Principles of Auditing & Other Assurance Services (Irwin Accounting)
20th Edition
ISBN: 9780077729141
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Question
Chapter 4, Problem 30OQ
a.
To determine
Whether the accountants were liable or not under various theories discussed.
b.
To determine
Whether the accountants were liable or not under various theories discussed.
c.
To determine
Whether the accountants were liable or not under various theories discussed.
d.
To determine
Whether the accountants were liable or not under various theories discussed.
e.
To determine
Whether the accountants were liable or not under various theories discussed.
f.
To determine
Whether the accountants were liable or not under various theories discussed.
g.
To determine
Whether the accountants were liable or not under various theories discussed.
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Generally, the auditor could be legally liable under?
Select one:
a. contract law but not under the tort of negligence to third parties
b. the tort of negligence to the client and contract law
c. the tort of negligence but not contract law to the client
d. contract law to third parties and to the client
Auditors may be held liable to both their clients and third parties under common law.
a. What must a client prove to recover its losses from the auditors under common law?
b. In a court that adheres to the precedent set by the Ultramares v. Touche case, what must an ordinary third party prove to recover losses from the auditors under common law
A number of cases have considered the auditor’s liability in relation to persons other than the immediate client. Even so, the AWA case established that:
Select one:
a. Duty of care and skill means following the accounting standards
b.auditors have a contractual duty to oversee and review the work of inexperienced audit staff
c.Auditors are only liable for the proportion of damages attributable to their actions
d.Auditors have a duty of care only to the shareholders.
Chapter 4 Solutions
Principles of Auditing & Other Assurance Services (Irwin Accounting)
Ch. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQ
Ch. 4 - Prob. 11RQCh. 4 - Prob. 12RQCh. 4 - Prob. 13RQCh. 4 - Prob. 14RQCh. 4 - Prob. 15RQCh. 4 - Prob. 16RQCh. 4 - Prob. 17RQCh. 4 - Prob. 18RQCh. 4 - Prob. 19RQCh. 4 - Prob. 20QRACh. 4 - Prob. 21QRACh. 4 - Prob. 22QRACh. 4 - Prob. 23QRACh. 4 - Prob. 24QRACh. 4 - Prob. 25QRACh. 4 - Prob. 26QRACh. 4 - Gordon Moore, CPAs, were the auditors of Fox ...Ch. 4 - Prob. 28AOQCh. 4 - Prob. 28BOQCh. 4 - Prob. 28COQCh. 4 - Prob. 28DOQCh. 4 - Prob. 28EOQCh. 4 - Prob. 28FOQCh. 4 - Prob. 28GOQCh. 4 - Prob. 28HOQCh. 4 - Prob. 28IOQCh. 4 - Prob. 28JOQCh. 4 - Prob. 28KOQCh. 4 - Prob. 28LOQCh. 4 - Prob. 29OQCh. 4 - Prob. 30OQCh. 4 - Match the important cases listed below with the...Ch. 4 - Prob. 32OQCh. 4 - Prob. 33OQCh. 4 - Prob. 34PCh. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - Charles Worthington, the founding and senior...Ch. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - Prob. 40PCh. 4 - Prob. 41ITCCh. 4 - Prob. 42RDC
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- What does a third-party user of financial statements have to prove under common law in a suit against an auditor for the auditor's negligence? Explain each item with an examplearrow_forwardUnder common law, which of the following statements most accurately reflects the liability of a CPA who fraudulently gives an opinion on an audit of a client's financial statements? A. The CPA is liable only to third parties in privity of contract with the CPA B. The CPA is liable only to known users of the financial statements C. The CPA probably is liable to any person who suffered a loss as a result of the fraud D. The CPA probably is liable to the client even if the client was aware of the fraud and did not rely on the opinionarrow_forwardWhat types of actions may an auditor be liable to a client under common law? Why would the clients prefer to sue the auditor for tort action rather than a breach of contract?arrow_forward
- What kind of actions might customers pursue against auditors under the common law doctrine of restitution? In each situation, what evidence do clients need to provide before filing a lawsuit?arrow_forwardIndividuals who believe they relied on misstated financial statements to make a decision andhave suffered losses as a result will issue an action known as aa. Breach of contract.b. Tort.c. Securities litigation.d. Constructive fraud.arrow_forwardWhat does a third-party user of financial statements have to prove under common law in a suit against an auditor for the auditor's negligence?arrow_forward
- 4) Explain if, and why an accountant will be held liable to: its client, to 3rd party intended users of the financial statements and audits it prepares for its client, and to reasonably foreseeable users of the work, it prepared for its client. ∙ Be sure to identify who reasonably foreseeable users would be and why the accountant is responsible to them in the absence of privity.arrow_forwardFor what type of actions can clients bring suit against auditors under common law? What must clientsprove prior to bringing suit in each case?arrow_forwardDistinguish between the legal concepts of actually foreseen third-party users and reasonably foreseeable third-party users. How does each concept establish a basis for an auditor’s legal liability to third parties?arrow_forward
- What is the auditor's role when a client fails to follow the law?arrow_forwardUnder the Ultramares rule, to which of the following parties will an accountant be liable for ordinary negligence? Parties in privity and/or Foreseen partiesarrow_forwardThe refusal of a client’s attorney to provide the information requested in an inquiry letter is considered A. Reasons for adverse opinion B. A limitation on the scope of the audit C. Grounds to withdraw from the engagement D. Equal to a significant deficiencyarrow_forward
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