Mod CStudent: ___________________________________________________________________________1.Auditors are potentially liable for monetary damages and subject to criminal penalties for failure to perform professional services properly. True False2.Auditors cannot be held liable to their clients for failure to detect material management fraud. True False3.Joint and several liability is a doctrine that allows a successful plaintiff to recover the full amount of a damage award from any defendant regardless of the defendant's level of culpability. True False4.Strict privity is the relationship of parties who enter into a contract together. True False5.The restatement of tortsextends liability for ordinary negligence to "foreseen" third parties who may not be explicitly known to auditors. True False6.The Private Securities Litigation Reform Act deals with lawsuits in both federal and state courts. True False7.Legal liabilities of auditors may arise from lawsuits brought on the basis of the law of contracts or as tort actions. True False8.Tort actions cover civil complaints other than breach of contract (such as failure to exercise the appropriate level of professional care). True False9.Actions brought under common law place most of the burden of proof on the defendant, usually auditors. True False10.Auditors' primary defense against a claim for ordinary negligence is to offer evidence that the audit had been conducted in accordance with generally accepted auditing standards. True False11. The Ultramarescase holds auditors to a higher level of responsibility than the Rosenblum v. Adlercase in terms of common law liability to third parties. True False12.Gross negligence represents a more significant departure from appropriate professional care than ordinary negligence. True False13.The Securities Act of 1933 regulates subsequent trading of securities, and the Securities Exchange Act of 1934 regulates the initial issuance of securities. True False14.The general registration form for new issues of securities is Form 10-K. True False
15.Section 11 of the Securities Act of 1933 contains the principal criteria defining civil liabilities under the statute. True False16.The effect of section 11 of the Securities Act of 1933 is to shift the major burden of proof from auditors to the plaintiff. True False17.If auditors can prove that a reasonable examination was performed, then auditors are not liable for damages under section 11 of the Securities Act of 1933. True False18.Rule 10b-5 requires that the plaintiff must prove that auditors acted with intent to deceive in order to impose liability. True False19.As a defense under Rule 10b-5, auditors must prove that they acted in good faith and had no knowledge of the material misstatements in the financial statements. True False20.Liability to foreseen third parties would expose auditors to a greater potential obligation than liability to foreseeable third parties.
- Spring '12
- U.S. Securities and Exchange Commission, Securities and Exchange Commission, privity