1)Under the Securities Act of 1933 and the Securities and Exchange Act of 1934, accountants may be subject to criminal penalties for:

a)Securities fraud

b)Obstruction of justice

c)Willful violations of the securities acts

d)Violations of internal controls

2)The U.S. Supreme Court ruled inErnst & Ernst v. Hochfelderthat:

a)The auditor has no legal liability for fraud to third parties

b)A private cause of action for damages does not come under rule 10b-5 in the absence of any allegation of scienter

c)Breach of duty is not required to establish fraud

d)The auditor engaged in an act in connection with the purchase or sale of a security that caused the loss to the plaintiff