[Anonymous]

Here is the question from cpareviewforfree.com

A CPA is subject to criminal liability if the CPA

A Willfully breaches a contract with a client.

B Willfully omits a material fact from a set of financial statements.

C Performs an audit in a negligent manner.

D Refuses to turn over requested audit document to a client.

The correct answer is apperently A, this was the explanation.

Willfully omitting a material fact from a set of financial statements by the CPA constitutes fraud on the part of the CPA. When a material misstatement is made and there is both knowledge of its falsity and intent to deceive, especially if in the opinion on the financial statements, the CPA attests to the financial statements being fairly presented and in accordance with GAAP, then the CPA has committed a fraudulent act.

But the CPA does not add or omit facts from statements management does. Also I dont see how A or C isnt right breaching a contract is illegal as is performing a neglegent audit.

Please help.

[tulip]

Breach of contract and negligence are acts of civil liability. Fraud is both civil and criminal.

BEC - 10/18/2010 - 79
FAR - 10/28/2010 - 82
AUD - 11/04/2010 - 73; 02/18/2011 - 86 - IT'S OVER!!!!!!
REG - 11/21/2010 - 83

[halfbaked]

you state A is the correct answer then you say you don't see how A or C aren't right, I'm confused. did you mean to say B was the correct answer. that would be my choice.

[jusey]

B is the correct answer….I agree with Tulip's explanation…

FAR 84 07/29/10
AUD 98 10/1/10
BEC 76 10/29/10
REG 71 11/30/10...02/28/11 88

[Anonymous]

how can the answer be B.

Willfully omits a material fact from a set of financial statements.

” The financial statements are the responsibity of the management” Our responsibility is to express an opinion on the financials….

So, I was thinking management can only omit a material fact from a set of financial statements not the auditors since they don't make one, they just audit it…

I hope it makes sense..

[tulip]

The wording is unambiguous – it says that the “CPA willfully omits”. That means the CPA himself/herself has intentionally committed a fraud.

BEC - 10/18/2010 - 79
FAR - 10/28/2010 - 82
AUD - 11/04/2010 - 73; 02/18/2011 - 86 - IT'S OVER!!!!!!
REG - 11/21/2010 - 83

[jusey]

Doesn't CPAReviewforfree.com give explanations? What are they saying? I don't believe actual test questions must be analyzed to this extent at least that was my experience. Most questions are clear and if not, it is probably a ‘test question'. I would not read into it much more. Just my thoughts! Good luck!

FAR 84 07/29/10
AUD 98 10/1/10
BEC 76 10/29/10
REG 71 11/30/10...02/28/11 88

[Anonymous]

Tulip,

“The wording is unambiguous – it says that the “CPA willfully omits”. That means the CPA himself/herself has intentionally committed a fraud. “

I would say,

CPA cannot willfully omit any information from the financial statements. However, the management of the company can. But if it was something like CPA willfully omits an information from the audit report then it would be a different case.

eg,

E.g. let’s say Becker (Peter Olinto) hires me as an auditor to audit Becker books. Can I willfully change or misrepresent the Becker’s financial statements? The answer is no way. But Peter Olinto definitely can. And suppose I found a major scam going on in Becker to rip off students and due to which they have a huge liability waiting on their way to happen. And peter Olinto comes to me and tells me that he will hire me as a accountant for becker and pay 130k a year if I issue him the unqualified opinion on the FS. ( Audit report ) Can I do that..Hmmm Think about it…

[Author]

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