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.

---

Definitions:

Transitivity

A principle in logic and mathematics stating that if a relation holds between a first and a second element, and also between the second and a third, it must necessarily hold between the first and the third.

Conservation

The act of preserving, protecting, or restoring the natural environment and wildlife.

Class Inclusion

Class inclusion is a cognitive ability to understand that a specific item can belong to a broader category as well as to a more specific subcategory at the same time, a concept extensively studied by Jean Piaget.

Decentration

The ability to consider multiple aspects of a situation simultaneously, characteristic of cognitive development in children.