Common Law Liabilitiy to clients

Question 1

A CPA can be liable to the client for negligence if

Answer 1

CPA failed to exercise due care (to the level and skill of a normal accountant)

Question 2

A CPA’s defense to neglegance is that he did not

Answer 2

Violate GAAP or GAAS performing the audit

Question 3

Lawsuits filed by clients for negligence

Answer 3

are filed under common law

Question 4

Elements for Constructive Fraud

Answer 4

Misrepresentation
Reckless disregard for the truth
Reliance
Damages

Question 5

An oral contract for an Audit

Answer 5

is still enforceable without a signed engagement letter

Question 6

The client’s responsibility is to

Answer 6

prepare the financial statements according to GAAP

Question 7

A CPA that does not detect fraud

Answer 7

is normally not held liable to the client unless

1) A normal Audit would have detected it
2) agreement that CPA would take greater responsibility
3) wording by audit report indicates greater responsibility

Question 8

In reviewing Financial statements

Answer 8

GAAS does not need to be followed

Question 9

What does not necessarily need to be proven in a Constructive fraud case

Answer 9

Scienter