NAME

Question types


Start with


Question limit

of 35 available terms

Advertisement Upgrade to remove ads
Print test

5 Written questions

5 Matching questions

  1. Scienter
  2. Rosenblum Approach
  3. Continental Vending (Ciminal Liability)
  4. Securities Exchange Commission
  5. Ultramares Approach
  1. a 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
  2. b Auditors were held criminally liable for gross negligence. Largely responsible for the development of required disclosure of related party transactions
  3. c Auditors know audited financial statements were to be used for a particular purpose by a known third party user
  4. d knowledge on the part of the person making the representations, at the time they are made that they are false.
  5. e 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

5 Multiple choice questions

  1. Damages 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
  2. Indirect: 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
  3. 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.
  4. Auditors know audited financial statements were to be used for a particular purpose, but auditors did not necessarily know the specific user
  5. 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.

5 True/False questions

  1. Causes of Legal ActionIndirect: 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. Litigation PerspectiveResult of inadequate audit performance,
    most cases: many estimates made by client are proven wrong,
    Deep pockets theory

          

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

          

  4. Class action suitsEastablishes form, content, and requirements of financial statements

          

  5. Unaudited Statements of Nonpublic CompaniesCompilation: 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