Question 1

1.Distinguish between the following: 
(a) primary versus other beneficiaries and (b) foreseen group versus foreseeable parties. Identify the principal cases that extended the accountant's liability for ordinary negligence to each of the parties identified in (b) above.

2.Contrast the terms "contributory negligence" and "due diligence defense."

3.Explain the essence of Section 10 and Rule 10b-5 of the Securities Exchange Act of 1934. Indicate the landmark case pertaining to this rule and the findings of the court in the case.

4.Why is it advantageous for a plaintiff to bring suit under the Racketeer Influenced and Corrupt Organization Act (RICO)? May a CPA be liable under RICO for ordinary negligence? Explain.

Accepted Answer

The answer of 1.Distinguish between the following: 
(a) primary versus...

Question 2

Explain why there is such a misconception as to the number of audit failures relative to the total number of audits performed.

Accepted Answer

The answer of Explain why there is such a misconception...

Question 3

Explain the responsibilities of the plaintiff and the defendant in a 1933 Act suit.

Accepted Answer

The answer of Explain the responsibilities of the plaintiff and...

Question 4

Which of the following would be an example of a foreseeable party?

Accepted Answer

A foreseeable party includes any individual or group that could reasonably be expected to be affected by the decisions of a company or individual. This encompasses all creditors, stockholders, present investors, and future investors, as their interests and financial well-being can be directly impacted by the actions and financial health of the entity in question.

Question 5

Whitlow & Company is a brokerage firm registered under the Securities Exchange Act of 1934. The Act requires such a brokerage firm to file audited financial statements with the SEC annually. Mitchell & Moss, Whitlow's CPAs, performed the annual audit for the year ended December 31, 200X, and rendered an unqualified opinion, which was filed with the SEC along with Whitlow's financial statements. During 200x Charles, the president of Whitlow & Company, engaged in a huge embezzlement scheme that eventually bankrupted the shareholders of Whitlow & Company, including Thaxton who had recently purchased several shares of stock of Whitlow & Company after reviewing the company's 200x audit report. Thaxton sues Mitchell & Moss for negligence but admits that the accountants had no knowledge of the fraud.
REQUIRED: What liability to Thaxton, if any, does Mitchell & Moss have under the Securities Exchange Act of 1934?

Accepted Answer

The answer of Whitlow & Company is a brokerage firm...

Question 6

Match between columns
                        Premises:  Is relatively narrow in scope because it relates only to a false or misleading statement in documents “filed” with the SEC under the Act.
 Establishes criminal liability for “willfully” and “knowingly” making false or misleading statements in reports filed under the 1934 Act.
 It is unlawful for any person, directly or indirectly, to (a) employ any device, scheme, or artifice to defraud; (b) make any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in the light of the circumstances under which they made, not misleading; and (c) engage in any act, practice, or course of business that operates, or would operate, as a fraud or deceit on any person in connection with the purchase or sale of any security.

Accepted Answer

The Answer of  Section 10 Liability and  Section is...

Question 7

Match between columns
                        Premises: An SAS on subsequent events was issued after the decision.
The accountant’s liability for ordinary negligence was extended to foreseen groups.
The critical issue was the CPA’s failure to inform the client of employee wrong-doings, regardless of the service rendered.
The jury found that the requisite of scienter was met through the accountant’s negligence.
The auditors were convicted of criminal charges.
Accounting firms should no longer be permitted to hide within the citadel of privity and avoid liability for their malpractice.
The accountant should not be held liable to any third party for negligence except to a primary beneficiary.
Plaintiffs claimed the accountants were negligent in their audit because they had not challenged or investigated the “mail rule.”
The accounting firm was guilty of breach of contract because they did not comply with the specific representation in their engagement letter.
The court concluded that the defendant knew that his certification was to be used for potential financiers.
The court concluded that the accountant should be held liable to reasonably foreseeable parties for ordinary negligence.
The work done by the senior did not meet the standards of the profession because he did not take some of the steps prescribed in the auditing firm’s written program.
Accountant should not be exposed to a liability in indeterminate amounts, for an indeterminate time, to an indeterminate class.
The defendant accountant was orally engaged to perform a service for the plaintiff.
The government charged that the defendant’s disclosure of related party relationships was false and misleading.
When a statute speaks so specifically in terms of manipulation and deception, we are quite unwilling to extend the scope of the statute to negligent conduct.
When the independent auditor furnishes an opinion with no limitation on its dissemination, he has a duty to all those whom that auditor should reasonably foresee as recipients.
The judge instructed the jury to determine whether the financial statements fairly presented financial position without reference to GAAP.
The U. S. Supreme Court rendered the decision.
The jury found the accountants guilty of aiding and abetting violations of securities laws (Rule 10b-5) and common law fraud.

Accepted Answer

The Answer of Ultramares Corp. v. Touche and 1136 Tenants is...

Quiz 4: Auditors Legal Liability

Explain why there is such a misconception as to the number of audit failures relative to the total number of audits performed.

Explain the responsibilities of the plaintiff and the defendant in a 1933 Act suit.

Which of the following would be an example of a foreseeable party?

For each one of the following descriptions, indicate the Securities Exchange Act of 1934 liability Section to which it relates .

For each of the following facts, indicate the case to which it relates using the following code: