Test Bank For
Ethical Obligations and
Decision-Making in Accounting
Text and Cases (2025 Release)
7th Edition By Steven Mintz,
William Miller
(All Chapters 1-8, 100%
Original Verified, A+ Grade)
All Chapters Arranged
Reverse: 8-1
This is The Original Test Bank
For 7th Edition, All other Files
in The Market are
Fake/Old/Wrong Edition.
,Student name:__________
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
The key element that protects an auditor against common law liability is
adherence to generally accepted accounting principles (GAAP).
adherence to generally accepted auditing standards (GAAS).
compliance with threats and safeguards approach.
maintenance of confidentiality of client information.
Which of the following is not one of the four stages in an audit-related dispute?
events arise that create losses for the users of the financial statements
losses are linked to material misstatements of financial statements
legal process resolves the dispute
auditors’ legal liability leads to financial settlement
Which of the following would normally be considered sufficient to demonstrate due care on the
part of the auditor?
The auditor had their work reviewed by another audit firm.
The auditor cites adherence to generally accepted auditing standards (GAAS).
No omissions or misstatements have been found in the client's financial statements.
The auditor signs a statement expressing their unmodified opinion as to the fairness of the
financial statements.
In the United States, if the auditor can demonstrate having performed services with the same
degree of skill and judgment possessed by others in the profession, they can be said to have
exercised
prudence.
scienter.
nonfeasance.
Version 1 1
,due care.
The legal precedent that evolves from legal opinions issued by judges in deciding a case and
guides judges in deciding similar cases in the future is referred to as
business law.
tort law.
common law.
statutory law.
A privity relationship means that
a party may be a user of the financial statements.
a party may sue if fraud has taken place.
a party's financial liability is limited.
a party has a contractual obligation.
The Ultramares v. Touche case of 1933 held that a cause of action based on negligence could not
be maintained by a third party who was not in contractual privity; however, it did leave open the
possibility that
third parties that were "foreseeable" may sue for ordinary negligence.
third parties may sue if one of the parties in contractual privity allowed it to.
third parties may sue in the case of fraud or constructive fraud.
third parties who used the financial statements may sue.
The Restatement (Second) of Torts Approach
expands an accountant's legal liability to third parties identified by the client as intended
recipients of work.
limits an accountant's legal liability to only those parties with which it has a privity relationship.
limits an accountant's legal liability to only those parties that have been named by the client.
Version 1 2
, expands an accountant's legal liability to all possible users of the audited financial statements.
The Rosenblum case ruling was of concern to the accounting profession because it implied that
full joint and several liability would be reinstated.
all possible third-party users of financial statements must be anticipated.
the concept of contractual privity would no longer be important.
financial liability would occur when scienter was proven.
The Credit Alliance v. Arthur Andersen & Company case established three tests that must be
satisfied for holding auditors liable for negligence to third parties. All of the following are tests
described except
knowledge by the accountant that the financial statements are to be used for a particular purpose.
the intention of the third party to rely on those statements.
some action by the accountant linking him or her to the third party that provides evidence of the
accountant's understanding of intended reliance.
the identity of the third party must be directly known to the auditor.
The unique aspect of auditors' legal liability in the Rosenblum v. Adler ruling is
auditors could be held liable for ordinary negligence to all reasonably foreseeable third parties.
auditors could be held liable for gross negligence to all reasonably foreseeable third parties.
auditors could be held liable for fraud to all reasonably foreseeable third parties.
auditors should be able to detect all deceit by management.
Which of the following is not a red flag for willful evasion of the tax law?
keeping two sets of financial ledgers
overstatement of deductions and exemptions
using a false Social Security number
claiming an exemption for a dependent
Version 1 3
Ethical Obligations and
Decision-Making in Accounting
Text and Cases (2025 Release)
7th Edition By Steven Mintz,
William Miller
(All Chapters 1-8, 100%
Original Verified, A+ Grade)
All Chapters Arranged
Reverse: 8-1
This is The Original Test Bank
For 7th Edition, All other Files
in The Market are
Fake/Old/Wrong Edition.
,Student name:__________
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
The key element that protects an auditor against common law liability is
adherence to generally accepted accounting principles (GAAP).
adherence to generally accepted auditing standards (GAAS).
compliance with threats and safeguards approach.
maintenance of confidentiality of client information.
Which of the following is not one of the four stages in an audit-related dispute?
events arise that create losses for the users of the financial statements
losses are linked to material misstatements of financial statements
legal process resolves the dispute
auditors’ legal liability leads to financial settlement
Which of the following would normally be considered sufficient to demonstrate due care on the
part of the auditor?
The auditor had their work reviewed by another audit firm.
The auditor cites adherence to generally accepted auditing standards (GAAS).
No omissions or misstatements have been found in the client's financial statements.
The auditor signs a statement expressing their unmodified opinion as to the fairness of the
financial statements.
In the United States, if the auditor can demonstrate having performed services with the same
degree of skill and judgment possessed by others in the profession, they can be said to have
exercised
prudence.
scienter.
nonfeasance.
Version 1 1
,due care.
The legal precedent that evolves from legal opinions issued by judges in deciding a case and
guides judges in deciding similar cases in the future is referred to as
business law.
tort law.
common law.
statutory law.
A privity relationship means that
a party may be a user of the financial statements.
a party may sue if fraud has taken place.
a party's financial liability is limited.
a party has a contractual obligation.
The Ultramares v. Touche case of 1933 held that a cause of action based on negligence could not
be maintained by a third party who was not in contractual privity; however, it did leave open the
possibility that
third parties that were "foreseeable" may sue for ordinary negligence.
third parties may sue if one of the parties in contractual privity allowed it to.
third parties may sue in the case of fraud or constructive fraud.
third parties who used the financial statements may sue.
The Restatement (Second) of Torts Approach
expands an accountant's legal liability to third parties identified by the client as intended
recipients of work.
limits an accountant's legal liability to only those parties with which it has a privity relationship.
limits an accountant's legal liability to only those parties that have been named by the client.
Version 1 2
, expands an accountant's legal liability to all possible users of the audited financial statements.
The Rosenblum case ruling was of concern to the accounting profession because it implied that
full joint and several liability would be reinstated.
all possible third-party users of financial statements must be anticipated.
the concept of contractual privity would no longer be important.
financial liability would occur when scienter was proven.
The Credit Alliance v. Arthur Andersen & Company case established three tests that must be
satisfied for holding auditors liable for negligence to third parties. All of the following are tests
described except
knowledge by the accountant that the financial statements are to be used for a particular purpose.
the intention of the third party to rely on those statements.
some action by the accountant linking him or her to the third party that provides evidence of the
accountant's understanding of intended reliance.
the identity of the third party must be directly known to the auditor.
The unique aspect of auditors' legal liability in the Rosenblum v. Adler ruling is
auditors could be held liable for ordinary negligence to all reasonably foreseeable third parties.
auditors could be held liable for gross negligence to all reasonably foreseeable third parties.
auditors could be held liable for fraud to all reasonably foreseeable third parties.
auditors should be able to detect all deceit by management.
Which of the following is not a red flag for willful evasion of the tax law?
keeping two sets of financial ledgers
overstatement of deductions and exemptions
using a false Social Security number
claiming an exemption for a dependent
Version 1 3
