Accounting and Auditing Terms and Concepts, Quizzes of Business and Labour Law

Download Accounting and Auditing Terms and Concepts and more Quizzes Business and Labour Law in PDF only on Docsity! TERM 1 Types of Accountants DEFINITION 1 CPA- certified public accountant who has met certain educational requirements passed CPA exam had a certain number of years of audit experience Public Accountant- accountant who is not certified TERM 2 Generally Accepted Standards DEFINITION 2 Generally Accepted Accounting Principles (GAAP)- standards for preparation and presentation of financial statementsGenerally Accepted Auditing Standards (GAAS)- standards for methods and procedures to be used to conduct audits TERM 3 Audit DEFINITION 3 Verification of company's books and records pursuant to federal securities laws, state laws, and stock exchange rules must be performed by independent CPA TERM 4 Auditor's Opinions DEFINITION 4 Opinion of auditor about how fairly the financial statements of the client company represent the company's financial position, results of operations, and change in cash flow Unqualified Qualified Adverse Disclaimer of Opinion- auditor unable to draw conclusion as to accuracy of financial records TERM 5 Liability to Clients DEFINITION 5 Breach of Contract Fraud Negligence TERM 6 Breach of Contract DEFINITION 6 Engagement- formal entrance into contract between client and accountant specifies terms for provision of accounting services accountant who fails to perform services may be sued for breach of contract TERM 7 Fraud DEFINITION 7 Client may bring civil lawsuit and recover damages from fraudActual Fraud- intentional misrepresentation or omission of a material fact that is relied on by client and causes client damage punitive damages may be awarded Constructive Fraud- accountant acts with reckless disregard for the truth or consequences of his/her actions may be gross negligence TERM 8 Negligence DEFINITION 8 Accounting Malpractice- accountant breaches duty of reasonable care, knowledge, skill, and judgment that he/she owes to a client when providing auditing and other accounting services to client must comply with GAAP and GAAS TERM 9 Liability to Third Parties DEFINITION 9 Breach of Contract- none Fraud- if third party relied on accountant's fraudulent info Negligence- 3 possibilites TERM 10 Negligence to Third Party DEFINITION 10 Ultramares Doctrine- accountant is liable only if third party is in privity of contract with accountant privity of contract- client employed accountant to prepare statements to be used by third party for specific purpose narrowest standard Section 552 of Restatement of Torts- accountant liable if third party member of limited class of intended users of client's statements mid-range standard Foreseeability Standard- accountant liable if third party foreseeable user of client's statements broadest standard