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5 Written questions

5 Matching questions

  1. Class action suits
  2. Direct Illegal Act
  3. Securities Exchange Commission
  4. Indirect Illegal Act
  5. Restatement of torts approach
  1. a Violations of laws other than those related to reporting: OSHA, FDA, EEOC Laws
  2. b has 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
  3. c Have material effect on financial statements
  4. d Auditors know audited financial statements were to be used for a particular purpose, but auditors did not necessarily know the specific user
  5. e designed to prevent multiple suits that might result in inconsistent judgements. Lawyers try to identify every potential member of the class.

5 Multiple choice questions

  1. intentional concealment or misrepresentation of a material fact that causes damage to those deceived. Scienter must be proved.
  2. Established the SEC and established requirement for annual audited financial statements
  3. 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
  4. Auditors were held criminally liable for gross negligence. Largely responsible for the development of required disclosure of related party transactions
  5. defendant would be required to pay a proportionate share of the damage, depending on the degree of fault determined by judge or jury

5 True/False questions

  1. Procedures of Illegal ActsIndirect: can have future impact,
    Auditor must follow up to determine if material
    If material - Report (to audit committee), make sure adequately disclosed in financial statements
    If not material, inform appropriate level of management

          

  2. Joint & Several LiabilityMay 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

          

  3. Accounting Profession's Credibility CrisisAuditors were held criminally liable for gross negligence. Largely responsible for the development of required disclosure of related party transactions

          

  4. Breach of Contractwhen a person fails to perform a contractual duty

          

  5. Rosenblum ApproachAuditors know audited financial statements were to be used for a particular purpose by a known third party user

          

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