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5 Written questions

5 Matching questions

  1. Ultramares Approach
  2. Indirect Illegal Act
  3. US vs Arthur Andersen
  4. Negligence
  5. Litigation Perspective
  1. a accused of wholesale destruction of documents relating to the Enron Coporation collapse. Loss of case put Arthur Andersen out of business. Conviction was overturned by U.S. Supreme Court.
  2. b Auditors know audited financial statements were to be used for a particular purpose by a known third party user
  3. c Violations of laws other than those related to reporting: OSHA, FDA, EEOC Laws
  4. d failure to exercise reasonable care, thereby causeing harm to another or to property
  5. e Result of inadequate audit performance,
    most cases: many estimates made by client are proven wrong,
    Deep pockets theory

5 Multiple choice questions

  1. 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
  2. Breach of Contract, Negligence
  3. Common Law, Statutory Law
  4. May conduct investigations and disciplinary proceedings on registered CPA firm and professional employee. Include monetary damages, suspension of firms from engagements with public companies, regerral of criminal cases to Justice Department
  5. 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 True/False questions

  1. Unaudited Statements of Nonpublic CompaniesAuditors know audited financial statements were to be used for a particular purpose, but auditors did not necessarily know the specific user

          

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

          

  3. Breach of ContractHave material effect on financial statements

          

  4. Joint & Several LiabilityDamages ought to be paid to those suffering losses caused by each party. Suffering party can recover full damages from any party. Usually % of fault is the percentage of damages each defendant pays but many cases Management is in bankruptcy so auditor is left to pay everything

          

  5. Securities Act of 1934Established the SEC and established requirement for annual audited financial statements