Which of the Following Statements Is True of Accountants' Liability

question 31

Multiple Choice

Which of the following statements is true of accountants' liability to clients in fraud cases?

• A) Actual fraud occurs when an accountant acts with "reckless disregard" for the truth or consequences of his or her actions.
• B) If an auditor does not verify information from third parties, constructive fraud is said to have been committed by the auditor.
• C) Punitive damages may be awarded in cases of actual fraud.
• D) The client can only recover nominal damages in cases of constructive fraud.

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Definitions:

Stock Price

The current price at which a particular company's shares can be bought or sold on the stock market.

Stock Market Return

Stock market return is the gain or loss achieved on an investment in the stock market, expressed typically as a percentage of the investment's original value.

Risk Free Rate

The estimated yield from an investment without any risk, frequently shown through the yield of government bonds.

Beta

An indicator of the fluctuation, or inherent risk, of a security or an investment portfolio relative to the overall market.