Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Chapter 5, Problem 14.1MCQ
To determine
Identify the correct option to the statement given.
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In a common law action against an accountant, lack of privity is a viable defense ifthe plaintiff(1) is the client’s creditor who sues the accountant for negligence.(2) can prove the presence of gross negligence that amounts to a reckless disregardfor the truth.(3) is the accountant’s client.(4) bases the action upon fraud.
A4)
Finance
The fraud-on-the-market theory is used in some cases under Rule 10b-5 as an indirect way of proving Group of answer choices the plaintiff’s due diligence in discovering the misstatement or omission. that the misstated or omitted fact was material. the plaintiff’s reliance on the misstatement or omission. that the defendant acted with scienter.
Individuals 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.
Chapter 5 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - Prob. 8RQCh. 5 - Prob. 9RQCh. 5 - Prob. 10RQ
Ch. 5 - What potential sanctions does the SEC have against...Ch. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14.1MCQCh. 5 - Prob. 14.2MCQCh. 5 - Prob. 14.3MCQCh. 5 - Prob. 15.1MCQCh. 5 - Prob. 15.2MCQCh. 5 - Prob. 15.3MCQCh. 5 - Prob. 16.1MCQCh. 5 - Prob. 16.2MCQCh. 5 - Prob. 16.3MCQCh. 5 - Prob. 17DQPCh. 5 - Prob. 18DQPCh. 5 - Prob. 19DQPCh. 5 - Prob. 20DQPCh. 5 - Prob. 21DQPCh. 5 - Prob. 22DQPCh. 5 - Prob. 23DQPCh. 5 - Under Section 11 of the Securities Act of 1933 and...Ch. 5 - Prob. 25DQPCh. 5 - Prob. 26DQPCh. 5 - Prob. 27C
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- What is an example of rationalization as one of the three elements causing a person to commit fraud?arrow_forwardAn investor or creditor believes that they have suffered harm due to the unexpected the bankruptcy of a large corporation: Required: Can that investor or creditor sue the auditor of the large corporation under contract law? Explain. If the investor or creditor chooses to sue the auditor of the large corporation under tort law, what must they prove before their claim can succeed? How can the auditor contest a claim of negligence?arrow_forwardWhich of the following items is not true about fraud?a. It can cause injury or damage to another party.b. It is an intentional misrepresentation of facts.c. Its damages must exceed a threshold of $150,000.d. It is designed to persuade another party to act in a way that causes injury or damage tothat party.arrow_forward
- Under 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_forwardWhich of the following is a way to prove that a fraud was intentional? A. Show that the suspect repeatedly engaged in activity of an apparent wrongful nature (pattern evidence). B. Show that the suspect did not personally gain anything from the fraudulent act. C. Show that the suspect had a legitimate motive for their actions at issue. D. Show that the suspects failed to conceal evidence of the fraud.arrow_forwardWhich of the following is NOT a possible legal risk that can arise because of a fraud investigation conducted in an improper manner? A. Forcible entry and detainer. B. Invasion of privacy. C. Defamation. D. Malicious prosecution.arrow_forward
- 4. Which of the following is true of a contingent liability? OIt is a potential liability that depends on a future event. OIt is an actual liability that is difficult to estimate. OIt is an actual liability that depends on a past event. OIt is a court-imposed liability based on an officer's fraud as decided in a completed lawsuit.arrow_forwardam. 27.arrow_forward1) Using the categories included in the professional standards, embezzlement is an example of: a)other illegal acts. b)misappropriation of assets. c)fraudulent financial reporting. d)an error. 2) Using the categories included in the professional standards, inappropriately and intentionally failing to expense expired amounts of the prepaid insurance is an example of a)misappropriation of assets. b)other illegal acts. c)fraudulent financial reporting. d)direct effect illegal act 3)A financial statement audit should be designed to obtain reasonable assurance that the financial statements are free of material misstatement due to: a)misappropriation of assets only. b)fraudulent financial reporting only.c)neither fraudulent financial reporting nor misappropriation of assets. d)both fraudulent financial reporting and misappropriation of assets 4)A financial statement audit should be designed to obtain reasonable assurance that the financial statements are free of material…arrow_forward
- Under the Ultramares rule, to which of the following parties will an accountant be liable for ordinary negligence? Parties in privity and/or Foreseen partiesarrow_forwardFraud is an ________ act by any person to conceal the truth, deceive and obtain illegal advantage. a. Unintentional b. Honest c. Intentional d. True and faiarrow_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
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