Question 1

As set forth in the case in the text, Bily v. Arthur Young & Co., which of the following is true regarding auditor liability to third parties under the Restatement rule?

Accepted Answer

A)   An auditor retained to conduct an annual audit and to furnish an opinion for no particular purpose generally undertakes no duty to third parties.
B)   An auditor retained to conduct an annual audit and to furnish an opinion for no particular purpose does undertake a duty to any foreseeable third party users.
C)   An auditor retained to conduct an annual audit and to furnish an opinion for no particular purpose undertakes a duty only to third parties who are financial institutions.
D)   An auditor retained to conduct an annual audit and to furnish an opinion for no particular purpose generally undertakes a duty only to directors of the company who provide loans to the company.
E)   An auditor retained to conduct an annual audit and to furnish an opinion for no particular purpose generally undertakes no duty to third parties except for financial institutions and also directors who provide loans to a company.F) B) and D)
G) B) and C)

Question 2

At a minimum, the duty of care of the accountant entails compliance with which of the following?

Accepted Answer

A)   Generally acknowledged accounting principles only.
B)   Generally acknowledged auditing standards only.
C)   Generally accepted accounting principles only.
D)   Generally accepted auditing standards and generally acknowledged accounting principles.
E)   Generally accepted accounting principles and generally accepted auditing standards.F) A) and B)
G) A) and C)

Question 3

What must be proven in order to recover damages under Section 10(b) of the Securities Exchange Act of 1934 and the corresponding SEC Rule 10b-5?

Accepted Answer

To recover damages under Section 10(b) a...

Question 4

After a significant amount of responsibility for the bankruptcy of ____________ Corporation was placed on the firms that provided accounting services for the corporation, the role of accountants became a question of significant public interest.

Accepted Answer

A)   Enron
B)   Acron
C)   Selinas
D)   Prolific
E)   DeltoidF) B) and E)
G) A) and B)

Question 5

Regarding liability for negligence to third parties, under the Restatement test, an accountant is liable to known third-party users of the accountant's work product and also to those in the limited class whose reliance on the work the accountant specifically foresaw.

Accepted Answer

A) True 
 B)False

Question 6

"Accountant Dissatisfaction." Paul agreed to perform accounting services for Teresa, and they entered into a contract setting forth the terms of their agreement. Teresa wanted Paul to review her financial information and her system of internal controls. Teresa became dissatisfied with Paul's work after he reported some irregularities in her financial statements. Paul, on the other hand, claimed that he had adequately performed his duties and that, at the most, any mistakes that he made were minimal.
-If Paul engaged in ____________ breach, he is not entitled to compensation for work completed.

Accepted Answer

A)   A substantial
B)   An adequate
C)   A material
D)   Any type of
E)   A comprehensiveF) C) and D)
G) A) and B)

Question 7

Which of the following is true regarding any affirmative defenses available under Section 20(a)  of the Securities Exchange Act?

Accepted Answer

A)   There are no affirmative defenses available.
B)   Comparative negligence is an affirmative defense.
C)   Contributory negligence is an affirmative defense.
D)   An affirmative defense exists when the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the underlying violation or cause of action.
E)   Comparative negligence and contributory negligence are affirmative defenses, and also an affirmative defense exists when the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the underlying violation or cause of action.F) C) and D)
G) A) and B)

Exam 11: Liability of Accountants and Other Professionals

Regarding liability for negligence to third parties, under the Restatement test, an accountant is liable to known third-party users of the accountant's work product and also to those in the limited class whose reliance on the work the accountant specifically foresaw.

Correct Answer
verified

At a minimum, the duty of care of the accountant entails compliance with which of the following?

Correct Answer
verified

Correct Answer
verified

Which of the following is true regarding any affirmative defenses available under Section 20(a) of the Securities Exchange Act?

Correct Answer
verified

After a significant amount of responsibility for the bankruptcy of ____________ Corporation was placed on the firms that provided accounting services for the corporation, the role of accountants became a question of significant public interest.

Correct Answer
verified

What must be proven in order to recover damages under Section 10(b) of the Securities Exchange Act of 1934 and the corresponding SEC Rule 10b-5?

Correct Answer
verified
To recover damages under Section 10(b) a...
View Answer

As set forth in the case in the text, Bily v. Arthur Young & Co., which of the following is true regarding auditor liability to third parties under the Restatement rule?

Correct Answer
verified

Exam 11: Liability of Accountants and Other Professionals

Regarding liability for negligence to third parties, under the Restatement test, an accountant is liable to known third-party users of the accountant's work product and also to those in the limited class whose reliance on the work the accountant specifically foresaw.

Correct AnswerverifiedShow Answer

At a minimum, the duty of care of the accountant entails compliance with which of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding any affirmative defenses available under Section 20(a) of the Securities Exchange Act?

Correct AnswerverifiedShow Answer

After a significant amount of responsibility for the bankruptcy of ____________ Corporation was placed on the firms that provided accounting services for the corporation, the role of accountants became a question of significant public interest.

Correct AnswerverifiedShow Answer

What must be proven in order to recover damages under Section 10(b) of the Securities Exchange Act of 1934 and the corresponding SEC Rule 10b-5?

Correct AnswerverifiedTo recover damages under Section 10(b) a...View AnswerShow Answer

As set forth in the case in the text, Bily v. Arthur Young & Co., which of the following is true regarding auditor liability to third parties under the Restatement rule?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
To recover damages under Section 10(b) a...
View Answer

Correct Answer
verified