Question 1

The Sarbanes-Oxley Act of 2002 makes destruction of audit documentation punishable by up to 10 years in prison.

Accepted Answer

The answer of The Sarbanes-Oxley Act of 2002 makes destruction...

Question 2

Discuss at least three specific actions which practicing auditors can take to minimize their legal liability.

Accepted Answer

The answer of Discuss at least three specific actions which...

Question 3

CPAs can be held liable for criminal activity under both state and federal laws. Infamous cases include United States vs. Natelli and ESM Government Securities v. Alexander Grant & Co. Discuss what occurred in each case.

Accepted Answer

The answer of CPAs can be held liable for criminal...

Question 4

Discuss some of the steps practicing auditors can take to minimize their legal liability.

Accepted Answer

The answer of Discuss some of the steps practicing auditors...

Question 5

Which of the following resulted in a federal law passed in 1995 that significantly reduced potential damages in securities-related litigation?

Accepted Answer

The Private Securities Litigation Reform Act was passed in 1995 and significantly reduced potential damages in securities-related litigation. This law aimed to discourage frivolous lawsuits and streamline the litigation process, making it more difficult for plaintiffs to pursue large damages claims against companies and their officers.

Question 6

In order to protect themselves from legal liability, it is important that CPAs

Accepted Answer

Understanding the client's business helps CPAs identify potential risks and tailor their services accordingly, reducing the likelihood of legal liability.

Question 7

The Private Securities Litigation Reform Act of 1995 capped damage awards against auditors to the amount of the audit fees charged.

Accepted Answer

The Private Securities Litigation Reform Act of 1995 did not cap damage awards against auditors to the amount of the audit fees charged, rather it established several reforms to limit frivolous and abusive securities lawsuits.

Question 8

Match between columns
                        Premises: an auditor's legal defense under which the auditor claims that the audit was performed in accordance with generally accepted auditing standards
a common-law approach to third-party liability in which ordinary negligence is insufficient for liability to third parties because of the lack of privity of contract between the third-party and the auditor unless the third-party is a primary beneficiary
a federal statute that makes it illegal to offer a bribe to an official of a foreign country
an auditor's legal defense under which the auditor claims that the client's own actions either resulted in the loss that is the basis for damages or interfered with the conduct of the audit in such a way that prevented the auditor from discovering the cause of the loss
a federal statute designed to significantly reduce the potential damages in federal securities-related litigation by providing for proportionate liability in most cases
an auditor's legal defense under which the auditor claims that the failure to follow auditing standards did not cause the damages suffered by the client
a federal statute dealing with companies that trade securities on national and over-the-counter exchanges .Auditors are involved because the annual reporting requirements include audited financial statements.
a situation in which an incorrect audit opinion is issued because it failed to comply with the requirements of auditing standards

Accepted Answer

The Answer of Securities Exchange Act of 1934 and Securities is...

Question 9

Match between columns
                        Premises: absence of reasonable care that can be expected of a person in a set of circumstances
existence of extreme or unusual negligence even though there was no intent to deceive or do harm; also termed recklessness
lack of even slight care tantamount to reckless behavior that can be expected of a person
the assessment against a defendant of that portion of the damage caused by the defendant's negligence
failure of one or both parties in a contract to fulfill the requirements of the contract
the assessment against a defendant of the full loss suffered by a plaintiff regardless of the extent to which other parties shared in the wrongdoing
laws that have been passed by the U.S. Congress and other governmental units

Accepted Answer

The Answer of third-party beneficiary and statutory law and joint is...

Quiz 5: Legal Liability