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potential investors. According to Treasury Department Circular
230
• Question 6 Under the liability provisions of Section 11 of the
Securities Act of 1933, a CPA who certifies financial statements
included in a registration statement generally will not be liable to
a purchaser of the security
• Question 7 Which of the following circumstances is a defense
to an accountant’s liability under Section 11 of the Securities Act
of 1933 for misstatements and omissions of material facts
contained in a registration statement?
• Question 8 A CPA partnership may, without being lawfully
subpoenaed or without the client’s consent, make client
workpapers available to
• Question 9 An accounting firm was hired by a company to
perform an audit. The company needed the audit report in order
to obtain a loan from a bank. The bank lent $500,000 to the
company based on the auditor’s report. Fifteen months later, the
company declared bankruptcy and was unable to repay the loan.
The bank discovered that the accounting firm failed to discover a
material overstatement of assets of the company. Which of the
following statements is correct regarding a suit by the bank
against the accounting firm? The bank
• Question 10 In accordance with the AICPA Statements on
Standards for Tax Services, if after having provided tax advice to
a client there are legislative changes which affect the advice
provided, the CPA
• Question 11 Alex Stone, CPA, prepared Ray Pym’s 2012 federal
income tax return. Pym advised Stone that he had paid doctors’
bills of $15,000 during 2012, when in fact Pym had paid only
$3,000 of bills. Based on Pym’s representations, Stone properly
computed the medical expense deduction, with consequent
understatement of tax liability of more than $5,000. Pym’s total
tax liability shown on the return was $40,000. Stone had no
reason to doubt the accuracy of Pym’s figures, although Stone did
not request documentation for the expenses claimed; but he was
assured by Pym that sufficient corroborative evidence of these