Professional Responsibilities

Question 1

Statements on Standards for Consulting Services (SSTS)

Answer 1

Competence
Due professional care
planning
supervision
obtain sufficient data
must service client interest
must have an agreement (written or oral)
must communicate with client
independence is NOT required

Question 2

Accountants Liability - Negligence

Answer 2

Proving negligence is the first step to proving fraud
to be liable:
accountant must have had a DUTY to preform w/ due care exercised by an average accountant
client experienced actual damages
damages were result of negligence

Question 3

Accountants Liability - Detecting Fraud

Answer 3

Not accountants job to find fraud and are normally not liable for detecting it.
exceptions:
-normal audit following GAAS would have detected it
-accountant agreed to take o more responsibility that what is required in normal audit
-accountant words audit report to indicate this greater responsibility

Question 4

Accountant Liab - Committing Fraud

Answer 4

accountant must Misrepresent material facts
accountant commits scienter
client has actual damages
client reasonably replied on misinformation

Question 5

Scienter

Answer 5

Know something is false or
recklessly disregard truth
intentionally conceal facts

Question 6

Accountants Liab - Third Parties

Answer 6

in most situations don’t have privity of contract with third parties connected to the client

Question 7

Ultra Mares decision

Answer 7

says accountants are not liable to 3rd parties unless 3rd party was an intended beneficiary of engagement and accountant knew they would be relying on fs

Question 8

Common Law fraud

Answer 8

regular fraud - misrepresentation of material fact, Scienter, Damages, Reasonable Reliance

Question 9

Constructive Fraud

Answer 9

Is negligence upgraded -
Gross Negligence
will open accountant to be liable to 3rd parties

Question 10

accountant client privlege

Answer 10

does not exist unless specific state recognizes