ADMS 2610 Lecture Notes - Lecture 4: Unfair Business Practices, The Employer, Qualified Privilege

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silverwallaby916

30 Sep 2015

School

York University

Department

Administrative Studies

Course

ADMS 2610

Professor

Richard Gasparini

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Document Summary

The development of tort law: contract law and tort law are two major areas that affect business transactions or activities, contract law vs. Applies to business activities where the parties have voluntarily agreed to their rights and responsibilities. Courts can enforce the rights and responsibilities through civil action: tort law. A party affected by a business activity or transaction. However, most persons who cause the injuries tend to not have sufficient funds for the it to be worthwhile to take the case to the courts. Governments acknowledge this and have set up funds to provide relief for those injured. If it was intentional and does not cause harm, it must be done without consent, in anger, or accompanied by a threat of injury or violence: does not need to be violent. Involves the touching of a person without consent and results to an injury: damages awarded. Usually to compensate the plaintiffs for injuries suffered.

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1. Fred, employee of ABC Company, notices the company has poorinternal controls and lack of segregation of duties. He realizes hecould take some cash and record it against miscellaneous expensewithout anyone catching it if he wanted. Which part of the fraudtriangle does Fred's thought relate to?

A. Opportunity

B. Rationalization

C. Pressure

D. None of the Above

2. Auditors must provide _______ assurance that the financialstatements are presented ________ in all material respects.

A. Reasonable; Fairly

B. Fairly; Reasonable

C. Complete; Justly

D. Justly; Complete

3. ____are items that management has full control over and isable to delay or eliminate.

A. Nondiscretionary accruals

B. Discretionary accruals

C. Defining Materiality

D. Revenue Recognition

4. ___Requires the auditor to perform professional services withdue care.

A. Legal Liability

B. Stat utory Law Liability

C. Common-Law Liability

D. Liability to Clients

5. Which is one of the UKs six principles on what constitutesadequate procedures?

A. Risk Assessment

B. Due diligence

C. Monitoring and Reporting

D. All of the Above

E. None of the above

6. The Fraud Triangle consists of:

Rationalization
Incentives & Pressures
Opportunities

D. All of the Above

7. A standard auditorâs report must include which of thefollowing:

What was audited
Management & auditorâs responsibilities
Scope of the audit
The auditorâs opinion
All of the Above

8. What does privity relationship mean?

A partyâs financial liability is limited
A party can sue if fraud has taken place
A party has a contractual obligation
A party may be a user of the financial statements

9. When an auditor acts careless in the application ofprofessional standards that it implies a reckless disregard for thestandards of due care is referred to as?

A. Negligence
B. Due Care
C. Fraud
D. Constructive Fraud

10. What is the legal term for the intent to deceive, manipulateor defraud?

A. Constructive Fraud
B. Due Care
C. Misfeasance
D. Scienter

11. From an accounting perspective, _____ implies a tendency todefer the recognition of assets and items that increase net incomewhile reserving for possible future declines in earnings:

A. High secrecy
B. High professionalism
C. High conservatism
D. High flexibility

12. According to CIMA code of ethics, âWhen you become sosympathetic to the interests of others as a result of a closerelationship that your professional judgment becomes compromisedâ,is considered:

A. Self-interest threat
B. Intimidation threat
C. Advocacy threat
D. Familiarity threat

13. To be appropriate audit evidence must be both:

A. Relevant and reliable
B. Significant and documented
C. Material and quantitative
D. Objective and reasonable

14. Common law liability does not include:

A. Breach of contract
B. Legislation passed a state or federal level
C. Tort actions
D. Legal opinions issued by judges

15. All of the following EXCEPT_______ is part of "The FraudTriangle"

A. Incentives/Pressures
B. Opportunity
C. Rationalization
D. All of the Above

16. A law suit against an accountant for failing to live up tothe terms of a contract is what type of legal liability?

Common-Law liability
Foreseeable Legal liability
Liability to Third Party
Liability to Clients

17. Audit Risk consist of 3 components:

Inherent, detection, material misstatement
Professional judgment, material misstatement, materialityjudgments
Inherent, detection, control

All the above

18. CIMAâs code identifies five common threats:

A. Integrity, Self-review, Objectivity, Intimidation,professional behavior

B. Integrity, self-review, self- interest, Intimidation,professional behavior

C. Self-review, self-interest, Intimidation, Familiarity,Advocacy

D. Integrity, Intimidation, Familiarity, self-interest,Advocacy

crimsonmammoth754

Fill in the blank with the answer. Each answer in thelist may be used more than once or not at all.

a.Separate and proportionate

b.Racketeer Influenced and Corrupt Organization Act (RICO)

c.Foreign Corrupt Practices Act

d.Fraud

e.Negligence

f.Reasonable professional care

g.Gross negligence

h.Securities Act of 1933

i.Compensatory damages

j.Damages

k.Criminal victim compensation

l.Punitive damages

m.Hochfelder

n.Ultramares

o.Privity

p.Near privity

q.Standing

r.Deposition

s.Constructive fraud

t.Breach of contract

u.Joint and severally

v.Securities Exchange Act of 1934

_____1.A federal statute used for legal action related to theinitial offering of securities to the public by a company.

_____2.Absence of the level of care that an auditor owes toanother party that has privity with the auditor.

_____3.Prior to SOX, the first federal statute requiringcompanies to have a functioning internal control system.

_____4.The federal statute that does not require the plaintiffto prove that he or she relied on the financial statements to beable to obtain a judgment against the auditor.

_____5.A case that established that fraud on the part of theauditor is required for an injured party to collect damages under10b-5 of the 1934 Act.

_____6.Cause of action which plaintiffs without privity have notbeen successful at using to obtain the remedy of specificperformance.

_____7.A judgment for the return of the loss the plaintiffexperienced.

_____8.Liability theory that is now used for federal civil casesagainst accountants and auditors based on the Private SecuritiesLitigation Reform Act of 1995.

_____9.When a state law does not specify the concept of grossnegligence, this is the legal concept that is likely used.

_____10.The motivation for a plaintiff to allege grossnegligence.

_____11.Can result in treble damages.

_____12.Typically requires the auditor to commit fraud beforethere will be a finding and judgment against the auditor.

_____13.Often a part of the process of discovery.

_____14.Requires that the offending partyâs behavior must havebeen intentional (scienter).

ADMS 2610 Lecture Notes - Lecture 4: Unfair Business Practices, The Employer, Qualified Privilege

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