5 Written questions
5 Matching questions
- Direct Illegal Act
- Litigation Perspective
- Contingent-fee cases
- Elements of Proof Under Common Law
- Securities Exchange Commission
- a if lose case client owes lawyer nothing, if win lawer get a % of winnings.
- b Result of inadequate audit performance,
most cases: many estimates made by client are proven wrong,
Deep pockets theory
- c Have material effect on financial statements
- d 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.
- 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
- designed to prevent multiple suits that might result in inconsistent judgements. Lawyers try to identify every potential member of the class.
- knowledge on the part of the person making the representations, at the time they are made that they are false.
- Sue those who can pay. Want the firm to settle to make a quick buck even if firm did nothing wrong.
- 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.
- Compilation: 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
5 True/False questions
Negligence → failure to use minimal care or operating with a "reckless diregard for the truth" or "reckless behavior"
CPA Liability → 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
Accounting Profession's Credibility Crisis → Lots of Fraud in early 2000's which caused the public to question the auditing profession.
Joint & Several Liability → 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
Breach of Contract → Have material effect on financial statements