NAME: ________________________

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5 Written Questions

5 Matching Questions

  1. Private Securities Litigation Reform Act 1995
  2. Gross Negligence
  3. Securities Act of 1933
  4. Elements of Proof Under Common Law
  5. Unaudited Statements of Nonpublic Companies
  1. a If Public company, auditor must inform Board of Directors for illegal acts by client.
    BOD has one day to inform SEC
    If don't; auditor has one day to inform SEC, or resign from audit and inform SEC,
    SEC may impose fines on auditor if not informed of illegal act
  2. b requires audited financial statements in registration statements of initial public offerings
  3. c Compilation: Preparation of financial statements based upon information provided to CPA's
    not intended to lend assurance as to statements' reliability
    Review: Limited verification procedures, provides limited assurance to statements reliability
  4. d failure to use minimal care or operating with a "reckless diregard for the truth" or "reckless behavior"
  5. e Duty - CPA accepted a duty of due professinal care.
    Breach of Duty - CPA breached contract.
    Losses - Suffered by Plaintiff.
    Causation - Losses were caused by CPA's performance.

5 Multiple Choice Questions

  1. failure to exercise reasonable care, thereby causeing harm to another or to property
  2. knowledge on the part of the person making the representations, at the time they are made that they are false.
  3. Result of inadequate audit performance,
    most cases: many estimates made by client are proven wrong,
    Deep pockets theory
  4. May exceed that of other professions because:
    number of parties suffering significant losses,
    possibly millions of investors as well as firms creditors,
    amounts can be excessive in some cases exceeding the limits of professional liability insurance
  5. Common Law, Statutory Law

5 True/False Questions

  1. Breach of ContractHave material effect on financial statements


  2. Restatement of torts approachAuditors know audited financial statements were to be used for a particular purpose, but auditors did not necessarily know the specific user


  3. Statutory LawLiability is based on federal securities laws or state stutes


  4. Securities Act of 1934requires audited financial statements in registration statements of initial public offerings


  5. 1136 Tenants CorporationUnaudited statements; importance of engagement letters to establish nature of services provided, need to follow up on unusual findings even when not performing Audit.


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