Question 1

When might an accountant issue a qualified opinion?

Accepted Answer

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Question 2

Identify the true statement concerning communications between clients and accountants.

Accepted Answer

Many states have statutes that grant protection to accountants' working papers and also to conversations, letters, and memorandums between accountants and their clients. However, federal courts do not always recognize such state statutes. For example, a privilege of confidentiality has not, in the past, been recognized in federal tax cases.

Question 3

An accountant may have conducted such a limited audit that she does not feel able to offer an opinion as to the accuracy of the client's financial statements. In such situations, the accountant may issue a(n) _____.

Accepted Answer

An accountant may have conducted such a limited audit that she does not feel able to offer an opinion as to the accuracy of the client's financial statements. In this situation, she may disclaim any opinion. However, she would still be liable for any irregularities that her limited audit should have revealed.

Question 4

Which of the following statements is correct with regard to working papers prepared by an accountant?

Accepted Answer

The working papers that an accountant prepares in making an audit belong to the accountant, not the client. This is so because the accountant may need to justify his work before the Internal Revenue Service (IRS) or a court. Although these papers do not belong to the client, the accountant must get the client's permission before they can be transferred to another accountant. Also, the client has a right of access to the working papers for any reasonable purpose.

Question 5

Raunak, an accountant, has been subpoenaed to testify and produce its working papers as well as conversations regarding a lawsuit brought against Shyam, one of his clients. Which of the following statements is true of Raunak's attempt to avoid having to present such evidence?

Accepted Answer

Communications between lawyers and their clients are treated by the courts as privileged. That is, under most circumstances they are protected from discovery procedures in a lawsuit. Generally, lawyers cannot be required to tell what their clients have said to them, nor can they be required to produce their working papers as exhibits in court or during discovery proceedings before trial. However, no such privilege has been generally recognized in the case of accountants. Thus, in this case, Raunak cannot avoid presenting the mentioned evidences.

Question 6

Describe the accountant-client privilege.

Accepted Answer

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Question 7

The accountant issues a(n) _____ if the audited financial statements accurately reflect the client's financial condition in compliance with generally accepted accounting principles.

Accepted Answer

The accountant issues an unqualified opinion if the audited financial statements accurately reflect the client's financial condition in compliance with generally accepted accounting principles, meaning that in her opinion there has been compliance with generally accepted auditing standards and generally accepted accounting principles.

Question 8

Explain the near privity approach to third-party negligence suits against accountants.

Accepted Answer

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Question 9

Explain the Ultramares approach to third-party negligence suits against accountants.

Accepted Answer

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Quiz 32: Legal Liability of Accountants