Mod 23 Key Terms Flashcards
(36 cards)
Much common law has now been codified to…
State statutes
Common law
Law that has historically been established by judicial precedents
Common law is the source of liability to…
Clients and third parties (not covered by securities laws)
Constructive fraud
Failure to use even slight care
Constructive fraud is referred to as…
Gross negligence
Contributory negligence
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
Of judgement
Ex. Of joint liability
Bank files suit against both CPA firm and management for
misleading FS
The bank may recover entire amount from management or CPA firm
Negligence
Failure to perform with level of skill and judgment possessed by
A typical professional
Negligence is often referred to as…
Ordinary negligence
Primary beneficiary
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
Privileged communication
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…
Law
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
