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5 Written questions

5 Matching questions

  1. Private Securities Litigation Reform Act 1995
  2. Ultramares Approach
  3. Direct Illegal Act
  4. Rosenblum Approach
  5. US vs Arthur Andersen
  1. a Auditors know audited financial statements were to be used for a particular purpose by a known third party user
  2. b 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.
  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 Have material effect on financial statements
  5. e If Public company, auditor must inform Board of Directors for illegal acts by client.
    BOD has one day to inform SEC
    If don't; auditor has one day to inform SEC, or resign from audit and inform SEC,
    SEC may impose fines on auditor if not informed of illegal act

5 Multiple choice questions

  1. Violations of laws other than those related to reporting: OSHA, FDA, EEOC Laws
  2. Common Law, Statutory Law
  3. Established the SEC and established requirement for annual audited financial statements
  4. defendant would be required to pay a proportionate share of the damage, depending on the degree of fault determined by judge or jury
  5. knowledge on the part of the person making the representations, at the time they are made that they are false.

5 True/False questions

  1. CPA 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

          

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

          

  3. Elements of Proof Under Common LawBreach of Contract, Negligence

          

  4. Deep Pocket TheorySue those who can pay. Want the firm to settle to make a quick buck even if firm did nothing wrong.

          

  5. PCAOBintentional concealment or misrepresentation of a material fact that causes damage to those deceived. Scienter must be proved.