Flashcards in Mod 23 Key Terms Deck (36):
Law that has historically been established by judicial precedents
Much common law has now been codified to...
Common law is the source of liability to...
Clients and third parties (not covered by securities laws)
Failure to use even slight care
Constructive fraud is referred to as...
Negligence on the part of the plaintiff that contributed to the party's losses
Contributory negligence will typically...
Some or all of the defendant's damages
Due diligence is the standard of care under...
Filings under Securities Act of 1933
To establish due diligence a CPA must...
1 Have made reasonable investigation
2 Have reasonable grounds to believe
3 Did believe that the financial statement was not misleading
Fraud 2 definitions
Misrepresentation intended to mislead another party or
a representation made with reckless regard for its truth
Joint and several liability, is a concept of liability that is similar to joint liability except that if...
All the judgment is recovered from one defendant, that party may attempt to collect from other defendants proportionate shares
Join Ethics Enforcement Program (JEEP)
Joint program of the AICPA and state CPA societies to jointly investigate ethics violations
Joint liability, is a liability concept in which...
Any joint defendant may be forced to pay the entire amount
Ex. Of joint liability
Bank files suit against both CPA firm and management for
The bank may recover entire amount from management or CPA firm
Failure to perform with level of skill and judgment possessed by
A typical professional
Negligence is often referred to as...
Party other than the client who primarily benefits from contracted services provided by the CPA
Primary beneficiary example
If CPA is aware that an audit is being performed at request of client's bank, the bank is a primary beneficiary of contract btw/CPA and client
Under common law primary beneficiary has...
Same rights as client
Communication that is not subject to disclosure in court or administrative proceedings
Privilege must be established by...
2) and generally communication between accountant and client is...
2) not privileged
Privity, 2 part definition
1 Mutual relationship established between parties
2 Typically established by contract
The client and third party beneficiaries are in privity with CPA in...
Contract to provide services
Public Company Accounting Oversight Board (PCAOB)
Nonprofit organization created by SOX to oversee audits of public companies
Public Company Accounting Reform and Investor Protection (SOX) Act
Act that set new set of enhanced standards for public company
boards, management and public accounting firms
Racketeer Influenced and Corrupt Organization (RICO) Act
Act designed to allow prosecution of organized criminals
The RICO Act was also used to pursue...
CPA firms who engaged in multiple instances (patterns) of wrongful
Civil actions under the RICO Act can result in...
Recovery of Treble damages
Securities Act of 1933
Federal securities act that covers initial registration of securities
Securities Exchange Act of 1934
Federal securities act that covers the secondary purchase and
Sale of securities
Several liability, is a concept of liability in which...
Joint defendants are responsible only for their proportionate share
Of the judgement
State boards of accountancy
State boards that regulate the practice of public accountancy
In state or jurisdiction
All individual CPAs and CPA firms must be licensed to...
Practice in states where they practice
Statements on Standards for Tax Services
AICPA standards for CPAs that perform tax services for clients
Treasury Department Circular 230
Regulatory requirements regarding the authority to practice
Before the Internal Revenue Service