5 Written questions
5 Matching questions
- Securities Act of 1934
- Statutory Law
- CPA Liability
- Litigation Perspective
- Ultramares Approach
- a Result of inadequate audit performance,
most cases: many estimates made by client are proven wrong,
Deep pockets theory
- b Established the SEC and established requirement for annual audited financial statements
- c Liability is based on federal securities laws or state stutes
- d Auditors know audited financial statements were to be used for a particular purpose by a known third party user
- e 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 Multiple choice questions
- knowledge on the part of the person making the representations, at the time they are made that they are false.
- liability concepts are developed through court decisions based on negligence, gross negligence, fraud, or breach of contract
- 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
- Violations of laws other than those related to reporting: OSHA, FDA, EEOC Laws
- Auditors know audited financial statements were to be used for a particular purpose, but auditors did not necessarily know the specific user
5 True/False questions
Elements of Proof Under Common Law → 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.
Regulation S-X → Eastablishes form, content, and requirements of financial statements
Private Securities Litigation Reform Act 1995 → Established the SEC and established requirement for annual audited financial statements
Negligence → failure to exercise reasonable care, thereby causeing harm to another or to property
Laws for Auditor Liability → defendant would be required to pay a proportionate share of the damage, depending on the degree of fault determined by judge or jury