Sampson,an Accountant and Auditor with ABC Accounting,was Auditing XYZ Company

question 32

Multiple Choice

Sampson,an accountant and auditor with ABC Accounting,was auditing XYZ Company.Delilah,the president of XYZ Company,told Sampson that she really needed to keep her job and that if the true condition of the company were exposed,she would certainly be fired.She tells Sampson that she is sure she can turn things around if he will only look help her out in the audit report.Sampson,who was infatuated with Delilah,agreed to include inaccurate numbers in the company's audit report knowing that the opinion would be included in the company's annual report on Form10-K filed with the SEC.Unfortunately,Delilah was not able to turn the company's performance around,and it went into bankruptcy later that year.Sampson becomes aware that an investigation is being conducted.Which of the following is true regarding his potential liability?

• A) Because he is a secondary actor, he cannot be found liable for the violation of any laws involving securities although he was aware of how the audit opinion would be used.
• B) Because he is a primary actor, he can be found liable for the violation of some laws involving securities, but not Section 10(b).
• C) Because he is a primary actor, he can be found liable for a violation of Rule 10(b) because he participated in the making of a false statement.
• D) As a secondary actor, he can be found liable for the violation of Section 10(b) since he was aware of how the audit opinion would be used.

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Definitions:

Bankruptcy Judge

A specialized judge who presides over bankruptcy cases, making decisions regarding the legal and financial affairs of individuals or businesses declaring bankruptcy.

Chapter 11

A provision under the U.S. Bankruptcy Code that allows for reorganization under the bankruptcy laws of the United States.

Reorganization Plan

A structured strategy to rearrange or restructure a company or its debts and assets in the face of financial instability, often under bankruptcy proceedings.

Creditors

Individuals or entities to whom money is owed by a debtor or borrower.