negligence to third-parties?

Accepted Answer

A)   None because there is no Restatement test
B)   All the states
C)   About half the states
D)   One-fourth of the states
E)   Only a few statesF) A) and E)
G) B) and C)

Question 5

In reference to the case of Credit Alliance Corp.v.Arthur Anderson & Co.,what did the court rule regarding the effort to hold the defendant accounting firm liable on a third-party reliance theory?

Accepted Answer

A)   The plaintiff was allowed to recover because the Ultramares Rule was applied.
B)   The plaintiff was not allowed to recover because the Carroll Rule was applied.
C)   The plaintiff was allowed to recover because it was a foreseen user.
D)   The plaintiff was allowed to recover because it was in a foreseen class of users.
E)   The plaintiff was not allowed to recover because the court did not find the necessary link between the plaintiff and the accounting firm.F) A) and B)
G) All of the above

Question 6

What is Rhonda's contract with Greg to do audit work for him called?

Accepted Answer

A)   Absolute contract
B)   Engagement letter
C)   Retention contract
D)   Audit affirmation letter
E)   Preview contractF) B) and C)
G) B) and D)

Question 7

Generally,unless engaged to detect __________,an accountant is not a fraud detector unless the fraud is uncovered in the course of exercising reasonable care and skill.

Accepted Answer

A)   Negligence
B)   Misfeasance
C)   Malfeasance
D)   Fraud
E)   MalpracticeF) B) and C)
G) A) and D)

Exam 11: Liability of Accountants and Other Professionals

Generally,unless engaged to detect __________,an accountant is not a fraud detector unless the fraud is uncovered in the course of exercising reasonable care and skill.

Correct Answer
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Correct Answer
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Which of the following is true regarding the number of states that have adopted the Restatement Test of accountant liability for negligence to third-parties?

Correct Answer
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The reasonably foreseeable users test holds an accountant liable to any third-party who was or should have been foreseen as a possible user of the accountant's work product and did,in fact,use and rely upon that work product for a proper business purpose.

Correct Answer
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In reference to the case of Credit Alliance Corp.v.Arthur Anderson & Co.,what did the court rule regarding the effort to hold the defendant accounting firm liable on a third-party reliance theory?

Correct Answer
verified

What is Rhonda's contract with Greg to do audit work for him called?

Correct Answer
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Under which of the following are accountants civilly liable for misstatements and omissions of material facts made in registration statements the SEC requires?

Correct Answer
verified

Exam 11: Liability of Accountants and Other Professionals

Generally,unless engaged to detect __________,an accountant is not a fraud detector unless the fraud is uncovered in the course of exercising reasonable care and skill.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding the number of states that have adopted the Restatement Test of accountant liability for negligence to third-parties?

Correct AnswerverifiedShow Answer

The reasonably foreseeable users test holds an accountant liable to any third-party who was or should have been foreseen as a possible user of the accountant's work product and did,in fact,use and rely upon that work product for a proper business purpose.

Correct AnswerverifiedShow Answer

In reference to the case of Credit Alliance Corp.v.Arthur Anderson & Co.,what did the court rule regarding the effort to hold the defendant accounting firm liable on a third-party reliance theory?

Correct AnswerverifiedShow Answer

What is Rhonda's contract with Greg to do audit work for him called?

Correct AnswerverifiedShow Answer

Under which of the following are accountants civilly liable for misstatements and omissions of material facts made in registration statements the SEC requires?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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