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5 Written questions

5 Matching questions

  1. Laws for Auditor Liability
  2. Rosenblum Approach
  3. Common Law
  4. Fraud
  5. Controlling Litigation
  1. a intentional concealment or misrepresentation of a material fact that causes damage to those deceived. Scienter must be proved.
  2. b Common Law, Statutory Law
  3. c Auditors should have realized it was reasonably foreseeable that audited financial statements would be used for routine business purposes. Opens door to liability for ordinary negligence to virtually all third parties who rely on the statements
  4. d Place emphasis within firm on complying with GAAS and professional ethics,
    investigate prospective clients thoroughly,
    obtain a thorough knowledge of clients business,
    use engagement letters to prevent misunderstanding, asses risk of errors and irregularities, exercise extreme care in audits of clients with high business risk, carefully prepare and review working papers.
  5. e liability concepts are developed through court decisions based on negligence, gross negligence, fraud, or breach of contract

5 Multiple choice questions

  1. Unaudited statements; importance of engagement letters to establish nature of services provided, need to follow up on unusual findings even when not performing Audit.
  2. Liability is based on federal securities laws or state stutes
  3. Auditors know audited financial statements were to be used for a particular purpose by a known third party user
  4. requires audited financial statements in registration statements of initial public offerings
  5. Established the SEC and established requirement for annual audited financial statements

5 True/False questions

  1. Joint & Several LiabilityCommon Law, Statutory Law


  2. Contingent-fee casesfailure to exercise reasonable care, thereby causeing harm to another or to property


  3. Securities Exchange Commissionhas power to prohibit CPA's from reporting on SEC registrants' financial statments. Can take punitive action against public accounting firms. Auditors are required to report any illegal acts by clients to SEC if client fails to report them


  4. Indirect Illegal ActViolations of laws other than those related to reporting: OSHA, FDA, EEOC Laws


  5. Scienterknowledge on the part of the person making the representations, at the time they are made that they are false.


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